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It's Not Your Mom's Department Store


Lindsay Bzdok's great retail discovery came 18 months ago when she was looking for a pair of jeans and didn't like what she saw at the usual suspects: Abercrombie & Fitch (ANF), Old Navy (GPS), Express (LTD). So the 23-year-old computer-systems major at Madonna University in Livonia, Mich., ventured into terra incognita: a Nordstrom department store. There she found the perfect jeans. "Nordstrom's had 10 different brand names and 10 different styles," she marvels. Over the past year, the intrepid Bzdok has planted her flag in other parts of the store: Now she gets her cosmetics, bedding, and dressier clothes there, too.

Bzdok would seem to be an unlikely success story for department stores. With many of their core family customers fleeing to the likes of Kohl's, Target (TGT), specialty stores, and the Internet, department stores' share of retail sales has shrunk from 9.5% to 6.4% in the past decade. Lately, though, most major chains have cranked up efforts to bring in a new generation of shoppers by reconfiguring stores, adding amenities from tea shops to tattoo parlors, and offering more inviting private-label apparel.

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Given department stores' stodgy image, those efforts might seem to stand as much chance as portly Uncle Bill winning a skateboard contest. Nevertheless, some retail watchers are picking up the first glimmers that the strategy may be working. An influential annual survey of 17,000 consumers conducted by Deloitte Touche Tohmatsu this fall found that the number of consumers planning to shop in a department store during the holidays jumped from 37% last year to 50% this year. And the gains were driven entirely by consumers age 18 to 34. "It's too early to call it a trend, but it's still a remarkable change," says Tara L. Weiner, national managing partner of Deloitte's consumer business practice.

The boost can't come too soon. After a solid back-to-school season buoyed by consumers' tax-refund checks, department stores saw sales slide 3.9% in October. Major chains such as Federated Department Stores Inc. (FD) and May Department Stores Co. (MAY) have managed to raise their operating profits by improving efficiency and shuttering unproductive stores in bad locations, but they haven't figured out how to get their top lines growing. That's where younger shoppers come in: They represent the future, and in contrast to time-pressed families seeking convenience at discounters and strip malls, young shoppers are hanging out in the malls anyway.

To get them in the door, department stores have undertaken an unprecedented bout of experimentation. Some are creating separate entrances that go straight to the apparel sections without forcing customers to navigate a clutter of cosmetics and handbag counters. Others, such as Neiman Marcus Group Inc. (NMG) and Bloomingdale's, are creating more theatrical environments that use music and light to mimic the excitement young shoppers have learned to expect from specialty stores. On State Street in downtown Chicago, Marshall Field's turned over some of its real estate to popular specialty apparel vendors such as London shirtmaker Thomas Pink.

If there are some glimmers of hope, department stores' ability to screw up their prospects should never be underestimated. Some of the most intriguing experiments so far are limited to a handful of downtown stores or those in high-end malls, while many stores are messy and help is impossible to find. And while apparel offerings have improved, many are still cut for the older core customer. "I'm a size zero," sniffs Teresa Fralish, 20, a University of Notre Dame student from Mishawaka, Ind. "They don't really carry that size at department stores."

Still, the best news may be the growing evidence that, to win over younger shoppers, department stores simply need to get better at being what they used to be: beautifully designed emporiums that gather unique products in one place. If department stores can deliver that, they may have a chance. By Gerry Khermouch in New York, with Robert Berner and Ann Therese Palmer in Chicago, and Anand Natarajan in Atlanta


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