Department stores are quickly turning into relics of a past generation as consumers are changing the ways they shop. The rise of the department store fed on the consumer’s need for convenience: a destination for the entire family and home, with an assortment of brands to choose from. But with online shopping and the ability to virtually compare products in design and price, these massive chains are struggling to stay relevant. Many are restructuring their corporate teams, laying off thousands of employees, investing in their online and off-price businesses, and rethinking their overall strategy to stay engaging.
More than anything, however, department stores are having problems because they aren’t selling clothing that people want to buy. Rebranding and restructuring can most definitely help, but at the end of the day, the products need to change.
Higher-end stores like Macy’s and Nordstrom as well as lower-tier Kohl’s and JC Penny all utilize the same tactic: to sell branded clothing that appear relatively unbranded and undesigned.
Despite the many price tags and brands scattered throughout these department stores, most merchandise is iterative. You can find 20 of the same style hanging in any given store at any given time.
Where does all this clothing come from and how does it find its way, in the tens of thousands, into these stores? Department stores operate through the independent brands they represent and their own private label merchandise. Private label refers to clothing that is owned by the department store itself, either designed in-house or subcontracted. Examples include Alfani, I.N.C. International Concepts, Bar III, and Style & Co. in Macy’s, many of which are household names. Macy’s has an entire building devoted to their in-house private label team, which designs, sources fabrics, reviews samples, and coordinates production runs with manufacturers. Many private labels may instead be designed and produced by subcontractors called licensees, which handle everything from design to factory relationships. Such private labels that outsource everything exist for brand recognition more than anything else.
These supply chains are complex and opaque, given the many middle men from factory to shelf.
Then comes the clothing from independent megabrands like Calvin Klein, Perry Ellis, Tommy Hilfiger, and more. These brands have omnichannel wholesale partners and sell clothing to an array of mid-price chains and off-price outlets like Bloomingdale’s, Nordstrom, Burlington Coat Factory, Marshall’s, and TJ Maxx.
While only some private label is outsourced, every single piece of clothing from these brands is produced by a complex network of licensees all over the world.
Let’s start with Perry Ellis. The iconic brand that is primarily known for its business casual menswear has been around for 40 years and sells to high-end Nordstrom all the way to budget-friendly Walmart, stocks its own boutiques, and has a booming Latin American business. The sheer amount of product it wholesales, all with subtle design variations, would involve huge amounts of labor to design in-house. Instead, all of it is outsourced. The vast majority is manufactured by long-time partner Salant Corporation, but in the past year, Perry signed agreements with Morel for travel bags, Roffe for handbags and accessories, Wolf for men’s apparel, ACI for boy’s footwear, and NMNY for day dresses. They also happen to manage the distribution of Nike Products throughout Latin America. The in-house design team approves product submissions from its licensees, relays requirements from its retailers (cut costs here, change a fabric there), and designs special projects like its runway collection and accessories (most of which never actually gets put into production).
Calvin Klein, the megabrand that sells luxury, mid-price, and off-price clothing, does have a dedicated in-house team for its luxury segment. But all of its underwear—arguably the brand’s claim to fame—is licensed through Warnaco Group, which not only produces the underwear but manages its distribution. A quick google search reveals that all its home goods are outsourced to Home Innovations Inc. and its women’s sportswear to G-III. Other brands like Steve Madden, popular for its affordably priced shoes, are licensees themselves. Besides managing its own products, it manufactures Betsey Johnson, Daisy Fuentes, Superga, and more.
By working with licensees, brands are able to capitalize on preexisting factory relationships, tap new geographic markets (Perry Ellis just scored a deal with Good People for underwear in South Korea), and offer products at multiple price points to boost inclusivity. But the result for department stores are undifferentiated racks with little to no information about how the products are made or what factories they come from.
From a sustainability standpoint, this poses an immense problem. When a brand doesn’t know which factory makes its own product, the store certainly won’t be able to pass on that information to an interested customer.
What started as a way to boost growth has turned into a convoluted system of licensees and labels, making it virtually impossible for the average consumer to know how a piece of clothing got into their hands.
As my generation of customers have become more educated, we want transparency from the brands we align ourselves with. We want product that feels personalized and matches our values.
In this sense, department stores fail to offer a lifestyle or message because they cater to the masses and they certainly can’t offer transparency until they themselves begin to demand more information. These chains could benefit from revamping their stores with unique products that tell unique stories, are manufactured responsibly to appeal to an increasingly woke generation, and sell inspiration and originality. Until then, you can find me shopping online.