Department stores are aging — and so are their customers.
For over a century, the stores won over multiple generations with a promise to sell shoppers a wide variety of everything. For many Millennial and Gen Z consumers, that hasn’t been enough — especially as they discover items on social media, and specialty retailers, big-box stores and online players steal away sales.
Department stores like Macy’s, Kohl’s and Nordstrom face an existential crisis, as they try to persuade investors to bet on their futures while sales slow and their core customers age. Harsh scrutiny from Wall Street has contributed to a fresh attempt by Nordstrom to take the company private, and a bid by activist investors to take over Macy’s and turn it into a private company. Kohl’s, too, has been the target of activist investors in the past few years.
Oliver Chen, a retail analyst at TD Cowen, said attracting younger customers has become more urgent, since the retailers have “lost so much ground already.”
“When you’re a department store, you need to — and you should — be catering to younger and older,” he said.
Customer data illustrates the challenge for the retailers. At Kohl’s, 40% of customers are Baby Boomers, according to Numerator, a market research firm that tracks retail trends and sales patterns with a panel of 150,000 U.S. consumers that’s balanced to represent the population. At Macy’s, more than a third of customers — 36% — are Boomers. (Macy’s data includes just its namesake stores and website, not Bloomingdale’s and beauty chain Bluemercury.)
Baby Boomers are age 60 or older, according to Numerator’s definition. The firm defines Gen X as between ages 43 and 59. Numerator puts Millennials in the age 29 to 42 range, and Gen Z between 18 and 28, since it only collects data from consumers 18 or older.
Nordstrom is the only one of the three that has a larger base of Millennial and Gen X shoppers than Baby Boomers, with Boomers accounting for 25% of its customer base. Its customer data includes both its namesake stores and its off-price retail chain, Nordstrom Rack, which has been known to draw in younger, fashion-forward customers hunting for deals.
All three department stores have announced plans to woo new customers — including younger ones. Yet they have shared weak outlooks for the fiscal year, calling for little, if any, year-over-year sales growth.
Chen said the retailers are paying more attention to the problem, since Macy’s and Kohl’s both have new CEOs and all three are trying to improve their private brands. The lines can help a retailer stand out because they are exclusive and often priced lower than national brands.
Aging customers isn’t department stores’ only hurdle. The chains, like other retailers, have struggled with foot traffic and sales as consumers spend less on clothing, bedding and other discretionary items while more of their money goes toward everyday items because of inflation.
To attract younger shoppers, Kohl’s is adding trendier clothing for teens, opening more Sephora shops and bulking up its baby department.
In an interview with CNBC in late March, CEO Tom Kingsbury said department stores, including Kohl’s, have relied too much on coupons to get customers through their doors. That formula doesn’t work for Millennial and Gen Z shoppers, he said. They want compelling merchandise and clear pricing — things they’re finding at off-price stores like T.J. Maxx instead.
Led by Kingsbury, Kohl’s is trying to capitalize on life stages that tend to spark purchases, such as decorating an apartment for the first time or having a baby. The retailer plans to add Babies R Us shops to about 200 of its stores in the fall. It is now carrying more home goods, such as lighting and wall art.
Kohl’s has also used Sephora shops, which it is expanding to all stores, to draw in younger shoppers and try to nudge them to other parts of the store.
“When they come in for Sephora, we want to make sure we can give them product they want as well,” Kingsbury said.
Still, Kohl’s doesn’t expect to see immediate results from the moves. It said in March that it expects net sales to range from a 1% decrease to 1% increase for the full year, and comparable sales to range from flat to 2% higher.
With a new CEO at the top, Macy’s wants to refresh its namesake brand and shutter stores that have dragged down the company’s sales.
It plans to close more than a quarter of its an approximately 500 namesake stores by early 2027. At the same time, Macy’s is trying to go where younger shoppers are, including suburban strip malls and beauty aisles.
The company plans to open up to 30 of its smaller off-mall Macy’s stores over the next two years. The locations are roughly one-fifth the size of its traditional mall stores and typically next to grocers, big-box stores and off-price retailers, which have steadier foot traffic.
It’s also opening more Bloomingdale’s stores and more locations of Bluemercury, its beauty chain — and taking steps to woo younger customers in the process.
Macy’s CEO Tony Spring, who stepped into the role in February, previously led Bloomingdale’s, which carries luxury brands but also has popular private labels like clothing brand Aqua. It’s also known for unique customer experiences, such as limited-time events or collections that tap into pop culture moments like the “Barbie” movie.
He’s hinted more of that is coming to Macy’s. The company has debuted new, exclusive clothing brands and given others a makeover. It’s trying to make Macy’s more of an attraction, including by having a play area in Toys R Us shops within the stores or cocktails inside of Bloomie’s, its smaller, off-mall version of Bloomingdale’s.
Despite efforts to jolt sales, the company’s forecast is muted: Macy’s expects full-year net sales to range between $22.2 billion and $22.9 billion, down from $23.09 billion in the prior year. It expects comparable sales, which takes out the impact of store openings and closures, to range from a decline of about 1.5% to a gain of 1.5% compared with the year-ago period on an owned-plus-licensed basis and including third-party marketplace sales.
One of the dilemmas for Macy’s? Gen Z and Millennial shoppers aren’t as loyal, TD Cowen’s Chen said. They shop high and low, buying a luxury handbag one day and an outfit from Target, Costco or Zara another.
“You can actually look better for cheaper now,” he said.
Compared to its department store rivals, Nordstrom has had more success with younger shoppers.
Some of that boils down to what the Seattle-based retailer carries: Nordstrom has been quicker to sign deals with hot brands and direct-to-consumer names, such as Skims, Kim Kardashian’s shapewear company; and Beis, the handbag and luggage brand started by actress Shay Mitchell. It launched Australian fashion brand Princess Polly in January and timed the debut of millennial-focused fashion brand Nasty Gal with an activation in Los Angeles coinciding with Coachella.
Another advantage for Nordstrom? Most of its stores are Nordstrom Rack locations, off-price stores that may have a friendlier price point for younger shoppers.
Still, CEO Erik Nordstrom said on the company’s March earnings call that the retailer wants to do better. He said it’s starting to a see a turnaround with the younger customer, “which is an area we have a multi-year plan to improve.”
Nordstrom is trying to increase its fashion-forward merchandise in a new way, too. About a month ago, it rolled out a third-party marketplace that allows it to sell a wider variety of items without taking on the risk of owning the inventory. The marketplace approach follows the model that Amazon and more recently, Walmart, has used to bulk up its online offerings.
With the marketplace, Nordstrom has said it will double or triple the number of items sold through its website and app. Macy’s, too, has begun using a third-party marketplace to add more items and brands.
Like Macy’s and Kohl’s, though, Nordstrom has a lackluster forecast: It expects full-year revenue, including retail sales and credit cards, will range from a 2% decline to a 1% gain compared with the previous fiscal year, which had an additional week.
Marketplaces can help department stores, as they’re under pressure to tightly manage inventory yet appeal to what different age groups want, said Christine Barton, a senior partner who researches consumer habits for the Boston Consulting Group.
Cost pressures can cause a retailer to place safer bets and order the same kind of merchandise that they always carry.
“You take away some of that newness,” she said. “You going back to more tried and true brands or products and so that becomes a bit of a self-reinforcing prophecy in terms of that younger consumer.”
Breaking away from those old habits is something that department stores will need to do if they want to become a staple for younger generations — and stay relevant for decades more, she said.