The department store flagship store is going the way of the dodo

The trend: The downtown flagship department store is becoming an increasingly rare sight across the US.

• Saks Global will close Neiman Marcus’ iconic nine-story flagship in downtown Dallas on March 31, ending more than 110 years of operation at the site. The move comes despite the resolution of a lease dispute that initially drove the closure.
• Macy’s Inc. is also scaling back, closing the Macy’s Market Street store in Philadelphia’s historic Wanamaker Building this month as part of its “Bold New Chapter” turnaround strategy that includes shutting down 150 underperforming stores by 2026.
• The company will also close its Bloomingdale’s location in the San Francisco Centre this spring, after nearly 20 years at the mall adjacent to Union Square (another department store anchor, Nordstrom, closed its store in the mall in 2023).

Flagship department stores were once the heart and soul of many cities' downtowns, and a visit to the store was often an experience unto itself. The stores were massive—Macy’s Philadelphia location in the Wanamaker Building occupies an entire city block—and they featured signature attractions, like the famous sixth-floor Zodiac Room restaurant at Neiman Marcus in Dallas.

But as the retail landscape evolved, many of these stores—and their parent companies—failed to adapt, causing them to miss the chance to chart a new course for the future.

A broader challenge: The decline of the flagship store is emblematic of the broader challenges facing the department store sector.

• Department stores once sought to offer everything their target customer could ever need or want under one roof (or website or app), but that’s no longer what consumers seek.
• While department stores like Nordstrom and Macy’s have added private label products and marketplaces to broaden their offerings, they’ve largely failed to sharpen their focus.
• This lack of direction allowed a range of competitors to encroach on their territory. Off-price retailers like TJ Maxx have captured market share by offering similar brands at lower prices, while niche retailers like Abercrombie & Fitch and Ulta Beauty have tailored their offerings to specific customer needs. Meanwhile, Amazon’s vast catalog and fast delivery speeds have made convenience its biggest selling point, further chipping away at the traditional department store's customer base.

Our take: Stores can’t just be about generating sales; they need to serve a broader purpose by providing a forum to tell a clear, compelling brand story that draws customers in and makes them choose that retailer over others.

For too long, flagship department stores focused too heavily on sales, which has made it easy for their parent companies to pull up stakes and move to cheaper locations offering better returns.

If department stores are going to thrive, they must find a way to inspire shoppers and create an experience that resonates beyond just the products they sell.

Go further: Read our analysis of department stores’ Q3 results in our Retail & Ecommerce Earnings Q3 2024 report. Our Q4 report will go live in mid-March.