Today, we released our first Digital IQ Index: Department Stores report. In years past, department stores had been grouped under the Specialty Retail umbrella (our 2013 report on that sector, released last month, is available here), but this year, the top 40 global department stores got their own benchmarking, with Seattle-based Nordstrom earning the No. 1 ranking, followed by Macy’s, and in a tie for third, Saks and Britain’s Marks & Spencer. One of the biggest trends in the department store industry is how brands are fighting back against their widespread structural disintegration brought on by discounters, specialty retailers and e-tailers like Amazon that every day are finding new ways to corner new markets, from groceries to eight-figure art. Department Store fulfillment investments (and de-investments) have made big news in the last year and serve as one of the barometers of the sector’s health. Some of these moves have raised doubts about the future of department stores: Neiman Marcus’s abrupt announcement in May that it had shut down its relatively new and sole shipping facility in China, for example, incited questions about how successful American department stores could be in the Chinese e-commerce market.
But other industry moves, most notably Macy’s significant investment in its upgraded logistics infrastructure, the store’s $35M expansion of its primary fulfillment center in Arizona, and its decision to turn 500 retail stores into multi-purpose regional fulfillment centers, have shown more promise. Likewise, top-ranked Nordstrom is projected to spend close to $1B on online operations by 2018; and another of our four digital ‘Genius’ stores, Marks & Spencer, recently opened a 900,000 ft² order fulfillment center in Leicestershire, which can store a staggering 16M pieces of merchandise and process 1M items each day. Not surprisingly, competition moves the ball forward, evidenced by Saks’ decision to accelerate its own $95M fulfillment upgrade timeline–likely the result of some or all of the aforementioned investments.
Below, a comprehensive timeline of how department store fulfillment has evolved over the past 12 months, based on moves made by 13 of the 40 stores included in our new report (click image for more detail):