Throughout history, stores have existed for five reasons, regardless of whether they have been physical or digital entities.
Stores have provided:
Taction (the idea of touching, feeling, trying products on, i.e., getting help or confidence in a purchase)
Experience (the memory or social delight of being somewhere)
Prior to the 1990s, physical stores were the only game in town. But then along came digital with the advent of Amazon, eBay and others, later supercharged by the mobile phone, and digital said to the world that it could do the first three things in the above list (inspiration, immediate gratification, and convenience) as well as, if not better than, physical stores. And, in so doing, digital also broadened the definition of the word "store."
Traditionally, the definition of the word store was narrow—commonly referring to “stores” of inventory, specifically the products inside of four walls. But, what the word "store" really meant all these years, and which many are just now beginning to see, is so much more. It meant not just a "store" of product inventory but a "store" of other inventory as well, namely services and experiences.
Products alone inside of four walls, what I call the "Field of Dreams" strategy, isn't enough anymore. The only way to survive is to differentiate one's physical stores of inventory across the dimensions mentioned above.
That is why the entire legacy department store segment doesn't stand a chance. Just examine the criteria:
Inspiration: Been in a department store lately? They look and feel the same way today as they did decades ago.
Convenience: For people who still want to leave their homes, department stores are often attached to malls. It takes a long time to get in and out of them, and there are other stand-alone or mass merchant experiences that are more convenient, even if one doesn't factor in never having to leave home with Amazon.
Immediate Gratification: There is still some aspect of immediate gratification at play, but it is not differentiating. If a consumer wants something quickly, they can get it via e-commerce or they can partake in a range of other physical options, all of which leads back to the convenience wheel of death.
Taction: Similarly to the last element, yes, consumers can still go to department stores to touch and feel products, but new online business models, like Stitch Fix, for example, that allow easy returns make this need less and less each day. Plus, being able to touch a product in one store versus another is not really differentiating either. Enter once again the convenience death spiral.
Experience: This point is the real kicker. What is the social experience point of differentiation across department stores anymore? Racks and racks of products, in environments where payroll has already been slashed to the bone, offer nothing compelling. Department stores offer nothing social—no food, no sense of community, no environment for learning, no play.
Not all physical retail has these same problems. The mass merchants, like Target, Walmart and others, are buoyed still by the one-stop-shop effect. They still have an angle of convenience and location attractiveness, at least until direct-to-consumer grocery takes hold, that leaves them in a different position than their department store brethren.
No, in the end, it all comes down to experience—the social joy of being in physical places. For department stores to right the ship, it will take wholesale changes in their business models away from just inventorying their four walls solely for products. It will take sifting through years and years of business model debt—architectural debt, technological debt and cultural debt—to come out clean on the other side and to imagine something completely new
But, therein, lies the issue: To what end? These same department stores are saddled inside of shopping malls, alongside other, smaller retailers with the exact same issues discussed above. The only way out is to shed the past limiting definition of stores, and for specialty retailers and department store retailers alike to come together with the mall operators and to reimagine the entire mall experience fresh from the ground up.
A super mall/retailer will need to emerge, one that restores the glory of a physical place across all five of the dimensions above. This same super mall operator will need to provide not just physical real estate for rent, but also a foundation for logistical collaboration, a ubiquitous shopping platform for consumers, and shared social experiences from which all can benefit.
Whoever has this vision will be the winner in the long run.