Department stores have faced fascinating challenges lately. Although they are traditionally known for their expansiveness of space and selection, perhaps some of them are starting to wonder whether "thinking small" might get them back into the big picture. According to The Wall Street Journal, staid department-store retailer Neiman Marcus is planning to open some boutique shops to lure customers who are younger than its usual demographic.
According to the WSJ article, Neiman Marcus' typical customer is a woman between 45 and 55. To lure a younger customer -- between the ages of 25 and 45 -- it's planning a chain of boutique stores called Cusp, which will feature clothes, handbags, and shoes "in loft-like settings" and giving off an air of "casual chic." It's going to start off small, with four stores opening in several affluent markets: in McLean, Va., the Georgetown section of Washington, D.C. (both close enough to Fool HQ that some of us retail fans might have a firsthand peek when the stores open), Los Angeles, and a fourth market that is yet to be determined. The first store will open in July, and the rest are planned for rollout throughout the next year, ending in March or April 2007.
So far, it's admittedly a minor move, but that doesn't make it any less interesting. It brings to mind the challenges that department-store retailers face, as many shoppers may find the concept just a bit dowdy these days. The trends that have been affecting department stores are pretty well known -- while high-end names like Nordstrom (NYSE:JWN) tend to do well (Neiman Marcus is private, but it fits into the same affluent demographic), middle-of-the-road names have struggled as many mid-income customers often opt to buy items on the cheap at discounters like Wal-Mart and Target and then shop upscale for other items, leaving some department stores out in the cold.
There's another interesting element, too. Although a mere four stores don't add up to an army of competition, one might think that if the concept resonates and Neiman does expand it even more, it could cause headaches for some other retailers that cater to a similar demographic, and I'd argue quite a few target the same age group. J. Crew (NYSE:JCG), Abercrombie & Fitch's (NYSE:ANF) Ruehl, and Urban Outfitters' (NASDAQ:URBN) Free People and Anthropologie chains all seek to lure women in the younger portion of that age group. On the higher end of the demographic, think Chico's (NYSE:CHS) (which also runs White House/Black Market), Ann Taylor (NYSE:ANN) (which also has Ann Taylor Loft), and Talbots (NYSE:TLB) (which also offers J. Jill).
These are interesting times for retail. Although J. Crew's IPO has made a big splash, this week's same-store-sales reports displayed some mixed messages about consumers' recent shopping habits at well-known chains. (Of course, recent trends remind us that we should always take same-store-sales data with a grain of salt.) So far, 2006 has proved to be a year where many retailers have lost investors' confidence as certain macroeconomic concerns seemed to bog down consumers. Add into the mix some interesting competitive moves like this one, and one might wonder whether the big picture is a changing landscape, and who the winners and losers might be.
Wal-Mart is a Motley Fool Inside Value recommendation. To find out what other companies value investor Philip Durell has recommended to subscribers, take a 30-day free trial today.
Alyce Lomax owns shares of Urban Outfitters, but no shares of the other companies mentioned. The Motley Fool has a disclosure policy.
