Feb 16, 2022 - Economy

1 big department store tech stack

Silhouette of women's face with retail receipts

Illustration: Gabriella Turrisi/Axios

What if all the mid-tier U.S. department stores were jumbled together to become one big one? Sound crazy? Not to Joel Bines, a managing director and longtime consigliere to retailers at AlixPartners.

Why it matters: The mid-tier space, on the whole, has recovered from the pandemic, but it still faces heavy pressure from Amazon, as well as supply chain constraints and a host of other issues that are cutting into sales and growth for individual companies across the industry.

  • You wouldn't need to change the banners above the doors (Macy's, Dillard's) or ditch the private label brands (Alfani, St. John's Bay).
  • The entire operation would run on a single, integrated tech stack.
  • Key to the "1 big store" concept, Bines tells me, is the elimination of redundant warehouses and supply routes in exchange for a streamlined distribution system.

State of play: Broadly speaking, the mid-tier segment serves the middle class. It falls between luxury and discount and sells mass-market brands like Levi's, Tommy Hilfiger, etc.

  • This space consists of regional banners such as Boscov's, Belk and Dillard's, as well as national names like JCPenney, Macy's and Kohl's.

Yes, but: There certainly would be antitrust issues, and the likelihood of a megamerger like this is extremely small, if not legally impossible.

  • And yet, the concept may be the best solution for a mature retail segment where size and buying power are key to survival, Bines says.
  • Consolidation is important to consider when factoring in the long-term health of the sector, the brands, the employees and the shoppers.

Details: Bines reckons that all-in, the merged parent company — let's call it "Consolidated United" — would have around $60 billion in annual sales.

  • By comparison, Amazon's annual North American sales last year grew by 18.6% to $280 billion across all categories.

Between the lines: The cost savings generated from Consolidated United would amount to "hundreds of millions of dollars" and could be reinvested in refreshing stores, digital and customer experiences, Bines says.

  • Today's technology would make it possible to manage all the independent brands on one platform, something that wasn't possible 20 years ago, according to Bines.
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