Department Store Debt
Few people still consider department stores like Nordstrom, Macy's, Bloomingdale's, and Neiman Marcus to be the backbone of American retail, but in the early to mid 19th century, their position in the apparel industry revolutionized the way we shop today. These companies, which once modernized the shopping experience, are now struggling to maintain their relevance and financial stability in a rapidly changing market.
Historically, department stores transformed retail by introducing the fixed-price policy, a revolutionary concept that set them apart from the general stores of the time where bargaining was the norm. Department stores offered a vast array of merchandise, exciting customers with elaborate window displays that made shopping a pleasurable experience. Auburn University’s Dr. Presley explained how department stores saw the birth of visual merchandising as a profession, as stores worked to attract shoppers with artistic displays and engaging environments. Department stores were more than just places to shop; they were cultural hubs that hosted performance art, musicians, and events, making them a key social element in communities. The first documented fashion show in the United States took place in 1903 at a department store, further solidifying their role in shaping American culture.
However, the shopping landscape has drastically changed over the past 10 years. With the rise of e-commerce, department stores are now struggling to stay financially stable. The convenience of online shopping, coupled with competitive pricing and a broader selection of products, has drawn customers away from brick-and-mortar stores. Social Media has revolutionized the way we shop; and a new generation prefers to shop with tech, including Instagram Ads, Pinterest, and even TikTok Shop. This shift has not only affected sales, but has also led to an avalanche of returns, a problem that undermines profit margins and highlights the difficulty these stores face in adapting to the digital age.
Having worked at Nordstrom over the summer, I witnessed firsthand the impact of these challenges. Nordstrom’s famously generous return policy, designed to foster customer loyalty, doesn’t seem to be working in their favor anymore. Each day, our store processes thousands of dollars in returns, often surpassing the number of new sales. For example, I had a customer come in with a box of 32 shoes to return, some of which had even been worn. This constant influx of returns is not just a financial burden, but also a logistical nightmare, requiring significant resources and employees to manage and restock items, many of which had been purchased online and returned in-store. The ease in which customers could buy and return items with no questions asked was a reminder of how the convenience of online shopping is undermining the traditional retail model.
My roommate and fellow apparel merchandising student, Kristina Burke, also worked at Nordstrom, and shared similar experiences at a different location, reinforcing the idea that this is not an isolated problem. The overwhelming number of returns, often driven by the “try before you buy” mentality encouraged by online shopping, created a challenging work environment for the both of us. The high return rates not only reflect changing consumer habits, but also highlights the pressure department stores face to maintain customer satisfaction. Through our two summers of working at Nordstrom, Kristina and I have learned that a crucial factor in successful merchandising is accounting for extra returns and finding ways to limit customer returns from online shopping. We have recognized that in this rapidly evolving market, the policies that once set these stores ahead of the curve are now contributing to their decline, as they struggle with debt and an uncertain future in an increasingly digital world.
