Department-store landmarks give way in big merger

Circa 1957: A woman and her young daughter enter Jordan Marsh in Boston, or maybe Higbee's in Cleveland or Marshall Field's in Chicago.

As they go through the store, unctuous salesmen greet them from behind glass cases filled with suede gloves and silk stockings. Madam's change will arrive in a tube from the second floor. After eating lunch at the store, the two will buy a box of Frango Mints if it's Chicago, or blueberry muffins in Boston.

Today, Mom probably shops at Wal-Mart, where cheap wool gloves are piled on tables. If she and her daughter don't want to leave their house, they can shop online. Even if they want to go to the mall or a department store, they will wait until there is a sale.

All these changes have caught up to the traditional department store - those multifloor retailers that try to offer consumers everything from pots and pans to $2,950 TAG Heuer watches. To stay alive, they are starting to merge. This week's $11 billion linkup between Federated and May Department Stores is symbolic of the changes in the way Americans buy what they need. Americans are increasingly pressed for time and can no longer devote hours to the large stores. They are also less concerned with quality since it costs less to replace products that wear out. And they are less concerned with personal service.

"At the end, it is the consumer who is making this happen. They are voting with their dollars," says Jay MacIntosh, director of retail and consumer products at Ernst & Young, the accounting firm.

There are scores of retailers who can attest to these changes. Gone are B. Altman & Co.; the Broadway; Woodward & Lothrop; and Montgomery Ward. In 1995, Wanamaker's, which just about started the US department store phenomenon with its Oak Hall Clothing Bazaar in 1876, closed its doors for good.

The changing retail landscape was evident outside a Wal-Mart in Guilford, Conn., this week.

Susan Nichols and her daughter Lindsey were heading in to exchange a "Star Wars" light saber for a different model. Ms. Nichols says that when she was young she did shop at traditional department stores regularly, but she rarely does now.

"Basically, I shop pretty much at Wal-Mart. It's close, and prices are competitive. The department stores are further away, and they offer less variety and are more expensive," she says. "Obviously, sometimes quality is more important than the price that you pay, but if you're looking for something disposable, you don't want to spend a lot of money."

For other shoppers, like Lillian Roth from Madison, Conn., quality is more important than price. But she shops at Wal-Mart because it's close, even though she'd prefer to shop at a traditional department store.

"The only reason you come to Wal-Mart is if you want to grab up something quick and you want to save a few pennies," she says. "There's no Macy's around here. You have to go far away to get to one."

Yet some people still do prefer the large department stores, especially when they are looking for quality.

Monday, outside a Lord & Taylor store on Fifth Avenue in New York, shopper Michael Stewart, a resident of Washington, says he was there in part because of the cachet. "The highest human good is peace of mind. They [department stories] carry a higher-quality product," he says.

New Yorker Chandan Kamble similarly summed up why he was shopping at Lord & Taylor in one word: "Prestige," he said, adding that the quality of goods at department stores was superior to what he could find at a big-box retailer.

However, for the most part, consumer attitudes have changed, points out Mr. MacIntosh. "The discounters, the dollar stores, continue to grab market share," he points out. "At the same time, the high-end stores, which cater to the affluent, are also doing well. It's the midlevel stores that are being hurt and are consolidating."

In fact, with the new mergers, the suburban malls will probably start to look different. Federated has 458 stores and May has 491 emporiums. May's brands include Marshall Field's, Lord & Taylor, Filene's, and Kaufmann's. Federated owns Bloomingdale's, Macy's, and Rich's. Retail analysts expect many of these stores will be closed if they are competing with one another. "Many of these were in downtown areas up to a few years ago," says Joyce Gioia of the Herman Group, a strategic consulting firm. "Then, they went through urban flight, and now they have these huge stores in suburban areas," she says. "But except for sales, they are often ghost towns."

Some suburbanites have mixed views about this phenomenon. One woman, Laurie, who didn't want her last name used, was shopping at the Wal-Mart in Guilford. She recalls how her family regularly shopped at the Fairfield Store, the local department store at the heart of her hometown in Fairfield, Conn.

"It was an institution, one of those places that you could always count on to have your basics," says the Clinton, Conn., resident. "It was sad when it closed down. It was kind of the end of an era."

In more ways than one. Now she rarely shops at department stores. The reason: prices. "When I was growing up, my mother was paying," she says laughing. "Now that I'm paying, I go where the best prices are - Marshall's, TJ Maxx, those kind of stores."

But she's also conflicted. Even though she'd just come out of a Wal-Mart, where she'd picked up toilet paper, tissues, and a storage container, she confessed that she really doesn't like to shop there, despite the lower prices. "I look at Wal-Mart as the evil empire, and I'm afraid they're going to drive all of the other small businesses out and then they're going to start raising their prices and we'll be held hostage to their methods," she says.

Alexandra Marks in Guilford, Conn., and Robert Tuttle in New York contributed to this story.

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