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COVID-19 and the Fall of Neiman Marcus, JCPenny

April 24, 2020
Ryan Fox Squire

SafeGraph’s foot traffic data paints a bleak picture for the future of Neiman Marcus, J.C. Penney, and the overall health of the US retail industry—long before the coronavirus pandemic took hold

As the continued rise and popularity of e-commerce has driven down foot traffic to brick-and-mortar retailers over the past decade, many department stores, in particular, have had no choice but to declare bankruptcy. Having just closed its stores at the beginning of 2020, Barney’s is one of the most recent big-name retail casualties to face its fate.

Given the debilitating impact that COVID-19 has brought to the retail industry as a whole, it seems likely that Neiman Marcus and J.C. Penney—experiencing year-over-year foot traffic decreases of 56.4% and 33.7%, respectively, since March 2019—are likely to add their names to the list of department store bankruptcies any day now. 

This is just one reason why the New York Times has warned that the “death of the department store” as we once knew it is on the horizon, a big part of the broader retail industry that stands little chance of surviving the coronavirus pandemic. 

SafeGraph foot traffic data reveals department store visits have consistently been on the decline 

All businesses, for all intents and purposes, are facing unique challenges in the face of the COVID-19 crisis. Those operating like well-oiled machines before the crisis have had to pivot business operations to weather the storm and make critical real-time decisions to stay afloat or, in the case of recent spikes in grocery store visits, meet sudden increases in demand. 

The retail industry, specifically around department stores, is a different story: this industry was already struggling before COVID-19 and was in no position to deal with yet another severe blow.

As we’ve already explored via our COVID-19 U.S. consumer activity foot traffic patterns dashboard around different industries, there’s no question that COVID-19 has made an impact on all aspects of U.S. consumers life and behaviors since March 2020. Unfortunately, all data suggests that this impact has been felt at least ten times stronger by department stores. 

Change in year-over-year foot traffic to major department store brands in the US
from January 2019 through March 2020 (where 100% represents no change at all).

In 2019, year-over-year foot traffic at a number of major department store brands was already consistently hovering in negative territory. Based on the graph above, you can see that J.C. Penney was one of the few department store brands to see some positive traffic spikes over the past year—most notably, 15% in April 2019 and 13% in January 2020—but even those spikes, as reported in the news today, can’t save J.C. Penney from near-certain bankruptcy. 

Even during this past year’s typically busy holiday shopping season and into the early part of 2020, household names like Bloomingdale’s, Macy’s, Nordstrom, Saks Fifth Avenue, and Neiman Marcus were already experiencing 10-30% declines in y/y foot traffic before major shutdowns went into effect. And while the data suggests there could have been a potential uptick beginning in February, the arrival of COVID-19 stopped any possible momentum in its tracks. 

In fact, by the time March 2020 rolled around, we saw steep decreases in foot traffic affect all big-name department stores—with Saks Fifth Avenue and Neiman Marcus suffering the worst blow, seeing decreases in y/y foot traffic in excess of 50%

However, while the decrease in foot traffic may not be as bleak for more “mass-market” department store brands, like J.C. Penney and Macy’s—though certainly not far off—numbers like this spell disaster for a retail industry consistently on a steady decline over the past decade.

Are luxury department stores even relevant anymore?

The troubles facing department stores is further accentuated by the fact that the more luxury, upper-market brands, traditionally catering to a smaller and more affluent clientele, have typically only been able to claim a very small piece of overall department store visits for years. This means that any significant drop in foot traffic—including mandatory store closures due to the coronavirus pandemic—would likely hit a lot closer to home and challenge the business’s ability to stay afloat during and after this economic crisis. 

Proportion of total visits to major department store brands in the US (January 2018–March 2020).

It’s not surprising that mid-market retailers, like Macy’s and J.C. Penney, garnered a significantly larger proportion of total department store visits compared to their high-end counterparts over the last two years. In many ways, albeit indirectly, this paints a clear picture of the distribution of wealth among Americans. It also begins to hint at why luxury department stores have been on their last leg for some time now: there is simply very little demand for them these days. 

Nearing the end of an era

Whether the COVID-19 crisis brings about the official end to department stores—for so long a prominent staple of shopping life in America—or simply speeds up a trend that was likely to happen anytime now, it’s safe to say that only time will tell. But as we’ve seen across many industries being impacted by the prolonged coronavirus pandemic, the very fabric of the US economy—and how consumers engage with it—is changing more and more each day. While this may quite well be the end of the department store era, this is certainly not the only industry that’ll have a tough time weathering the long and uncertain storm ahead.

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