Dillard’s is on the cusp of becoming irrelevant

Tom Dougherty, CEO – Stealing Share

1 March 2010

Dillard’s “success” represents much of the retail world

Maybe it’s just the way of the retail world now. To increase earnings, you have to cut costs. Because only a very few – thinking Wal-Mart here – have accomplished it the old-fashioned way: By gaining new customers.

Today, Dillard’s reported an upswing in fourth-quarter profits, but this is truly a case of the emperor having no clothes. As most analysts have noted, Dillard’s increased its profit by cutting costs and reducing inventory, coming off a year in which Dillard’s closed stores.

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The regional player has, in the words of the Wall Street Journal, “underperformed the industry for more than a decade in terms of same-store sales and sales per square foot.” Sounds like to me Dillard’s needs some assistance, and needs it quickly.

As I’ve noted in Chain Store Age, the problem for most retailers is that they try to copy the market leader to gain share. That does very little to move the needle because the market leader always becomes the default choice from the point of view of the consumer when everything appears to be the same.

Dillard’s is in the same situation. It’s difficult to come up with a difference, especially an emotional one, between it and competitors such as Macy’s and JC Penney. Those retailers are nearly identical from the perspective of the consumer, so retailers attract customers with sales (which cuts into margins) and by just being in a convenient location. In this case, Dillard’s loses out to the likes of Macy’s and JC Penney because those larger chains advertise more.

A new model may be in order for Dillard’s, which is something we’ve recommended for other retailers. In lieu of that, Dillard’s could become different and more memorable in the minds of consumers if its differentiators were tone, attitude and message. Then, it could even gain preference. Right now, its messaging and brand are lost in retail marketing because it sounds, looks and feels the same as that from the competition.

The bottom line might be looking better for Dillard’s, but it’s on the cusp of becoming irrelevant. A brand that says something about who the Dillard’s customer is could change that.

See more posts in the following related categories: Dillard's JC Penney Macy's Retail brands

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