• by Sarah Mahoney , June 5, 2009

In the midst of one of the steepest retail slumps in memory, it's easy to think the weak economy explains everything. And while it's true that at the moment, luxury stores are languishing while bargain stores are booming, there's more to it than that, argues Kendra Wehmeyer, client director of Landor Associates. To her, it's all about branding -- something many retailers have lost sight of entirely.

Q: Consumer spending is down, and of course, that's hurting retailers -- especially department stores. But is there a bigger issue?

A: Absolutely -- after all, consumer spending is up at some stores. I don't think stores think enough about how important their brand is, and then what kind of consumers would be most interested in that brand. I think they think they're brand-conscious -- they spend a lot of money and energy deciding what brands to carry, for example, or developing their own apparel lines. But how their own brand differs from the next department store? That's been lost in the shuffle. On every single marketing decision, retailers need to ask: How can this bolster our brand, or better answer the needs of our consumer?

Q: What's an example of brand confusion?

A: Macy's. It's huge, and not only is it still affected by the brands it acquired, like Marshall Field and May, it carries a lot of inventory. Yet, they don't have a point of view. It's clear they are trying to latch on to one -- and when you see the ads, which feature its Martha Stewart, Jessica Simpson and Tommy Hilfiger lines, it seems like they do. But when you walk in the store, that's not what you see -- you just see lots of merchandise that could be in any department store, with sales associates who could be working at any store in the mall.

Q: Are any department stores doing it right?

A: I think one of the reasons Nordstrom sales have held up relatively well is that it does have a brand personality. It stands for quality and service. I'm betting that most people who go there don't care about finding the latest trends, as they would at an H&M. But whatever it does sell -- whether it's trendy, classic or luxury -- it's going to be high quality.

Q: What about lower-end success stories?

A: Kohl's has done a very good job by adding names like Vera Wang and Dana Buchman. It tells consumers, very effectively, "Yes, we are affordable, but we also have brands with a little more cachet."

Q: How has Internet shopping made store branding more difficult?

A: It's been another way for stores to reveal their inconsistencies. They really do need to understand that they have to be the same brand at all their touchpoints. And some stores, like Saks and Tiffany, do get that -- what you see online really reflects what's in the store, so there's no disconnect. But very few chains have achieved consistency.

Q: Consumers have become powerful bargain-finders. And the massive markdowns of the last eight months or so have shown them that eventually, everything will be marked down -- often by more than 50%. Will shoppers ever trust department stores on price again?

A: Eventually. Last year's markdowns only happened because stores had way too much inventory -- that's just not a concept consumers grasp, unless they've worked in the business. Now that inventory is sold off, and stores will gradually wean people back to full prices. Plus, people are getting antsy, after so many months of not spending. At some point, just because there will be fewer sales, it will be easier to say: "That's a beautiful white blouse. I've waited three weeks, and it hasn't gone on sale -- I've got a big meeting coming up and I need it now." It will be gradual, but people will naturally migrate back to higher prices.

Q: Is service an issue?

A: Yes. Long ago, that was the way department stores stood out, but they've lost it. Now, when we think of exception service, it's at stores like Williams-Sonoma, L.L. Bean, or REI. Salespeople aren't just there to work a job -- they're enthusiasts. Mainstream stores have lost that -- they don't know how to turn their associates into brand advocates.