Off-Price vs. Department Store Retailing

Author

Denise Aghion, Syracuse University

Degree Type

Honors Capstone Project

Date of Submission

Spring 5-1-2013

Capstone Advisor

Amanda Nicholson

Honors Reader

Linda Cushman

Capstone Major

Management

Capstone College

Management

Audio/Visual Component

no

Capstone Prize Winner

no

Won Capstone Funding

no

Honors Categories

Professional

Subject Categories

Business | Business Administration, Management, and Operations | Business and Corporate Communications | Fashion Business | Operations and Supply Chain Management | Sales and Merchandising

Abstract

There are multiple forms of retailing in the United States – two of the most common forms are department store retailing and off-price retailing. Both types of retailers are looking to create profits by negotiating costs with vendors to create suitable gross margins; however, they go about doing so in very different ways. Because I have interned at both types of corporations, my Capstone is to identify which, if either model, is more sustainable in today’s conditions.

Department store retailing is the most well-known form of retailing, and is currently the largest sector of retailing in the United States. They have been successful in the United States since the middle of the 1800’s, and continue to exceed in the market because they are household names that people trust, and they cater to the middle and upper classes, who place a value on convenience. Off-price retailers are best known for offering designer goods at prices that can be between 20% and 60% lower than their department store prices. It’s a far newer concept that tailors its assortment to people who want to buy name brands, but who can’t afford or don’t want to pay department store prices. There is a place in the market for these retailers because of the growing concern of value. Off-price retailing has been growing at extremely rapid rates in recent years.

My internships, and observations from these internships, at Macy’s and Ross Stores is my primary form of research for this paper. I also conducted interviews with industry insiders and consulted secondary sources on the subject.

In order to begin this process, I analyzed the two organizations that I interned at, Macy’s and Ross Stores. I assessed each stores strengths, weaknesses, opportunities and threats that I witnessed throughout my time at each company.

Taking what I learned from my analysis of the two organizations I had personal experience with, and my interviews from professionals working in the industry, I identified the major similarities and differences in the two business models. After analyzing the similarities and differences, I looked at how the political, economic, socio-cultural and technological externalities affected retailing in general.

Based on all of my primary and secondary research, I believe there is a place in the market for both models of retailing. Because Americans are increasingly price-conscious, off-price stores do have a slight edge in today’s market. Off-price stores appeal to a wide variety of customers and offer excellent value to their customers. The stores have been showing incredible growth from year to year, and their customers often leave satisfied, even though the stores lack the “glamour” of department stores.

However, this doesn’t negate the fact that department stores still do appeal to a very specific customer that is not going away. The wealthier part of the society still enjoys shopping at department stores for their excellent customer service, their wide assortment and the “feeling” they get when in the stores. Department stores have been successful in the American market for a long time, and even though they have been declining in growth to some extent, they have always managed to come back from these declines in the past. As long as they continue to respond to their loyal customer’s wants and needs, there will continue to be a place for them in the market.

Recommended Citation

Aghion, Denise, "Off-Price vs. Department Store Retailing" (2013). Renée Crown University Honors Thesis Projects - All. 78.
https://surface.syr.edu/honors_capstone/78

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