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Department Stores Haven’t Been Known for Speed, But Could That Be Changing?

When describing department stores, the comparison analysts and commentators reach for most is ships because historically, they’ve both been big and slow, and neither have ever been accused of being nimble.

And even as most chains are whittling down their fleets to focus on the most productive locations, this idea that stores like Macy’s, Kohl’s and J.C. Penney are slow to change persists.

But the retailers are actively working to change not only the perception but the reality. And the undertaking is none too soon given the pace at which their digitally native and fast fashion competitors move.

In the latest round of earnings calls, retail executives took pains to underscore the ways in which they’re executing on speed to market.

For most, their private label collections have been the incubators for new ideas and processes, which are now expanding beyond these testing grounds to wider adoption.

“The most important thing is to make quick decisions, move faster, don’t be so deliberate so that we can understand the needs of the customers faster,” said Penney’s CEO and chairman Marvin Ellison.

For Penney’s, and many of its competitors, that’s meant rejiggering the corporate structure, removing layers and reexamining roles. Earlier this month, the department store announced it was eliminating the role of chief merchant, which had been occupied by John Tighe. The development made headlines because it seemed to illustrate how the approach to product is changing across the landscape.

In response to analysts’ questions on the company’s Q3 earnings call, Ellison said “We’re competing against e-commerce companies that don’t have chief merchants, don’t have even category merchants. They are just moving fast with data.”

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Ellison said that until recently, Penney’s buying process had been stuck in a time warp for 20 years. The reorg of its merchandising team, in addition to building an in-house data team, is an attempt to modernize, he said. “We think that merchandising is important, but I believe that leadership should be closer to decision making and we should have more nimble, agile, decision making based on merchant instincts and data without having this hierarchy that slow things down.”

Already Penney’s has reduced buying time for some of its private brands by 40 percent.

Going forward, the retailer is aiming for “fast frequent fashion,” through which shoppers will see new product on a monthly or even weekly basis. With more freshness, Penney’s hopes to entice consumers in more frequently.

Macy’s too is speeding up the supply chains for some of its private brands. The result has been capsule collections that that are resonating with consumers.

In August, Macy’s reorganized its merchandising structure as well, rolling merchandising, planning and private brands together and providing the new organization with better data analytics. The results have had a direct effect on speed, according to CEO Jeff Gennette. “We’re working faster and smarter,” he said. “We’re responding more quickly to our customer, and we’re engaging more effectively with our brand partners.”

The restructuring has also put the company in a better inventory position than it had been in the first half, Gennette said, allowing for a fresher floor. “The opportunity to react in-season and with our streamlined merchandising organization that is armed with… an available checkbook, we’re able to react to those things that are tested, that area known, that are giving us higher margin because the sell-throughs are better when it comes in.”

[Read more about department store inventory management: Are Department Stores Stocked Up or Facing Stock Outs This Holiday?]

Similarly, Kohl’s inventory position illustrates the company is on the right track with its speed initiatives, according to quarter, chairman and CEO Kevin Mansell. “If speed to market is working, then inventory should go down, while sales should outpace inventory. So I think [the] third quarter is a great example of that. We came into the quarter with less inventory than last year we came out of the quarter with less inventory than last year. And yes, we had a positive sales increase,” he said.

Unlike its department store competitors, Kohl’s locations are largely in strip centers away from malls, which has helped the retailer maintain traffic. But getting even more people through its doors is the company’s first priority, which speed to market is helping with as well, Mansell said. “Having more relevant product in the stores is a big part of, I think, the resurgence in traffic,” he said. “People are finding what they want more regularly.”

In the third quarter, the company saw “significant” improvement in performance in its private label collections, further proof Mansell said that the company is getting faster.

In a blog entry posted on Friday, Kohl’s stated it will reduce end to end lead times by 40 percent by 2019. “To achieve speed, we really changed everything,” said Michael Gilbert, executive vice president of product development at Kohl’s, in a video accompanying the post. “We’ve changed how we work, our culture, our process and our decision making to enable speed.”