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Monday, October 20, 2003

Once upon a time, when department stores were a fresh idea and their family owners cerebrated the synergies that might come from mixing ladies' millinery with gentlemen's haberdashery, all roads seemingly led to their doors. The great palazzos sold ready-to-wear soft goods, horse-drawn buggies, and bedding for people and often for plants. They set the styles and their marquees towered over the lesser-known names of shirts and pants and paints and sinks and the other bric-a-brac of modern life, circa 1900.

Timothy Eaton said his goods would be satisfactory or the customer's money would be refunded. But there is no more Eaton empire. The catalogue operation in Winnipeg closed decades ago; the remaining business flopped after an initial public offering of what many, though perhaps not enough, saw as a doomed stock; and Sears Canada Inc., that great merchant of hardware and appliances, bought the name. Sears promptly lost a fortune on a soft-goods concept that presumed the Eaton name was still worth something. Evidently, it wasn't.

No wonder it is widely believed that the pride of retailing in the 20th century, the department store, has turned from a swift ship into a slow barge.

The decline of the department store as the focus of retailing has been matched by the rise of big-box stores such as Home Depot, category killers such as Wal-Mart and brands that seemingly come with their own real estate such as Banana Republic. The cost of peddling clothing in high-rent districts is huge, but consumers perceive value in brand names and willingly pay for both. Meanwhile, the downtown department stores, even those close to the brands-turned-marquee, struggle with huge downtown rents, lack of parking and abandonment by suburbanites who are far from city cores or too worried about the safety of the areas to drive to them.

But don't count the big department stores out, not even the downtown ones that some critics regard as fossils of merchandising. Diane Brisebois, president and chief executive officer of the Retail Council of Canada, says downtown revivals and the gentrification of slums, the movement back to downtown living by those who have no kids or whose kids have grown up and gone their own ways, will contribute to a renaissance of downtown retailing. "We have learned that nothing is impossible in downtown areas," she says.

But there are challenges, Brisebois adds. "Power centres [clusters of big-box stores] are popular. They have good locations, and consumers who want one-stop shops and discounts go to them. They are the solution for shoppers who are starved for time."

Note that big-box stores face inward. They have no windows for people strolling past because no one walks to a parking lot to admire their goods. They are destination stores for the initiated.

Some department-like stores are thriving in the competitive retail environment. Costco and, of course, Wal-Mart are doing very nicely, notes John Winter, one of Canada's best-known retail consultants. From his Toronto perch, he says that some kinds of retailing survive for lack of alternatives.

"There is no substitute for the neighbourhood convenience plaza and there is no substitute for the enclosed regional mall," Winter explains. "But the big-box stores are not meant to be permanent. They are flimsy things and they seem designed to be developed. Then new big-box plazas will be built farther out, as have the designer outlets in Barrie, and more moose pasture will be turned to retail."

There are anchoring facts that will continue to direct retailing: Women spend three-quarters of all retail dollars, Brisebois says. Men buy the hardware. You can't run a lumber yard with its enormous demand for space in a downtown location. And the concept of bricks and mortar is here to stay as the foundation of retailing, Winter adds.

The World Wide Web has captured only a tiny fraction of retail sales, even though a few Web-based merchants such as Amazon.com have become category killers. A high mortality rate among the dot-coms has left traditional retailers much more secure.

© The Globe and Mail