Declaring that the problem with Gottschalks was simply too much overhead, Levy plans to keep administrative costs lean at his new Gottschalk by Joe Levy chain, which begins in November with the reopening of a former Gottschalks store site in Clovis, Calif. Other still-empty Gottschalks in Fresno, Oakhurst and other California towns are also under consideration as possible sites for the budding chain.
But the problem with regional department-store chains is so much more than overhead. Most importantly, it's economies of scale -- it's brutally hard to compete against the buying power of a Macy's (M), which absorbed and rebranded many regional chains on its way to dominating the sector.
The days when shoppers reveled in the luxurious department-store experience and were willing to pay more to shop there is fast vanishing, unless you're a customer-service powerhouse like Nordstrom (JWN). Most department-store shopping these days is all about price -- and massive sector leaders such as Target (TGT) and Walmart (WMT) will eat the lunch of any small fry who venture into this turf. Levy has said little yet about how he will make Gottschalk different enough to survive, aside from the usual platitudes about providing better customer service. The unanswered question is whether the chain can find unique merchandise to offer that will make it a destination, a critical factor for big stores today.
It's been many decades since anybody tried launching a new department store, and for good reason. Even fast-growing Kohl's (KSS), which has succeeded by aiming at younger shoppers with disposable, cheap-and-trendy fashions, started its big expansion in the mid-1980s but really dates back to 1962.
The rise of online shopping has savaged many department-store chains. The convenience they used to offer of everything-in-one-place has been outstripped by the convenience of sitting home at a computer and getting anything you can imagine delivered. It's hard to compete with e-tailers' low-overhead model.
Levy has at least got the smarts not to get back into selling mattresses and furniture, two notoriously tough and costly categories in terms of both inventory and space needs. Gottschalk will focus on apparel, accessories, shoes, gifts and housewares.
Gottschalk by Joe Levy may be an overgrown hobby business for a dyed-in-the-wool retailer who's finding retirement boring. But Levy could surprise us. With old Gottschalks stores standing empty, landlords are probably falling over themselves to make him a deal, so that'll help keep costs down for now. The odds are against him, but you've got to admire his moxie in trying to resuscitate one of the oldest names in department stores. If he succeeds in spawning a successful new department-store chain, it'll be a crowning achievement to his long career -- a possibility that's apparently proven irresistible.
Photo via Flickr user army.arch