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Le Bon Marche in Paris.

On a recent Sunday, when stores in Paris are usually closed, Le Bon Marché was not only open and jammed with Christmas shoppers, it was teeming with young children riding a merry-go-round and taking in a puppet show. Partly, this jour exceptionnel was a family-friendly culmination to celebrations of the department store's 160th anniversary. Earlier this fall, there were also special exhibits (including windows designed by star graphic novelist Marjane Satrapi) and events (for example, a film featuring Catherine Deneuve strolling the department store's Left Bank neighbourhood).

All very charming. But there is a broader rationale for tipping the balance between shopping and spectacle here, evident by the masses of large black and gold shopping bags in view: To thrive, department stores need to be much more than simply a space to buy stuff. They need to tap customers at a deeper level – the level of ideas and dreams.

No one understands this better than Frédéric Bodenes, who was hired to "tell stories" and "create experiences" for the store's shoppers – a position that had never existed before he came on board.

"Department stores today realize that their role must evolve," he says. "They need to offer other things besides products, things with immaterial value. … We didn't want people to come here just to buy. We wanted them to come to discover, and then from there, to have focused talking points."

Not too long ago, the only talking point around department stores was their imminent demise. According to Boston Consulting Group, from 2003 to 2010, the U.S. department-store sector shrank by 3.7 per cent to $66-billion (U.S.), as overall retail sales picked up by that same percentage and online stores jumped by 11 per cent.

Many department stores, let's face it, were seen as dowdy, and looked the part. Dressing rooms were scuffed and funky, and spotting a sales clerk was about as likely as seeing another shopper. When Hudson's Bay Company was taken over in 2008 by Richard Baker, a U.S. real-estate mogul, even he admitted that stores were tired and in need of renovation.

So why are you likely to be in a department store this weekend (that critical period when retailers ring up one-third or more of annual sales) when they seemed like dinosaurs only a few years ago?

Last month, Hudson's Bay Company launched a sizable initial public offer; Holt Renfrew is currently pouring $300-million into expanding its stores and has plans for another chain, Hr2; the U.S. retailer Nordstrom is feeling bullish enough to expand into Canada in 2014 and in Europe, Paul Delaoutre, chairman and chief executive officer of Galeries Lafayette, expects sales to rise to about 1.5 million euros this year from 1.4 million euros last year.

What explains the radical shift from a sector in crisis – a bold new approach that draws directly on the early roots of shopping.

It was Émile Zola who referred to the department store as "the cathedral of modern business."

His 1883 novel Au Bonheur des Dames (The Ladies' Paradise) tells the story of a retailer named Octave Mouret, whose department store is both "strong and light," a place for shopping but also a place to read, to see art and to socialize, with other women, and with families. "Women came to spend their hour of leisure in this shop," he writes, "the thrilling, disturbing hours which in the past they'd spent in the depths of a chapel."

Zola was clearly inspired by Le Bon Marché, sometimes called the world's first department store. It was that shop's founder, Aristide Boucicaut, who installed a gallery in 1875. But more important was his insight into shopping itself. The department store, for better or for worse, was a place where capitalism and identity intersected: It offered a sense of place, a connection to other shoppers and tapped into larger ideals of freedom and free time.

There was an almost spiritual aspect to going to market. The department store was an embodiment of "the good life" as a church was of the "good self."

This thinking is quite clear in Paris. By 1912, Galeries Lafayette not only launched a store with five floors of merchandise but an urban landmark with a neo-Byzantine glass dome with 10 painted windows. A cathedral of business, indeed. Today, the store draws more visitors than the Eiffel Tower and the Louvre. Printemps, another stunning French heavyweight, estimates that it has 22 million visitors annually.

"Essentially, [department stores] are spaces in which people come to buy and consume but also to improve their life, to discover things, to take in an experience – the fashion, the architecture, the design – a complete mise-en-scene," says Guillaume Houzé, the great-grandson of Galeries Layfayette's founder and its director of corporate image.

But a compelling space is not enough. As museums have learned, the draw for visitors is not just being in a beautiful building with beautiful things – it's how you interact with them, it's offering them an experience. The payoff is keeping customers in the store, and coming back to it.

"The department stores gave permission to look," explains retail expert Paco Underhill, the author of Why We Buy: The Science of Shopping. "Up to that point, if you walked in, it was expected you would buy. The ability to browse whetted people's appetites and what the original merchant learned from that was if you don't buy now, they have put a seed in your head and at some later point, you will aspire to buy it."

The revival of the upscale department store, then, is partly reviving a feeling of largesse, of scale and monument – hundreds of stores have undergone massive renovations in the past decade – and partly a recognition of those intangibles that make up "thrilling, disturbing hours."

This is why you are more and more likely to see a live fashion show at the headquarters of the Hudson's Bay Company, or a musician at a grand piano in one of Holt's "shoe halls." And the trend goes beyond the West: Isetan recently overhauled the women's department of its flagship store in Tokyo, adding art and fashion installations.

Sometimes the experience department stores offer are somewhat counterintuitive. In Britain, Selfridges (owned by Canada's Weston family) is introducing at "no noise" campaign at its Oxford Street store this February. Inspired by a silent room introduced in 1909 by the store's founder, the campaign will include a soundproof area, meditation sessions and a "quiet shop" selling "debranded items."

"Customers are suffering a deluge of information and communication and deluge of brands and choices. We know we're part of all that," creative director Alannah Weston says. "So what can we do to ease it up a little and give slice of silence?"

If this seems risky, Ms. Weston says, "it takes confidence to think of [the department store] as a dwelling space and not a shed full of product that people are forced through."

Confidence is still sometimes hard to come by, however.

Even as they amp up the drama of in-store shopping and draw on their roots as places for social interaction and shared dreaming, there is pressure to match the efficiencies of digital shopping: Nordstrom now has mobile checkouts to cut down on lineups at the cashier; Hudson's Bay (which also owns Lord & Taylor in the United States) is ramping up its smartphone shopping services and, earlier this year, introduced a "virtual greeter" named Anna at its Toronto flagship, which allowed customers to buy products simply by touching the shelf they were on with a QR-embedded card.

In retail jargon, this approach is called omni-channel shopping, since it allows shoppers to buy products wherever and whenever they want, from a home computer, a laptop, a mobile phone or at a physical store. "That's what every department store is after right now," says Marc Metrick, chief marketing officer at HBC. "Whoever cracks it first and right is going to be a big winner."

But it's harder than it looks: The Bay let Anna go a few months ago.

"It's an inevitable downward spiral," said Mark Cohen, former chief executive officer of Sears Canada Inc. and now a professor at the Columbia Business School in New York. "E-commerce is an enormous threat. It's the second biggest shadow that crosses their enterprise."

Another shadow is the challenge of fragmented markets: Even high-end shoppers now buy at places like Target Corp., which will start opening stores in Canada next year. And while shoppers want that element of fantasy and luxury at department stores, they also demand at least a hint of accessibility (thus the inclusion of moderately priced British line, Topshop, at The Bay, Nordstrom and Selfridges).

For all that, though, the days of deathly sluggish high-end department stores – even in Paris on a Sunday – seem behind us. Back at Le Bon Marché, the team seems particularly pleased with the way their year has panned out.

Asked how they think Mr. Boucicaut would feel about the message the store conveys today, Mr. Bodenes replies, "The business is important, of course, but beyond the business, this was to be a place where women could come with their kids and have a place where they could rediscover themselves. He wanted an experience that was truly pleasurable. Aristide would be very happy to see this tradition continue."

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