(FORTUNE Magazine) – THE DEPARTMENT store, that showcase of everything from washing machines to perfume, has long been the fabulous invalid of retailing. Like a Broadway play, it costs more to produce than many customers are willing to pay. Specialty stores that sell one kind of merchandise -- records, women's clothing, or shoes -- have steadily won over shoppers with eye-catching displays, better service, and lower prices. But a few big department-store chains are fighting back. ''She ain't dead yet,'' says James Zimmerman, chairman of Atlanta-based Rich's, one of a handful of companies that has not only survived the industry's prolonged shakeout but managed to make good money. The winners have picked up more than a few tricks from their specialty + rivals. Catching on to the notion that customers want to be entertained while they shop, they have packed stores with electronic gimmicks and remodeled interiors about as often as they once changed window displays. Most important, they have trimmed inventories and emphasized high-profit items such as clothing rather than refrigerators and other slow-moving items that take up lots of space. The current frenzy of alterations in the $140.5-billion-a-year industry comes not a moment too soon. Gim-bels, long a famous name in New York City, is going out of business. Alexander's and Ohrbach's, two other New York-based chains, are closing stores in the face of dwindling sales. Sears' retail sales have been flat for several years and profits have been declining. As bruising as it has been for many department stores, the melee in the malls has left some companies stronger and smarter than before. Macy's 1985 sales were up 15.5% over the year before to $3.2 billion. Bloomingdale's and Rich's, both owned by Federated Department Stores, got big increases in market share in the early 1980s and have managed to hang on to them. The biggest winner in 1985 was Dillard's of Little Rock, Arkansas, which operates mostly in small cities. Partly because of acquisitions, Dillard's sales rose 25% over the year earlier to $1.6 billion. Profits were up 31% to $115 million. Merrill Lynch has touted Dillard's as ''a growth company in a maturing industry.'' RETAIL MANAGERS, consultants, and security analysts suggest six strategies to match Dillard's success, and that of some other successful chains: Find a strong chief executive and keep him. ''There are no home runs in this business,'' says H. Michael Hecht, 46, chairman of The Broadway, a 42-store Los Angeles-based unit of Carter Hawley Hale Stores. ''It is a game of squeezing out singles, bunts, and walks.'' Managing in such a close game requires an iron hand. Analysts point to strong chairmen like Macy's Edward Finkelstein, 61, and Bloomingdale's Marvin Traub, 61, as well as savvy families like the Nordstroms in Seattle. The Dillards have run their company since it was founded in 1938. Wall Streeters say Gimbels' downfall was partly due to frequent management changes by the company's British owners. Invest in computers. At a cost of $20 million, Dillard's built a centralized computer system that links 115 stores in 11 Southern and Midwestern states. The system keeps track of inventory, allowing management to peer into every cash register. It cuts overhead, and the savings are spent on more advertising and extra salespeople to improve customer service. Buy out your competition at the first opportunity. Shopping mall construction has slowed markedly, so acquiring weaker rivals is the most common way retailers can get new locations. Dillard's snaps up sluggish stores from otherwise successful retailers like Macy's and Dayton-Hudson. So far, it has been able to turn them around. May Co. is acquiring Associated Dry Goods, whose operations include the specialty store Lord & Taylor and such well-run local department stores as L.S. Ayres & Co. in Indianapolis. John Hoerner, chairman of L.S. Ayres, sees another advantage in the industry's consolidation. In the past managers felt stampeded into new malls because competitors were there. ''Now you can be more discerning,'' he says, choosing sites on their merits. In this business, bigger is definitely better. Monroe Greenstein, a retailing analyst at Bear Stearns, says the retailers' rule of thumb is that the store with the highest sales in a given market is very profitable, No. 2 is profitable, No. 3 is marginal, and No. 4 is losing money. Develop a clear image. A well-honed identity helps persuade customers that they are getting their money's worth even if the department store is pricier than some of its rivals. Bloomingdale's is renowned as a yuppie emporium, where trendiness makes up for higher prices. Macy's aims for the shopper on a budget who is interested in wide assortment and name brands. A reputation for quality merchandise, hassle-free returns, and more personal service may still draw a value-conscious crowd away from discounters such as K mart and Toys ''R'' Us despite steeper price tags. One reason Sears is having trouble is because its image is fuzzy. Long known as a sure-fire place to buy a lawn mower or a swing set for your kids, Sears in recent years has tried to emphasize high-fashion clothing, with women's lines endorsed by model Cheryl Tiegs and pin-striped blue suits modeled by Arnold Palmer. But the solid, utilitarian image has yet to be fully replaced. Build medium-size stores and fill them with strong departments. ''There used to be a maxim that a great department store is a combination of lots of mediocre departments,'' says New York retail consultant James Posner. ''That isn't true today. If you're going to have a book department it had better be a good one, because B. Dalton is just down the mall.'' Rich's has put gourmet markets with such items as Dom Perignon champagne and miniature squash in three of its stores. The buildings do not have to be so large anymore. Many department stores that once carried everything including the kitchen sink no longer bother to sell appliances, toys, or tools. Instead they concentrate on women's clothing and accessories, goods that enjoy high margins and relatively quick turnover. Wallets and wristwatches also take up less floor space than washing machines. ''The wave of the future is down-sized buildings,'' says Arthur Handshaw, president of Retail Planning Associates, a consulting firm in Columbus. He thinks three floors will be the maximum for most suburban stores. Spend money on staff. Hire more salesclerks and train them better with the savings from computers, as Dillard's does. Lazarus in Cincinnati, for instance, has added 200 salespeople. One persistent customer complaint at many department stores is surly or sloppy service. Since stores usually stay open 70 or more hours a week, they rely heavily on part-time sales help. To make matters worse, retailers' after-tax profits of 3% to 4% tempt managers to squeeze every nickel, skimping on training. Survival-minded retailers are learning the value of rewarding salesclerks with commissions. Chairman Hecht says that sales at The Broadway stores have risen ''significantly'' since October, when the company started paying commissions. The chain pays 85% of its staff on commission, up from 20% last year. Some chains have also begun to hire professional shoppers to grade salesclerks on selling skills and courtesy. The shoppers appear in a store as many as 30 times a month, but never reveal their mission. The customer service model for much of the industry is Seattle-based Nordstrom's. The chain's clerks keep notebooks on customer dress sizes and fashion preferences. In some stores a tuxedoed bootblack will shine your shoes, while an elegantly attired employee plays a grand piano amid the haute couture dresses. The approach seems to work: Nordstrom's stores' 1985 sales per square foot were $294, almost double the industry average. Sales last year rose 36% to $1.3 billion and earnings 23% to $50 million. Change displays monthly and remodel the entire store every three to five years. Many stores have huge visual display departments; L.S. Ayres in Indianapolis has 78 people working on lighting, display design, and mannequin arrangement. Rich's in Atlanta has discovered that presentation can be everything. The store was selling two pink Sony television sets a week, until a designer set up an elaborate display of pink cameras, TVs, tape players and telephones held aloft by pink robots with whirring lights for eyes. Thanks to the glitz, the stock of pink equipment sold out in five days. Many companies are pouring money into renovating entire stores in hopes of thrilling the jaded. Rich's calculates that the average customer visits a store 28 times a year. But managers worry that if the customer sees nothing new on many of those visits, the number could drop sharply. Successful retailers insist that stores today satisfy a mild and modern version of the ancient Roman craving for bread and circuses -- albeit now updated to designer chocolates and laser light shows. ''That's why department stores are going to be here a hundred years from now,'' says Zimmerman of Rich's. ''And that's why electronic telemarketing and all that stuff won't ever put department stores out of business. The biggest single problem in America is boredom. That's why people go to shop.'' And you thought they just needed new shoes.