My recent blogs, for the most part have tended to be pessimistic in the extreme. I have focused on retailers that are in decline: some of them terminal. I continue this unhappy trend by looking at department stores in general and Debenhams in particular in this blog.

Recently Debenhams, a bastion of the UK department store sector announced that it was closing ten stores with immediate effect and forty more over the coming months. With over one hundred and sixty stores dotted across the UK it has been a retailer exuding history and heritage for decades. Earlier in the summer of 2018, House of Fraser also went into terminal decline. In the USA another iconic department store, Sears announced closures. Is nothing sacred anymore?

Department stores have been around since the middle of the nineteenth century. They represented the innovation of those times, leading right up to the 1970’s in Western Europe and the USA. They were the precursor to the shopping centres and malls.

Their unique selling proposition (USP) has revolved around the fact that it is a “one-stop-shop” carrying a wide range of brands in an eclectic mix of product categories. Shoppers can explore the offerings over a wide shopping space and over a number of different floors. What’s not to like about this?

Well the reality is that the inevitable rise of online channels, social media platforms and location-based marketing has shattered, if not irreversibly damaged this hitherto strong differential advantage.

Time-poor shoppers find the concept of trekking around a department store to be unduly daunting and stressful. Why put yourself through this misery when you can shop in relative peace from the comfort of your home, place of work or on the train or bus into work?

Different sub-sectors of retailing: fast fashion and electronics, to name but two, provide a much wider range of items in a specific category than a department store can hope to deliver.

Their cost structures are lower, particularly those with no physical presence on the high street. Their taxes are also lower and in some cases non-existent.

As department stores grew in size (in terms of physical space in an individual store and in scale of operations) many shoppers see a badly laid-out store, with the constant drudgery of going up escalators and floors to find the required department.  The worst of them are almost like a maze!

In previous blogs we have discussed the cost structures that have damaged stores such as Marks and Spencer and House of Fraser. I do not plan to revisit this in detail again. Let us focus instead on other issues that have led to the potential demise of department stores and discuss whether or not they can instigate measures to improve their prospects going forward.

As we have discussed in my book, one of the biggest apparent crimes that a retailer commits is that of being “stuck in the middle”. By this I mean that they are not seen as a premium player or a discount player in their retail sector. This reduces the ability to develop a clear point of differentiation when compared to their competitors. This makes it difficult for the shopper to identify a clear reason as to why they should patronise this store and give it their repeated custom.

What can we take out of this observation? I would suggest that being “stuck in the middle” is the ultimate recipe for blandness, boredom and a muddled value proposition. In most retail sectors shoppers are looking for excitement or something different to what is there already. Middle of the road retailers fall down between the cracks. If we consider the concept of positioning then it becomes almost impossible to create such points of differentiation.

In the case of department stores in the United Kingdom, we can see that premium retailers such as Selfridges and Harrods most certainly do not fall between the cracks. They put forward innovative initiatives that help them to create a position in the minds of their respective target markets.

Put simply they focus on experiential customer journeys when shoppers make a visit to their stores. This is reflected in the way in which they make use of retail space. They work on the principle of providing a range of activities that are not necessarily focused on the purchase of items. They indulge in some of the following by way of illustration. Dedicated events such as masterclass cooking classes, juice bars, restaurants and so on. The toy departments introduce a range of multi-sensory features to enhance the experience.

None of these are necessarily unique in my opinion. We see many such activities in shopping malls for instance. However they address the fundamental need for many shoppers: in interactive and positive shopping experience. Whether or not this is a long-term way of sustaining their businesses is debatable. What is to prevent competitors in the non-department store sectors introducing better “experiences” for shoppers?

Premium department stores also have worked more proactively to develop the omni-channel experience. With varying degrees of success they are striving to provide a relatively seamless and integrated experience for shoppers across their touchpoints during the purchasing process.

Middle of the road department stores such as Marks and Spencer. Debenhams and House of Fraser have failed to grapple with experiential customer journeys to the same extent. They have also been more reactive than proactive in their quest to develop omni-channels.

The net result is they have struggled or in the case of House of Fraser gone out of business.

In my view it is inevitable that even successful department stores will have to rationalise their physical store operations to reflect the changing trends.

By contrast they can focus more fully on their “flagship” stores. These stores allow them to portray their “best-in-class” value proposition: innovative brands, new initiatives and so on. If the trend towards omni-channels continues apace then it is likely that the flagship, “bricks and mortar” store will continue to play a role in the customer journey.

This weakness with department stores even extends to one of their traditional metrics for measuring performance, sales per square foot”. This approach takes on decreasing relevance as footfall to department stores declines and eyeballs on online channels grows.

There has also been (relatively speaking) little meaningful investment in the department store sector. When allied to the high overhead costs we can say that this has led to the decline.

Some stores have addressed in-store elements such as in-store WIFI, self-service kiosks, and staff tablets and so on. Again they have been relatively slow in relation to other retail formats to embrace such technology. Constantly playing “catch-up” in not the best way to succeed.

The concept of a “one-stop-shop” across a very large, potentially confusing space, arguably is not the way to go in light of trends and developments in the retail sector.

Let’s watch this space!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s