Research Briefing Winter 2018 Transforming the Department Store New. Updated. / Back Next visualthinking.co.uk / 1 About The very definition of the department store is in flux. Since we published our first report on mainstream department stores, the sector has seen acquisitions, restructuring and hundreds of store closures. Visual Thinking knows a thing or two about the department store What department stores will look like in the next five years is one sector. With 25 years of experience, we’ve enabled some of its question; but what about the here and now? The hard truth is that biggest names to see real and immediate breakthroughs in store retailers must balance the need for long-term strategy with the more performance. Our team of retail transformation specialists are immediate reality of poor store performance. Many do not have the dedicated to helping retailers take stores from the everyday to the luxury of time to get it right; with individual stores and even the very exceptional. Whether your focus is on game-changing methods existence of the retailer themselves under continued threat. or continuous improvement, we turn big strategy into meaningful In this report, Visual Thinking has set out to explore the current action – informing policy, embedding change, empowering teams challenges and opportunities facing our mainstream department stores and engaging shoppers. No one delivers visible change instore if they are to turnaround their commercial fortunes. Not at some point better and faster. in time, but today. For more information visit: We hope this report, supported by exclusive research conducted by www.visualthinking.co.uk Roamler and expert opinion and analysis, goes some way to answering the key questions facing the sector. Which brands face the biggest challenges? Where should senior leadership teams be focusing investment to deliver tangible improvements in retail performance? How can retailers deliver new strategies and innovations at the scale and pace required? Put simply, there is much work to do. Many in the sector are still missing out on quick wins. Whether that’s better-defined visual policy – making stores easier to navigate and fulfilling shopper desire for environments with a greater sense of discovery and inspiration – or improving store team’s ability to deliver first-rate retail standards. The support and tools exist. They just need to be adopted and applied effectively Many in the sector are still missing out on quick wins. Image | David Jones Flagship, Sydney, Australia Karl McKeever Visual Thinking Back Next 2 Rising Demands Many mainstream department stores are falling short when it comes to making a good impression. Most are simply fighting for survival. Others have already fallen off the cliff. Image | © Shutterstock Back Next 3 The strain on the UK department store market has been highlighted by the high-profile struggles of leading chains. Changing shopper behaviour, declining sales, falling profits and poor leadership have all added to the pressure. While iconic names likes Harrods, Harvey Nichols and Selfridges continue to thrive, it’s important to draw distinctions. These are high-end names with small estates – completely different beasts to the likes of Debenhams, House of Fraser and John Lewis. In 2017, sales in UK department stores amounted to £34.5 billion. Although sales figures have remained relatively stagnant in the last few years, forecasts reported by Statista predict that department stores will see a decline in sales as high as 17% between now and 2022. We have already seen the demise of British Home Stores, and House of Fraser fall into administration before the Mike Ashley buyout. Debenhams and Marks & Spencer have seen a decrease in their market share and are closing stores. Marks & Spencer went from being the leading retailer with 29.1% of the market in 2012 to falling below Image | John Lewis, White City, London John Lewis in 2017. Between 2012-2017, both Marks & Spencer and Debenhams experienced declines in their market share of around 6% and 1.5%, respectively. In the US, the story of Sears is a sobering one, with the former bastion of These are certainly ‘interesting times’ for department stores. the department store now struggling for survival and closing hundreds of Innovation has predominantly centred on creating a compelling instore stores in a bid to tackle some of its vast debt. Proof if needed that size environment and whilst this is important, research suggests that and reputation are no guarantee of survival. Canadian retailer Hudson’s department store retailers should be doing more to ensure both their Bay also has experienced significant losses, leading to a number of store products and instore merchandising resonate with customers, if they closures, including 10 of its Lord & Taylor stores in the US. In Australia, are to reinvigorate sales and deliver sustainable profitability, once the Big W, Target, Myer and David Jones have all seen a difficult year. Target short-term benefits of cost cutting measures have been exhausted. has announced plans to close up to 20% of its stores. David Jones has placed all its focus on its Sydney flagship store as part of a $200million Download a copy of our original 2017 Research Briefing, Click Here. refurbishment. Reporting massive losses, Myer has brought in new Chief Executive John King in a bid to turn fortunes around. Meanwhile in Germany, Karstadt and Galeria Kaufhof are to merge, making it one of Europe’s largest department stores, with 243 stores. Which? Customer Satisfaction Ratings The annual high street retailer survey compiled by Which? is the UK’s biggest. Here’s how customers ranked the UK’s big four mainstream department stores. 1 50 50 36 14 10 100 House of Fraser Debenhams Marks & Spencer John Lewis Customer score is based on overall satisfaction with the shop and how likely people are to recommend it to a friend. For the full list of Britain’s best and worst high street shops, visit www.which.co.uk Survey of 10,356 members of the UK general public in January 2018. Back Next 4 As we highlighted last year, Marks & Spencer announced In our 2017 edition of ‘Transforming the a ‘transformation strategy’. Still, chairman Archie Norman Department Store’ we explored the challenges recently declared the retailer was ‘on a burning platform’ with its future resting on its ability to change and develop. ahead for mainstream retailers in the UK sector. The company has reported a small increase in profits, but So how do things look 12 months on? declining sales in clothing and food, therefore it has begun its programme of closing 100 stores by 2022. Chief executive Steve Rowe is now leading a radical retail transformation plan, which includes opening newly remodelled stores in 2019, fixing the online channel and putting It’s been a turbulent year for the retailer. This time last every aspect of the supply change, ranges and marketing policy under year, the talk was of its planned transformation strategy, close scrutiny. encompassing product, customer and infrastructure. But since the £90m buyout in August, Mr Ashley has sacked the former directors and senior management team, including CEO Alex Williamson. Key concessions and Our reference last year to John Lewis’s ‘reinvention for the suppliers such as Edinburgh Woollen Mill have pulled out, with brands 21st century’ has now been strengthened by the retailer’s seemingly nervous about now supplying product. More imported brands announcement of a rebrand, becoming John Lewis & from Sports Direct have arrived, but run the risk of undermining the Partners. This is accompanied by a new monochrome retailer’s traditional values if implemented poorly instore. House of Fraser visual identity and is mirrored by its supermarket arm, has also alienated customers with ambiguity over gift cards bought before rebranded as Waitrose & Partners. For the first time ever, the buyout. The retailer now looks set to be hit by further store closures the two operated dual marketing campaigns. The ambitious campaign was after landlords have rejected rent proposals. supported by a big launch to communicate the rebrand, with a group of schoolchildren staging a theatrical reimagining of Bohemian Rhapsody. Meanwhile, its new ‘experiential’ concept is evident in its White City and Debenhams’ reputation for relying on Blue Cross discount Oxford stores, with demonstrations, services, sensory VM and exploratory days boosted sales but encouraged customers to wait shop fits designed to actively engage shoppers. for promotions before buying, further squeezing the bottom line. Last year, we touched upon the Debenhams Redesigned strategy. CEO Sergio Boucher describes it as ‘...not trying to be more premium, but to have a more premium presentation.’ Its new-look Watford store is the Something of a new entrant into the department store realisation of this strategy, designed to make shopping easy, sociable world, Next has taken the bold step of dipping its toe in and fun. With hero departments, including beauty and home, it places the department store ‘these waters’ with its new store on a strong focus on innovative thinking, with flexible zoned areas and Oxford Street. The store features own-brand products interactive spaces. However, the retailer has now announced up to 50 store along with an array of concessions, such as Lipsy, closures, almost a third of its estate, along with huge profit slumps. Are Paperchase, Clarks Kids and Dutch lifestyle brand HEMA. we likely to see the sale of the company’s