Articles

How Many Department Stores Are Too Many?

The United Kingdom has roughly sixty two million inhabitants. The leading full service department store in the world – Selfridges – currently possesses just four stores and it’s website and direct / catalogue operations to service the segment of that sixty two million people who shop at full service department stores.

A full service department store is not a self-service zone.

It is not constructed to be a self-service zone from its fixtures all the way through the business model and transaction processing. Floor stock in most departments is literally display only in many cases and demands assistance to purchase. Selfridges has more on-floor service staff per square metre in their stores than any comparable store outside the United Kingdom. You cannot go more than 3 metres in any department without being greeted by, have eye contact from and enjoy disarming dialogue with a member of staff that genuinely aims to help you purchase.

A population about three times the size of Australia. Four stores.

A market where – unlike Australia – retail sales this year versus same period last year are in the decline, while Selfridges sales and profit are increasing.

In Australia, David Jones has thirty-eight stores and Myer seventy-four stores. To serve the segment of our twenty-two million people that want to shop at department stores. A population one-third the size of the United Kingdom. Our retail market is actually – despite media commentary to the contrary – at an all time high in same period dollar turnover and has continued to see same month this year versus same month last year growth throughout the global turmoil. In the same period both Myer and David Jones sales have declined.

Selfridges does not have suburban stores – only city locations and only one store per city. Myer and David Jones have city and suburban stores with multiple locations in each territory and coverage heavily biased towards suburban locations.

The suburbs are the natural home of the discount department store (DDS). High volume, low cost environments that sell volume goods at discount prices in self-service environments that are very efficient and very affordable for families who live in the suburbs to buy from. In these same catchments, Australian departments stores attempt to compete by cutting their cost base but maintaining selling environments that were constructed for full service and higher cost, lower turn merchandise.

In the same period that the customer’s time has become more and more valued by them, department stores have reduced staff numbers and staff costs in store set-ups that do not support self-service but rather trade off a reputation for delivering personal service as a differentiator. In their natural habitat – the CBD – Australia is well served by our department stores relative to the competitive context we live in. But in the suburbs both our department stores and their customers suffer (with some notable exceptions) from the fish out of water syndrome. So to my original question – how many department stores is too many?