Articles

The New Department Store Paradigm.

Every year I am lucky enough to travel the world and – like a voyeuristic sponge – soak up new knowledge from the best (and worst) the wonderful world of retail has to offer. Of particular interest over the many years of retail gluttony I have indulged in is the study of department stores because they affect the competitive context for so many categories.

We’ve gone from the land grab expansion of department stores in the 1980’s to their decline in the 1990’s to the more recent resurgence through internal restructuring in the naughties. Globally – for many department stores – big cracks are now starting to re-emerge. Former giants such as Japan’s Diamaru are so pessimistic about the future they are rushing to close stores and shrink their businesses.

‘Industry think’ is a powerful force and many of the investment and management leaders of department stores worldwide have lost sight of the core reason for being of department stores. Today many see themselves as more akin to small shopping centres – dividing space into concessions and running their promotional strategies as either the co-op funded equivalent of ‘catalogue concessions’ or merely tagging the advertising of the brands they stock.

Either way, many have opted to become the landlord rather than present a meaningful customer value proposition to the shopper. In a world which mixes increasingly interesting online retail, deep discounting from multiple volume merchants, over-distribution from national brands and brands themselves competing with flagship stores the customer is seeing less and less relevance in a large number of international behemoths.

But there are also department stores that get it and are prospering. Retailers like Harrods, Bergdorf-Goodman and Harvey Nichols. They know they are not landlords. They see their conceptual context not as a mini-Westfield but more aligned to a great magazine and specifically it’s stylist.

The era of the great contemporary department stores as we know them today began in the mid-19th century. They were emporiums. That is, their value proposition was and always will be anchored in their ability to be the style adviser, the ideas generator for the customer scouring the globe to select merchandise that is cleverly blended together into a story that excites and seduces.

The vast majority of department store customers are not stylists – they need help. Help to put together seductive ideas and to give them the confidence to buy them. This is the role of the department store. The default purchase zone that not only gives me a convenient comparative shopping opportunity, but one which showcases blended ideas from a multitude of sources that gives department stores a real reason to exist because they add creative flair.

Those department stores that see themselves merely as a landlord for other people’s brand to showcases are failing.

Those that recapture the essence of what they always were and make it relevant again in the 21st century will prosper and – as a result – create a better retail landscape for everybody.