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Department stores up the ante in the battle for fashion spend

As House of Fraser spells out its vision for the future, rival department stores are also making moves to grab a bigger slice of the fashion market. But which is most likely to succeed?

House of Fraser’s recent charm offensive towards suppliers - which involved posting them a glossy brochure outlining its future under new owners - illustrates just how important the battle for department store fashion sales has become. But the 61-store chain is not the only department store upping the ante with its fashion credentials. Middle-market players are also jockeying for position in the race to become market leader.

John Lewis, traditionally more of a destination for its homewares and electricals than for its clothing, is making huge strides to stake its claim with a more contemporary fashion offer. Meanwhile, struggling department store business Debenhams is embarking on a major store revamp programme to help revive its sliding fortunes.

House of Fraser’s management team had been tight-lipped about its plans since the retailer was bought by the Highland Group consortium last year. Now it has unveiled a raft of new brands for autumn and a multi-million pound store refurbishment strategy and marketing campaign, as well as a transactional website that will sell more than 250 brands.

It is a much-anticipated statement of intent following a management shake-up that saw new chief executive John King and chairman Don McCarthy take the helm. House of Fraser now says it wants to be the UK’s number one premium department store, sitting neatly at the feet of Selfridges. However, suppliers will be asked to help pay for the £50 million rebranding and marketing programme, and it is unclear how many will be willing to co-operate.

Some brands say they are glad to see the department store nail its colours to the mast, and have welcomed the company’s aspirations. Nigel Addison, sales and marketing director at Duck And Cover, which is supplying its womenswear collection to House of Fraser for autumn, says: “Progress has already been made since the change of ownership and we’re very pleased with it. You can already see within the stores that a lot of time has been devoted to creating a better environment. We’ve seen a good increase in turnover, so we’re happy. The branded offer provides good adjacencies for us and the online plans are great.”

Meanwhile, John Lewis has also been shaking up its operations. Earlier this year it promoted Peter Ruis to the newly created position of buying director for fashion - an overarching role for men’s, women’s and kids’ wear.

John Lewis has been revamping its fashion offer over the past couple of years, streamlining its own-brand ranges, introducing more premium brands and testing new shopfit ideas, including the roll-out of a new menswear area into 17 stores.

Its brand portfolio now features the likes of 7 For All Mankind, Diesel and Polo Ralph Lauren, as well as French Connection, Timberland and Gant. It is the only wholesale outlet for lifestyle brand Fat Face and has signed a deal to introduce Reiss to a handful of stores. It will also launch a Designer Collective menswear area later this month to test new brands and is in talks with premium labels including Timothy Everest.

Andrew Hampson, managing director of Timothy Everest, which offers a bespoke tailoring service and also sells made-to-measure suits in Liberty and Flannels, says: “John Lewis is trying to take in more upmarket customers. Our ready-to-wear suits would push the top price point to £550, with shirts at £100 to £125. Everyone is raising their price points, and John Lewis realises it can score if it sticks with good fabrics and good design. It knows it can get the price for it.”

Hampson believes revitalised House of Fraser and John Lewis chains can co-exist. He says: “There is room in the market for a retailer to sit between Marks & Spencer and Selfridges. It is for customers that are maybe a little intimidated by Selfridges and want a more mid-market feel. House of Fraser’s offer is less formalwear based (than John Lewis) and is a little more edgy, with more jeans and casual product. Debenhams has lost a lot of direction. Its Designers at Debenhams range is great, but it needs freshening up.”

Certainly Debenhams has been affected by a resurgent Marks & Spencer. While John Lewis posted a 38% hike in pre-tax profits to £264m for the year to January 27, Debenhams has issued three profit warnings since it floated last year.

Debenhams arguably cemented its status as the most pioneering fashion department store when it introduced the Designers at Debenhams ranges in the 1990s. But a lack of investment in stores and constant discounting has caught up with it and knocked its credibility as a full-price fashion emporium. Recognising that its store environment now falls short of the rest of the high street, Debenhams has also embarked on a refurbishment plan. It is also understood to be cutting down on the length of its promotions and discounts after slipping dangerously close to becoming a value retailer in shoppers’ eyes.

Nevertheless, the Designers at Debenhams model remains a significant point of difference for the retailer, and is still expanding - the business launched its first kidswear tie-up with Ted Baker this autumn. On menswear, it has cut its Designers at Debenhams prices by 15% to make it more competitive.

As well as a healthy pipeline of store openings for its full-size stores, Debenhams is also expanding its smaller-format Desire stores to extend its reach into smaller markets. The Desire format has also been used to trial new merchandising and shopfit ideas that can be transferred to larger shops.

Investec analyst Mark Charnock says: “The issue for Debenhams is that it needs to spend more time trading at full price. It will probably have to take a hit on sales to see gross margin go up. If anything, it has moved downmarket. Designers at Debenhams worked well, but so many other retailers are latching on to the idea. What House of Fraser is doing sounds sensible, although it will be up against it with John Lewis doing a better job on fashion. John Lewis is a bit more middle of the road and older, but there is some crossover in brands and it will be quite competitive.”

Of the three businesses, John Lewis has the most potential to add sales by growing its portfolio - it has just 26 stores and still lacks a presence in many parts of the UK. But up to 20 more stores are planned, with 10 in the pipeline before 2013. A debut store in Northern Ireland at Sprucefield shopping centre near Lisburn is also awaiting the outcome of a planning inquiry.

Debenhams has a healthy store opening plan, with 29 full-sized stores to add to its existing 126, while 61-store House of Fraser is planning new openings next year in Belfast, High Wycombe in Buckinghamshire, Bristol and London’s White City. It opened its first Irish store in Dublin last year. There are also rumours that the chain is looking for locations to trial smaller-format stores for specific product categories such as womenswear, although the chain has denied it.

All three businesses are ploughing extra cash into marketing campaigns, no doubt spurred on by the success of Marks & Spencer’s Twiggy ads. In the advertising stakes, House of Fraser and John Lewis are behind the likes of Debenhams, which drafted in actress Jane Seymour to star in its TV campaign to help attract older customers this spring. It has also launched a press campaign this autumn to promote its Designers at Debenhams ranges.

House of Fraser is vowing to spend £50 million on branding and marketing over the next three years, and appointed Matt Chambers to the new role of brand director in May. Meanwhile, John Lewis has increased its use of in-store graphics promoting its own labels, and is considering increasing its marketing activities next year.

But the most immediate battleground is likely to be online. Debenhams already has an established online presence and John Lewis launched an expanded fashion offer on its revamped website last week, adding the likes of 7 For All Mankind and Nougat to what was previously dominated by own brand. House of Fraser is spending £20m to put more than 250 brands and 8,000 products online later this month, as it vies for a slice of the £1.2 billion annual online fashion spend.

The stakes for all three middle-market department stores are high and the battle for market share will undoubtedly be bloody. But the race to the finishing line will be fascinating.

DEBENHAMS

UK and RoI store count: 126 full-size stores and 7 smaller-format Desire shops. Bought nine Roches stores in Ireland last September

International stores: 32 franchise stores.

Planned openings: 29 full-size stores and five Desires

Brands: Principles, Sonneti, Levi’s, plus Designers at Debenhams, which includes tie-ups with John Rocha and Betty Jackson, and other labels including Red Herring, Mantaray, Maine New England, Thomas Nash

Online: established transactional site, selling own label and brands

INITIATIVES

- £70m to refurbish 60 stores

- Cut down on mega-day Sales and number of discounting days

- Develop smaller format Desire stores

- Has cut menswear Designers at Debenhams prices by 15% to take on M&S

- Persistent rumours that Baugur, which owns 11% stake, could mount takeover

- Aiming for 50-plus market with Jane Seymour ad campaign

Most recent figures:

Like-for-like sales fell 6.9% for six weeks to April 15 and fell 4.5% for 26 weeks to March 3. Total sales up 5.8% to £1.29bn. Pre-tax profits up 34.4% to £105.5m

HOUSE OF FRASER

UK and RoI store count: 61 stores

International stores: none

Planned openings: four to open next year

Brands: Karen Millen, Whistles, Mulberry, Gucci, Prada, Paul Smith, Diesel, Polo Ralph Lauren

Own labels: Linea, Untold, Howick, Therapy

Online: scheduled to launch this month

INITIATIVES

- Aims to move more aspirational, closer to Selfridges

- New look for London Oxford Street flagship, plus £180m revamp of 61 stores

- New brands, including Isaac Mizrahi, Jil Sander and Calvin Klein Collection

- Childrensworld kidswear concept to launch, including first UK Gap concession

- £20m investment in website that launches this month selling 250 brands

- £50m to be spent on marketing and branding over the next three years

- Own-label sales target to double in 18 months

Latest figures:

Sales: about £1.25bn. Like-for-like sales rose 7.5% for the four weeks to December 20.

JOHN LEWIS

UK and RoI store count: 26 stores in the UK

International stores: zero

Planned openings: 20 more stores planned, with 10 by 2013, including Leicester, Portsmouth and Stratford in east London. First Northern Irish store at Sprucefield on hold, pending a planning inquiry

Brands: Gant, French Connection, Great Plains, Levi’s, Ted Baker, 7 For All Mankind, Timberland

Own labels: JL, John Lewis

Online: expanded online offer launched last month

INITIATIVES

- Tie-ups with Reiss, Fat Face and Timothy Everest

- New menswear storefit rolled out to 17 stores

- Designer Collective menswear space to trial new brands

Most recent figures:

Sales up 10.6% to £2.7bn for the year to January 27

Pre-tax profit up 27% to £319m

John Lewis Direct sales up 64% to £185m

THE BEST OF THE REST: UK AND REPUBLIC OF IRELAND DEPARTMENT STORES

ALLDERS

Speculation is rife that Allders owner Harold Tillman is preparing to resurrect Allders as a national department store chain to capitalise on the “grey pound”. Rumoured to be in talks with House of Fraser to take some of its tertiary stores, although this has been denied by HoF. Allders has one store in Croydon, Surrey.

FENWICK - Last year Fenwick remained one of the most profitable chains in the sector, with an operating margin of 10.8% on turnover of £329 million. However, this included a 9.2% fall in operating profits. Fenwick is thought to have been hard hit by the revitalised John Lewis, but its performance has also been knocked by rising costs.

HOOPERS

Eight-store department store chain Hoopers is in the process of completing a six-figure revamp of its Carlisle store. The ground floor menswear area will be extended and a new cookshop and linen department will open on the second floor.

PEARSONS

Pearsons revamped its store in Enfield, north London as part of the redevelopment of the Palace Exchange shopping centre, and closed its Wood Green store, also in north London. It also has a branch in Bishop’s Stortford, Hertfordshire.

SELFRIDGES

Selfridges overhauled the entire menswear department in its London store, adding the likes of Reiss and Topman to its offer, and shifting ties and shirts from the ground floor. The next project is to revamp the women’s Superbrands room, following the creation of an extra 3,000 sq ft for accessories and handbags in its new Wonder Room area. Its other stores are in Birmingham and Manchester, although planned expansion into Leeds, Newcastle upon Tyne and Bristol looks to have been abandoned. Profits for the first half of 2007 rose 33% to £65m. Sales were up 11% to £597m last year.

ARNOTTS

Chairman Richard Nesbitt bought out the 24.6% shareholding of Irish department store Arnotts that was owned by the O’Connor family for EUR40m (£27m) last week, giving him complete control of the company. Arnotts is planning a EUR750m (£505m) redevelopment of the Dublin department store and the surrounding properties which it owns, to create a new 47-store shopping district.

HARRODS

Sales at the luxury department store in London’s Knightsbridge soared 14% last year, and pre-tax profits more than doubled to £42.7m in the year to February 3. For the first half of 2007, like-for-likes were also up. Trade was boosted by opening the store until 8pm, plus recovering tourist trade. Harrods’ position looks secure thanks to its upmarket offer.

[BX] LIBERTY Chief executive Iain Renwick stepped down in May after four and a half years. The company is expected to be back in profit this year. His exit is said to have been due to strategic differences. A larger own-label offer for its Liberty of London brand is one of the goals for new chief executive Geoffroy de La Bourdonnaye. The retailer is also gearing up to open a standalone Liberty of London store in the capital.

BEALES

Following a profit warning in March, the 12-store chain embarked on the revamp of its stores in Bournemouth and Poole in Dorset. Chief executive Allan Allkins is expected to retire next spring. The retailer also launched a transactional website in May.

HARVEY NICHOLS

Sales rose 5% to £200m for the year to March 31, thanks to a burgeoning luxury sector. The group, is gearing up to unveil its seventh UK store in Bristol next spring, and is in the process of building a £1.5m expansion to its store at The Mailbox shopping mall in Birmingham. More international shops are planned in Indonesia next autumn. Its online operation is currently limited to accessories.

OWEN OWEN

After collapsing into administration in February this year due to cash flow difficulties, in May former owner David Thompson saw off competition from Allders and rescued three of Owen Owen’s stores: Lewis’s in Liverpool, Robbs in Hexham in Northumberland, and Joplings in Sunderland. Its three other stores have now closed. Thompson is focusing on rebuilding the business, and his plan to restock and open new departments is now 70% complete. Allders has opened homewares departments in the stores.

TJ HUGHES

Discount department store group TJ Hughes is ramping up its buying team after drafting in turnaround specialist Sue Tennant from Rosebys to replace chief executive Robin Dickie, who left in June. A new good, better, best pricing architecture will be introduced. The “best” product will be priced at just 10% to 15% above its core prices.

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