Suggestions that the department store model is severely under threat have been quashed by an upsurge in innovation and activity in the sector.
Research firm Verdict Research revealed that 2 million more shoppers are heading to department stores to buy their clothing than in 2006. Department stores have been moving quickly to capture those customers where the battle for market share is fierce. Acquisitions, own-brand strategies and increased firepower overseas and online are all helping to make the department store sector a vibrant place post the recession.
Last month, Liberty, one of the UK’s most iconic department stores and one that has stood for cutting-edge fashion and creativity, was sold to private equity fund BlueGem Capital Partners for £32m, with £10m to be injected to drive better merchandising and improve systems. BlueGem owner Marco Capello has an exciting growth story for the “national treasure” which has struggled for years to maintain its niche positioning and to turn a profit.
Capello sees opportunities to return Liberty to its former glory by integrating its Liberty of London own label to sit alongside its luxury counterparts at a more affordable price. He also sees growth overseas. A menswear licensing deal with Italian manufacturer Slowear has laid the foundations for risk-free market testing with Liberty of London.
Capello - who is undertaking a review of the store this month - has not ruled out the possibility of making Liberty more accessible to a key demographic, the tourist, with lower-priced designers.
If he pursues this option, he would follow rival Harvey Nichols, which has converted the fourth floor of its Knightsbridge store to more mainstream brands in order to beat the downturn.
Luxury rival Harrods is also ramping up its own-label offer. It is set to open dedicated areas for its eponymous own label by 2012 as it sees “huge potential” for the range, says general merchandise manager for menswear Jason Broderick.
The push for own label is helping to attract the new customers Verdict has identified as shopping for fashion in department stores. A significant proportion of the 2 million new shoppers are aged 55 and above, many of whom are less concerned about a branded offer.
Sarah Peters, senior retail analyst at Verdict, said: “Department stores have been able to tap into the 55-plus market, one that is generally underserved on the high street. In fact, our research shows that 46% of consumers who use department stores to shop for clothes are over 55.”
However, the younger market should not be overlooked, as although only 8.3% of 16 to 24-year-olds use department stores to shop for clothes, there are signs of potential growth, according to Verdict.
Carly Syme, retail analyst at Verdict, said: “Although traditionally some department stores have mainly appealed to young customers via their health and beauty offerings, they are now working to ensure these shoppers spend their cash on clothing by increasing their brand mix. Debenhams, for example, has introduced its fashion-forward H! by Henry Holland range.”
As well as attracting a new customer, own-label offers bring their own benefits in terms of margin and profit gain, something Debenhams has been chasing. The department store has converted some 500,000 sq ft of concessions space to its own-label offer, which includes new ranges for its Designers At portfolio from the likes of Holland, and new launches such as menswear range Fit For Purpose for autumn 10.
Debenhams has also been swift to react to acquisition opportunities, with a £13m deal for Danish department store chain Magasin du Nord allowing it to test a company-owned overseas strategy and trial its own labels in other markets. It has also picked up floundering businesses, such as footwear chain Faith’s concessions business and its revival of womenswear chain Principles, now designed by Ben de Lisi.
This week, House of Fraser said increased impetus behind its own-brand offer would help it to deliver a like-for-like sales rise of 7% for the six months to July. In September it will relaunch iconic brand Biba and expand its own-label offers.
Meanwhile, John Lewis has, in contrast, been evolving its offer to include an array of brands that would not have been associated with Middle England’s favourite department store a few years ago. Revamped womenswear departments in Cardiff, Cheadle in Greater Manchester and Welwyn Garden City have created a boutique shopping environment. It has also launched its first designer collaborations, such as its Joe Caseley-Hayford menswear range, as well as exclusive lines like its Damsel in a Dress range.
John Lewis’s online offer has been a huge success (it is expected to add £10m to online fashion sales by 2011), and etail offers from Selfridges and multichannel initiatives from House of Fraser have upped the department store sector’s online game.
It’s not only the multiples that have taken advantage of opportunities in the sector. Independent department store chain Beales has created womenswear and menswear own labels - REDi and Crimson respectively - and is rolling out a men’s young fashion offer.
However, it has not all been plain sailing in the sector. Independent department store group Vergo Retail - which included Lewis’s of Liverpool and Joplings of Sunderland - hit the buffers earlier this year. Even Debenhams’ own-label strategy has been at the forecasted expense of like-for-likes, which fell 0.4% in the 42 weeks to June 19.
One source said: “While Debenhams and many other department stores are chasing profit rather than sales this year, there is a customer which looks for brands. Sales must bounce back too at some point if the [department store] model is to survive.”
Verdict added that staying close to the department store customer was vital, and stores must react quickly to the needs of specific demographics and offer newness and excitement.
Peters said: “Department stores must offer something unique - this could be superior service, an aspirational store environment or exclusive ranges. They need to ensure they offer customers true value.”
Rise in the number of people shopping for clothing in department stores this year compared with 2006
Consumers aged 55-plus who use department stores to shop for clothes
Consumers aged between 16 and 24 who use department stores to shop for clothes