What does the future hold for department stores?

Retail sector challenges have been hitting the headlines for all the wrong reasons for a good few years now, and the department store has seen a particular focus. But is the outlook as pessimistic as some would have us believe, or is there scope for a reinvention of this much-loved store format? 

Department stores have a special place in retail history as palaces of luxury and innovation – in the 18th and 19th centuries they were effectively theatres of consumerism; the place to see and be seen. Interestingly, by the early 20th century elevating the consumer experience (Selfridges) and tempting shoppers in with new technology (Harrods installed the first escalator in 1898), were successful strategies used by the retail innovators of the day. 

Retail landscape shifts and developments 

In recent decades, however, the headlines have not always been so positive. With the department store model having expanded to include the middle market, and the advent of online shopping impacting on the high street, there has certainly been a shift in thinking about the success of the department store. Some commentators have declared that this type of business is waning, citing the fact that all around the world some once-great stores have closed. The data backs this up, with 85% of stores operated by ‘traditional’ brands on the UK high street having closed. 

But is the picture really this bleak? While disappearance of some very well-known chains, including the once-ubiquitous Debenhams, might suggest some truth in the idea that the department store is defunct, but there are just as many industry voices offering an alternative viewpoint. 

Department stores fit for the 21st century 

The common thread is that in order to persist, the department store must evolve. It’s not so much that consumer desires have changed, although options have certainly broadened, and it’s not even the impact of COVID driving more retail online. It’s more that allure of the department store has been allowed to fade.  

Rather ironically, the innovation required for success in contemporary times actually harks back to the approach taken by the earliest department store pioneers: focus on the customer experience – what makes customers keen to step inside, whether that’s events, experiences, a niche offering, or exclusive products – and highlight the latest technology.  

Getting this right makes all the difference. There are in fact some thriving brands in the space, offering a unique customer proposition that is strong on community and experience, curating their stock carefully and offering added-value services – for example, Neighbourhood Goods in the US, and Sandersons in the UK. They’re not alone, either. In addition, the reinvented Frasers brand has seen a strategy that involves co-location with Sports Direct, Flannels, Evans Cycles, Game and Belong, with a site at Gateshead’s Metro Centre also boasting a large Everlast gym; Next has also moved into the space, first selling other brands through its online platform, and later opening department-style stores. 

Creating a compelling omnichannel offering 

It’s not a case of just harking back to days gone by, though, it’s about a return to the original principles of what made the department store proposition so appealing: novelty, luxury and innovation. Department stores do need to reinvent themselves for a new era and a new audience, across both physical and digital channels. 

The experience of stepping foot into a carefully crafted lifestyle environment shouldn’t be underestimated, and the department stores that are thriving seem to have this aspect covered. Not everybody wants to purchase as efficiently and conveniently as possible; shopping as a leisure activity – browsing without a clear idea of exactly what you want, for enjoyment and maybe an eventual purchase – is a pleasant way for many to spend their time, and curated collections also have the benefit of avoiding overwhelm (the paradox of choice is very real). In addition, the opportunity for experiences that elevate a shopping trip to something fun and innovative can be a compelling reason to visit a store. 

Conversely, the in-store experience shouldn’t be considered in an analogue bubble. Thinking holistically about how consumers shop, and meeting their needs seamlessly with an integrated system, ensures the best possible results across different demographics and different types of purchases. The complexity of consumer behaviour is best served in this way since they have maximum flexibility when it comes to how to choose and secure their purchases – whether they wish to benefit from the expertise and experience of customer service professionals, or simply to see products in real life to know exactly what they are buying (to get a more accurate idea of colour, texture, and feel). 

Customer experience is the key to success 

The pressures for department stores are still of course very real – as they are for many bricks and mortar retailers in the digital age – especially when you factor in what some commentators are saying about the trend for new investors to leverage the real estate of department stores, putting up rents and squeezing margins. However, with a return to the original formula for success, albeit for a digital age, the future is looking bright for department stores who “treat [customers] as guests when they come and when they go, whether they buy, or not,” as famously stated by Harry Selfridge. 

If you’d like to join the conversation about how technology can best elevate customer experiences, why not join us at our next retail event at the Royal Opera House in October?

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