Re-thinking the traditional department store format

A visit to a traditional department store often goes something like this: entering the building into a vast beauty hall, an emporium of brands selling makeup and fragrances behind counters, spritzing customers with their latest perfumes, pushy sales advisors at the ready. The adjacent aisles feature displays of handbags, accessories and gifts, mostly targeted at tourists and out-of-towners. Up the escalator is men’s or women’s wear, vast floor spaces of shop-in-shops retailing collection after collection. Above the fashion floors there may be homeware or tech or books, often the quietest spaces, bar the restaurant on the top level. So far so traditional, perhaps, but this format is quickly dating and no longer drawing customers like in its halcyon days.

The pandemic fuelled a seismic shift in consumer demand, which is why since economies reopened, department stores have been slower to recover. The disruption and challenges to the format have been felt for years, which is why legacy players from BHS, Debenhams, JC Penney, Sears, Barneys, Neiman Marcus, Hudson’s Bay, and a long list of others, have all faced bankruptcy, liquidation, closures, new ownership, re-financing or new management. Dubbed the legacy laggards, departments saw an average of -18 percent decline during the pandemic, one of the highest in the sector. As for those overly stuffed fashion floors, apparel saw sales plummet -25 percent.

Best days behind them?

Despite re-openings, traffic to department stores remains down. The question to ask is how will these stores, in a post-Covid era, meet the needs of the new normal? Shopping behaviour will settle after the pandemic becomes less of a day-to-day conundrum, but it remains to be seen which retailers will attract the most interest.

The original marketplace

Department stores were once great marketplaces and one-stop shopping destinations. But as e-commerce continues to grow, most products found in department stores can easily be bought online, not to mention in other stores, often on the same high street. Without a significant level of product differentiation, there is too much sameness and not enough innovation. Gen Z and Gen Y are the value-focused generation, who care about experiences, sustainability, authenticity and value. They should be a significant focus of any retailer’s strategy.

A new era of retailing

Shoppers have increased expectations for omni channel experiences, from same day delivery to choosing when, where and how to receive goods, even if shopping in-store. Innovative retailers are testing new formats, using floor space to launch new concepts stores, curating traditional departments into hybrid showrooms and most importantly offering a superior mix of products in order to drive traffic back to stores.

Less fashion

Not everything a retailer sells needs to be found in a physical store. By shifting to a digital-first strategy companies can test if customers are brand or category loyal. Marks & Spencer reduced selling formalwear, but instead of shifting it to online, acknowledging the category has ebbed for many but will always be needed, customers are choosing to shop elsewhere because it is no longer available.

Additionally, the pandemic was a wakeup call for eliminating what we do not need: wardrobes stuffed with too many clothes that are rarely worn. Buying into every high street trend, lured by cheap prices, has lost its gloss and is proven to be unsustainable consumption that harms both people and planet.

Assortments much change in order to woo back customers, both old and new. Changing category demands, like increasing home furnishings, experiential retail spaces, less old-fashioned over the counter beauty but more wellness and clean personal care will resonate with a new age consumer. In short, offer less of the same.

For fashion, interesting capsule ranges and partnerships with brands focusing on exclusivity will be more impactful than legacy retailing. With luxury brands reducing wholesale accounts, finding novel ways of working together with established houses is also an opportunity to focus on new channels, lesser known designers, smaller ranges and own-brand collections.

Focus on local

Local shoppers are triggered by convenience and many department stores have enormous amounts of goodwill with local communities and loyal customers. By utilising their strong positioning and listening effectively to what customers want will exceed expectations and secure a post-Covid future.

The shift to e-commerce has seen the Amazon’s, Alibaba’s and Wallmart’s of the world outspend any retailer on innovation and technology, creating sticky shopping experiences and capturing extraordinary amounts of data to continually improve customer service.

What they don’t have, however, is a personal relationship and the physical draw that our beloved high street department stores have in spades. Convenience aside, department stores offer a place of connection, discovery and experiential satisfaction that can’t be had from clicking on an add to cart button.