The great department store reset: Why Harrods, Selfridges and Harvey Nichols are taking different paths

Department stores in the UK are navigating a consumer environment dictated by unlimited online choice and cautious discretionary spending. What has transpired as a result is a two-sided challenge for retailers that have to both work to keep stores open, while also giving customers a reason to visit them. In this context, the traditional department store model is no longer enough in itself. Instead, a physical footprint must come with a contemporary purpose.

“The role of the department store has evolved significantly,” says Jacqui Baker, partner and head of retail at RSM UK. “Consumers can now access almost any product, from almost anywhere, meaning successful department stores are differentiating themselves through experience, service, brand identity and convenience, rather than product availability alone.”

Baker notes that despite consumers having an increasing amount of choice at their fingertips, they are also more cautious and selective about where they choose to spend. “With budgets coming under greater pressure, department stores are no longer only competing with other retailers, they’re also now competing with the likes of leisure, hospitality and entertainment for a share of consumers’ disposable income,” she adds.

Department stores have been prompted to pivot their approach, many turning their attention specifically to the in-store experience through investments into store layout, broadening or concentrating product offerings and specialised services, as seen across John Lewis and Marks & Spencer. Those in the luxury sector have also not remained unscathed, with many embarking on turnarounds of their own in response to waning demand and dampened sentiments.

Harrods and Selfridges: From product providers to destinations

For some, the outcome has yielded largely positive returns. Harrods provides a clear example of a department store responding by becoming more concentrated. The retailer closed its experimental Shanghai store and has concentrated investment on its Knightsbridge flagship. Here, its womenswear overhaul, the new International Designer Room, hospitality additions and an incoming jewellery and watches redevelopment intend to reinforce the flagship as a key shopping destination.

Commenting on Harrods’ most recent financial results released earlier this month, GlobalData apparel analyst, Elliot Rickerby, said the retailer’s performance was steadying after years of controversy and hurdles, such as its 2025 cyberattack. For FY25/26, turnover rose 1.2 percent to 1.1 billion pounds and the business returned to pre-tax profitability, influenced by lower exceptional costs.

Rickerby added: “Notably, this stabilisation occurred during a challenging period for the UK economy, when consumers’ propensity to spend has dipped even among wealthier demographics. [...] While the retailer has not returned to the 8 percent revenue growth experienced in FY23/24, its turnover demonstrates brand resilience and consumer desirability amid both internal and external uncertainty.”

Rickerby recognised that Harrods was leveraging its “status as an established luxury shopping destination”, placing it in a strong position within an economic climate in which “wealthy consumers value premium face-to-face experiences and high-end hospitality”. Harrods is essentially betting on a future department store that can succeed by being less geographically expansive and more distinct. However, physical investment alone is not the entire turnaround. “Although the flagship store’s physical refurbishments are impressive, Harrods’ true challenge lies in restoring the consumer trust eroded during recent controversies,” Rickerby added.

Selfridges is championing a different transformation model. The retailer, which was snapped up by Thailand’s Central Group and Austria's Signa for a pricey four billion pounds in 2021, has faced a myriad of difficulties, from unreliable business partners to lacklustre sales. Challenges continued into the most recently reported financial year, ending January 4, 2025, when revenue declined 7 percent, reflecting weaker luxury spending and fewer international visitors. Its operating performance improved, however, on the back of more profitable sales and cost control. The comparison also came against a longer, 53-week prior period.

Its turnaround is therefore taking shape in financial discipline and the reinvention of a customer proposition that extends beyond pure luxury. Investments span experiential retail, omnichannel services, pop-ups and differing price points. Noting the strength of the retailer’s positioning, Melissa Minkow, CI&T director of retail and insights, said: “Selfridges’ investments in omnichannel services as well as its pursuit of timely pop-up shops and a wide range of price points has allowed it to be a very accessible version of the department store. This resonates with a broader variety of consumers and inherently achieves a level of resilience.”

Selfridges is channeling efforts into remaining relevant by serving as a department store that holds multiple reasons to visit, from product discovery to entertainment. The challenge, however, is whether this broader proposition can translate into sustainable profitability, particularly amid the restructuring of its head office and cost reduction programmes.

Harvey Nichols faces a more fundamental reset

Unlike Harrods and Selfridges, Harvey Nichols is not only refining an existing strategy. After acquiring the retailer earlier this month, Frasers Group acknowledged that a meaningful restructuring is needed, with the store estate, organisational structure, operating model and cost base all under review. The retailer entered its fifth consecutive year of loss and experienced an 11 percent UK turnover drop during 2025, underlining the scale of the challenge. On the back of securing new ownership, plans to close Harvey Nichols' Irish store, which was excluded from the transaction, have been confirmed and online operations have come to a halt as the transition goes underway.

From the perspective of Dora Punk, retail analyst at GlobalData, Harvey Nichols’ issue lies in a more fundamental loss of distinctiveness. “Once one of the most distinctive names in British retail, Harvey Nichols was bold, culturally relevant and a place to discover products that could not easily be found elsewhere. That distinctiveness has eroded as the retailer became less innovative, while its competitors continued to invest in experiences, emerging brands and exclusive collaborations, leaving the retailer vulnerable to becoming another collection of luxury concessions that consumers can access directly from the brands themselves.”

Frasers’ challenge goes beyond simply cost reduction measures and narrowing real estate. It needs to establish why Harvey Nichols should be chosen over competitors and the online world, which should also not be discredited. “For department stores, investing in the physical experience is crucial because that is what signals premium and makes the large footprint worthwhile,” CI&T’s Minkow said. “Given the extreme omnichannel nature of modern shopper behaviours, investments in digital infrastructure have become table stakes. Shoppers deeply value convenience, and when they can’t make it to the physical store, they expect brands to still be available to them online.”

Harrods, Selfridges and the broader sector show that there is no single department store model, however. “Fenwick’s narrowing losses demonstrate that a differentiated proposition can gain traction even in a difficult market, while John Lewis & Partners’ reset reflects a wider shift across the retail channel towards reinvesting in physical stores and making them destinations that customers actively want to visit,” Punk said. “Services such as cafes and personal styling can enhance this but cannot make up for an uninspiring core offer.”

No single blueprint for the modern department store

Minkow similarly argues that experiences may create visits, but the department store still has to convert those visits into sales. The product mix therefore remains the foundation of any department store strategy, with Minkow even going so far as to say it “will always be the most important investment any retailer can make, as consumers typically have a specific idea of what they want to buy when they set out on the journey”. She added: “Having the correct combination of technology and merchant expertise ensures optimal demand forecasting, which means nailing the assortment.”

Success will also be determined by how department stores reframe their communication, bringing together experience, community, events and cultural relevance under one cohesive message. While Baker noted that consumers need a reason to engage with a brand long before they make a purchase, Minkow stated that retailers must work to build worlds and tell stories within each brand. “Department stores’ modern appeal derives mostly from being a destination, so the more experiential the brick and mortar presence can be, the more justified the shopper feels in making the visit.”

In this respect, Selfridges and Harrods are often seen to be out in front, both using their physical spaces as platforms for discovery, service and experience. Harrods demonstrates the potential resilience of a highly differentiated, ultra-luxury model, while Selfridges is relying on a broader, more accessible and experiential proposal. Harvey Nichols must define its own version of this as it rebuilds its identity under Frasers.

There is still a viable future for the UK department store, just maybe not in the traditional format. “The department store sector of retail has faced unique challenges, but has also been presented with key opportunities thanks to how consumers’ shopping behaviours have changed,” Minkow stated. “Consumers largely stopped shopping by brand long ago and started shopping by product or solution, which is different from how department stores are organised.”

The question is not whether a department store can survive in the current climate, nor is it about how many products can be offered under one roof. Instead, success will depend on how convincingly a retailer can turn that roof into somewhere consumers still want to be. Harrods, Selfridges and Harvey Nichols are responding to the same pressure in different ways, demonstrating there is no singular formula. Yet, across their strategies, the pursuit of long-term relevance is taking shape in strong assortments, compelling experiences, digital infrastructure and, most importantly, distinct cultural connections.