The department store_survival strategies for a struggling format

2
Introduction
Retailing:The Department Store
Euromonitor International
Scope
Retailing
Grocery
NonGrocery
Non-store
Mixed Retail
Health & Beauty
Clothing & Footwear
The Department Store: Survival Strategies for a Struggling Format
March 2010
Retailing:The Department Store
Euromonitor International
Introduction Market Background Regional Performance, Key National Markets International Potential Future Horizons: Threats and Stratagems
Online retail poses a significant threat to department stores, and the product categories offered by major players such as Amazon and newcomers such as Tesco Direct continue to expand. Department stores need to invest in their own operations. Concessions are a long-standing part of the department stores business model and help retailers to differentiate themselves from the competition. The current retail environment is putting relationships under pressure, and new models are emerging. Department stores have been put under intense pressure by the recent economic instability. However, this has forced retailers to cut costs, improve efficiency and inventory control and try new strategies, as well as removing weaker players from the market. The channel’s survivors may well emerge stronger for the experience.
5
Market Background
Retailing:The Department Store
Euromonitor International
Slow Growing Department Stores Format Hurt by Downturn
500 400 300 200 100 0
Introduction
Retailing:The Department Store
Euromonitor International
Key Findings
Department stores format hard hit by the global economic downturn Emerging markets provide strongest prospects for growth Urbanisation is key to department stores’ growth potential Competition from other channels is high in core developed markets Private label development allows department stores to play to their strengths Department stores should continue to expand their online offer Retailers are taking more control in relationships with concessions The global recession: kill or cure? The department stores sector had already been struggling to maintain its position within global retailing even before the downturn. The channel needs to overcome its perception as dated, overpriced and lacking relevance to young consumers. Provision of non-grocery retailing within modern, upmarket environments remains limited in many emerging markets, while the appetite for luxury brands amongst the growing middle class consumer base further enhances the channel’s prospects. The department stores format has traditionally been dependent on urban environments. As the percentage of the world’s population living in rural areas decreases, more opportunities for department stores retailers should emerge. As markets develop, so does the threat to department stores from rival channels. Department stores need to make a clear offer on price, range, convenience or reliability – or a combination of these – to attract consumers.
Global Depaห้องสมุดไป่ตู้tment Stores: Value Sales 2004-2014
With sales of US$424 billion in 2009, the department
Global Retail vs Department Stores: Value Sales Growth 2004-2014
Private label offers retailers the vital ability to differentiate their offer from the competition and protect their profit margins, but will require ongoing investment both in terms of keeping up with product trends and to develop new product categories.
Home & Garden
Electronics & Appliance
Leisure & Personal Goods
Other NonGrocery
Department Stores
Variety Stores
Mass Merchandisers
Warehouse Clubs
Disclaimer Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised
4
Retailing:The Department Store
Euromonitor International
Introduction Market Background Regional Performance, Key National Markets International Potential Future Horizons: Threats and Stratagems
Learn More
To find out more about Euromonitor International's complete range of business intelligence on industries, countries and consumers please visit or contact your local Euromonitor International office: London + 44 (0)20 7251 8024 Vilnius +370 5 243 1577 Chicago +1 312 922 1115 Dubai +971 4 372 4363 Singapore +65 6429 0590 Cape Town +27 21 552 0037 Shanghai +86 21 63726288 Santiago +56 2 4332226 3
% year-on-year growth 6 4 2 0 -2 -4 -6 -8 Year-on-year growth: All Retailing Year-on-year growth: Department Stores
stores channel remains a significant force in global retailing, but its influence is waning. Sales through department stores have consistently underperformed global retailing in terms of growth, in part because they have been directly affected by the expansion of other channels such as hypermarkets and the Internet. Initially the cornerstone of high-street retail, department stores were then lured into malls as anchor tenants. Although this positions stores in high-footfall locations, it also places competing specialist retailers within a stone’s throw, making it harder for department stores to differentiate themselves on the basis of product offer, service or one-stop shopping convenience. The department stores channel is reliant on developed markets for the bulk of its sales. Market saturation and competition from these other retail channels combined to restrict growth over the review period. Department stores are traditionally positioned at the mid to upper end of the market, in line with their status as part of the retail “establishment”. This left the channel highly vulnerable to the impact of the global economic crisis, which began in 2008, on its consumer base, resulting in a sharp dip in sales in 2009. Forecast recovery will be aided by expansion into emerging markets, but low income levels will limit progress in the short- to mid-term, at least.