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DEPARTMENT STORES: THE BATTLE FOR REINVENTION

Wednesday 13 December 2017 Data Insight & AnalyticsShopping Behaviour

Will Minnett's picture
By Will Minnett

In most major shopping destinations, department stores still anchor the centre. Yet their role as the shop that provides ‘all things to all people’ where you are ‘never knowingly undersold’ has never looked more precarious. The fall of BHS, and more recently Debenhams warning its investors of market volatility, means that department stores have grabbed the headlines for all the wrong reasons. The retail industry, and especially the department store trade, is undergoing structural changes with dipping footfall, Brexit’s devaluing pound, and the shift to online. Despite this, department stores remain integral to shopping centres and high streets alike.

 Is it all ‘doom and gloom’ or are department stores successfully reinventing themselves? Based on 180,000 department store interactions, CACI’s Shopper Dimensions database of face-to-face consumer surveys is well placed to understand what’s going on.

A department store shopper spends 28% above the Shopper Dimensions average on their trip

1. DEPARTMENT STORES REMAIN INTEGRAL TO RETAIL DESTINATIONS

Department stores are anchor tenants for landlords up and down the country; they successfully attract high spending shoppers and they’re affluent – over a quarter of these shoppers are made up of the most affluent Acorn category. A department store shopper spends 28% above the Shopper Dimensions average on their trip, making these shoppers key drivers of sales and footfall for landlords.
 
Somewhat surprisingly, House of Fraser, and not John Lewis, stands out as the most valuable to a landlord in terms of cross-shopping and average spend. House of Fraser shoppers have strong in-store spend but, perhaps most importantly, these shoppers will almost definitely go on to spend in another store and visit at least another two on the same shopping trip. On average, they’ll spend another £141 elsewhere in other stores, which is the highest value seen amongst the big department stores.
 
Source: Shopper Dimensions 2016/17
 

2. BROWSING OR IN-STORE RESEARCH?

Unlike House of Fraser and John Lewis who seem to be able to buck this trend, department stores across the UK are battling to convert visitors into spenders. The proportion of shoppers who make a purchase has seen a dip (7% fall over a two-year period). This has been evident for Debenhams and M&S amongst others, who have suffered from higher levels of browsers, uninspired window shoppers and the potentially savvy scoping out their forthcoming purchase discounted online.  This is hardly surprising, given that our recent ‘How We Shop’ research tells us that 18% of consumers undertake research in store before going home to buy online.

 

3. THE ROLE OF DIGITAL AND IMPORTANCE OF CLICK & COLLECT

Consumers have an increasingly blurred vision between online and offline, as shopping channels merge. This means that department stores still need to be exciting and offer a new experience but, equally as importantly, they need to be digitally coherent. In today’s world, department stores not only compete with the global acceptance of the internet but also with the abundance of retailers in a shopping centre or high street.
 
Over the last two years, a higher proportion of department store shoppers have spent more of their salary on buying comparison goods online. The proportion of shoppers that spent online in a single month rose by 3 percentage points to 52%, with an average online spend of £210. However, for a traditional bricks and mortar store, trying to capture that spend is very challenging. 
 
 
This is where convenience becomes particularly important; Click & Collect perfectly bridges this gap, providing an added reason for shoppers to visit a bricks and mortar store and enjoy the experience. Shoppers are increasingly using Click & Collect services, and is popular particularly amongst department store shoppers who are twice as likely to use these services compared to the UK average. Our data also shows that an average Click & Collect purchase online will be 18% higher than store spend, highlighting the value of offering such services. Convenience is key; for example, Selfridges implemented a drive-through service where shoppers at the end of their visit could pick up their online order from the comfort of their own car.
 

…an average Click & Collect purchase online will be 18% higher than store spend

4. CUSTOMERS MORE THAN EVER WANT TO BE ENTERTAINED

Service and experience have always been a paramount element of the department store experience. The Selfridges flagship store on Oxford Street opened in 1909, and bedazzled customers by offering over a hundred departments, restaurants, writing rooms and concierge services. This legacy remains, but ‘experimental shopping’ is even more important than ever - customers want to be entertained.

  

In their brand-new store in Oxford’s Westgate, John Lewis offers 21 services including a ‘The Experience Desk’, home design services, rooftop bars, beauty treatments and personal shoppers. The Oxford Street branch even has its own ‘pop-up’ apartment labelled ‘The Residence’. Here, lucky shoppers get to experience a night’s sleep first-hand, get design inspiration, and take workshops in  hosting a cocktail party. Meanwhile, recently struggling Debenhams announced it would introduce in-store gyms, beauty bars and over 50 new food and beverage concessions in an attempt to make shopping "confidence-boosting, sociable and fun." 

However, if catering is going to play an increasing role going forward it is important to consider that, in department stores, catering appeals predominately to shoppers aged over 44 years old. These shoppers are almost twice as likely to engage, so the proposed in-store catering mix should either appeal to this demographic or aim to offer something new, like Joe & The Juice which are now found in some John Lewis’. 

5. AND FINALLY…

Yes, department stores are struggling, but (like all retailers) these are only the stores that aren’t changing with the times. Those that provide experience, technology and a connected digital offer continue to reinvent themselves - these will be the ones anchoring shopping destinations for years to come.

In most major shopping destinations department stores still anchor the centre. However, as the retail industry undergoes structural changes, department stores role has never looked more precarious. Is it all ‘doom and gloom’ or are department stores successfully reinventing themselves? Read on to find out…

DEPARTMENT STORES: THE BATTLE FOR REINVENTION