Is it the ‘End of an Era’ for our UK department stores?

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Army & Navy, House of Fraser Chichester
Army & Navy, House of Fraser Chichester

Yesterday Debenhams announced that their retail business had “lost 491.5 million against profits of £59 million” and “plans to close up to 50 stores.” This Winter “31 out of 59” branches of House of Fraser department stores are closing across the UK. (1)

In West Sussex many local people are very disappointed that the ‘Army & Navy’ store in Chichester will close on the 27th of January 2019. This historic building in West Street was originally a school in the 18th century. The voluminous ‘Army & Navy’ building now owned by House of Fraser then became a cornerstone part of this upmarket commercial high street and has been situated opposite Chichester cathedral since 1941. The ‘Army & Navy’ store became the replacement premises for a well known store of the same name in Southsea, Portsmouth that was destroyed by German bombing during the second world war.

On the 10th August 2018 Sports Direct owner Mike Ashley bought all House of Fraser assets, stock and brand for 90 million pounds after the struggling retailer went into administration earlier this year. (2)

The Office for National Statistics stated that in 2017 “The amount of money spent in the retail industry (excluding fuel) increased by 4.7% to approximately £366 billion in 2017, when compared with the previous year.” (3) However it has been reported in 2018 that “High street spending fell at its fastest annual rate in six years and footfall tumbled in April.” (4)

We know how well known big chains can disappear quickly causing thousands of job losses. British Home Stores failed to stay afloat a few years ago and all their shops are long gone. Marks and Spencer has closed 21 stores and plans to shut more than 100 stores by 2022 to try to maintain their profitability. These closures create ‘front teeth’ sized gaps in the smile of many high streets.(5)

All UK retailers have had to deal with the detrimental effect of a weak pound. This makes the cost of imported stock significantly more expensive and directly impacts on profit margins. The costs of running these large stores, that are often set over several floors has increased, with a rise in the national minimum wage.

Property prices are continuing to command top figures, especially in the south of the UK, so land owners are expecting higher rents than ever. Even those companies who own many stores outright such as Marks & Spencer, have chosen to close poorer performing shops that cannot afford the commercial council tax rates, electricity and staff costs to make their venture worthwhile financially.

Internet shopping has transformed the retail landscape dramatically. “Throughout 2018 we had record proportions for online spending, increasing to 18.2% in August.” explains the Office for National Statistics. This means that “bricks and mortar sales still account for nearly 82% of sales.” (3) So we can assume that a strong online presence is vital for the future of any retailer as the percentage spend on purchases online grows year on year. However 4 in 5 sales are still made in person shopping in the traditional way.

A recent report by Deloitte found that “Millenials hear messages from multiple channels simultaneously.” (6) This means this important customer group of working age that was born between 1981 and 1996 pickup marketing information from a diverse range of sources. Their inspiration comes from advertising, magazines and social media websites before even entering an outlet that they are likely to purchase from.

Retail experts also comment that, for those that can afford it, there is a trend in buying less and buying better quality. Keeping clothes and other items like bags and shoes for longer and looking after them well is a strategy some employ that extends to gadgets and computing equipment. Investing in good quality furniture and textiles is a luxury that makes good sense to those who have the ability to collect fine things.

Exclusive stores in cities like London have some of the most famous department stores in the world.  Harrods and Selfridges are doing very well indeed and are buoyed along by their international visitors. It is the ‘middle market’ retailers who are finding themselves left in the cold. Their stock is not designer, feel good, luxury treat type of items for people to purchase and it is not cheap or the height of fashion either. Many old fashioned shops across the country have an empty and deflated atmosphere, especially during the week.

The average person is now more concerned about the environment and conserving energy than ever. There is no stigma to wearing second hand threads and repairing and customising clothing is positively de rigueur. There is a vogue for ‘capsule wardrobes’ that fit neatly into smaller bedrooms and carry on suitcases and also a move away from the branded flashiness of the 1980’s. This all does nothing to help turnover at the traditional department store. Suiting used to be a key area for these smart shops but business wear is more likely to be ‘smart casual’ than ever.

There is a lot of change in the market for the traditional department store to deal with simultaneously. External factors are challenging and this is a politically and economically unsettling time for Great Britain and Northern Island as we move towards an uncertain Brexit. In order to survive and retain the loyalty of customers stores will need to offer a special and unique in store experience.

Department stores need to offer more social, fresh and relaxing spaces that cater for leisurely dining, exercising and discovering the latest looks and ways to wear them. These activities should be fully synchronised with their interiors, virtual presence and a unique and positive brand identity. Branded store apps that welcome consumers on their smartphones as they are near their location are now popular. They currently reward their patrons with the latest offers and promotions as they browse in the vicinity.

Soon holographic assistants will be commonplace in both the physical and online webstore locations as they help us select the perfect pieces for our age, figure, colouring and lifestyle. In the United Kingdom the old saying goes that we are a nation of shopkeepers. In the future it is likely we will become known as a nation of savvy and stylish online shoppers, keen to engage with eachother whenever and wherever we feel like it as the experience becomes as important as the product.

 

(1)’House of Fraser: The Full List of Stores Due To Close’ Sabrina Barr, The Independant, 10 Aug 2018 https://www.independent.co.uk/life-style/fashion/house-of-fraser-closing-down-sales-store-closures-list-full-uk-a8411301.html

(2)’Acquisition of House of Fraser by Sports Direct’ OTP Investis website 10 August 2018 http://otp.investis.com/clients/uk/sports_direct1/rns/regulatory-story.aspx?cid=723&newsid=1142693

(3)’Comparing “bricks and mortar” store sales with online retail sales: August 2018′ Rhian Murphy, Office for National Statistics, 20 Sep 2018 https://www.ons.gov.uk/businessindustryandtrade/retailindustry/articles/comparingbricksandmortarstoresalestoonlineretailsales/august2018

(4)’High street spending drops at fastest pace in six years as retail gloom worsens’ C Chapman, The Independent, 14 may 2018 https://www.independent.co.uk/news/business/news/high-street-spending-falls-fastest-six-years-retail-sector-visa-research-a8349526.html

(5) ‘Marks and Spencer closures – which M&S stores are closing and how many job losses will there be?’ Tara Evans, The Sun, 14 Aug 2018 https://www.thesun.co.uk/money/5465250/marks-and-spencer-closures-stores-list-jobs/

(6) ‘What Makes a Millennial Spend More?’ Deloitte report https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consumer-business/deloitte-uk-young-luxury-shopper-2017.pdf