Department stores are one of the oldest retail concepts in history, dating back to the opening of Le Bon Marché Rive Gauche in 1852 in Paris, but they’ve withstood the test of time, battling through a pandemic, climate crisis, war and inflation.
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Now that the world is on the other side of Covid and Asia is finally opening up, department stores have the opportunity to reinvent themselves.
At the recent World Retail Congress, retail executives came together to discuss what lies ahead in a panel discussion hosted by Selvane Mohandas du Ménil, chief executive officer of the International Association of Department Stores.
Du Ménil was joined by Niraj Jain, chief financial officer of Indonesian department store Matahari; David Wilkinson, chief executive officer of Steen and Strøm in Oslo, and Rita Clifton, portfolio chair and non-executive director at John Lewis Partnership.
Here are some of the key takeaways from the conversation.
It’s time to think beyond categories
In order for department stores to continue to excite customers, they need to think beyond the traditional business model and categories, particularly as retail is now merging with lifestyle, entertainment and hospitality.
“If you feel yourself being category-bound, you start thinking about the conventions of that category, as opposed to the possibilities of companies, brand and relationship,” pointed out Clifton. “It’s much better to start with the customer, the brand you’ve got and the differentiation you’ve got with that relationship. Then you can think about channels. It’s the difference between one individual department store that’s in a traditional mode, as opposed an amazing one.
“You could even argue the internet is one great department store. You have to be trusted to do the editing, the curating and life enhancing, which is the biggest opportunity for department store brands if they can grasp it.”
Moving from a house bands to a house of specialists
While department stores have historically been treated as a house of brands, Indonesian retail giant Matahari decided to shift gears last year – and instead focused on specialising in certain areas that appeal to families.
“We exited some categories. We wanted to focus on apparel, footwear and beauty – not electronics or furniture like many other department stores,” chief financial officer Niraj Jain explained, adding that Matahari was focused more on offering customers quality products at good prices. The updated strategy was backed by a new identity and involved a rejuvenated merchandise offer, new store concepts and upgraded customer experience.
“How do we excite the customer in terms of experience? How do we give customers the Indonesian experience they really want and to be the pride of the country? How do we grow and improve the country and standard of living?”
There are currently more than 140 Matahari stores in Indonesia, focusing on regional malls. Indonesia alone has a population of 28 million – that’s larger than seven European countries combined in terms of both consumption and population.
Finding new ways to connect with customers
Compared to its European counterparts, WhatsApp plays a significant role in retail in the Asian market and during Covid, Matahari introduced its Shop and Talk program, to encourage customers to continue contacting their teams and vice versa.
“Our sales on Shop and Talk are higher than our dotcom and marketplace. Our customers love it. They do a lot of personal shopping and I’ve seen some staff talking to them on chat, then the customer turns it into a video call. Customers are engaged with us. It’s much quicker and conversion rates are higher,” said Jain.
Balancing local customers and tourists
For some high-profile department stores, like Harrods in London or Galeries Lafayette in Paris, tourists make up a significant chunk of the customer base. In 2019, 15 per cent of Steen and Strøm’s customers came from overseas, but this year, it will be closer to 30 per cent, said Wilkinson.
“At Steen and Strøm, [we’ve attempted] to become the store of Oslo. We’re deeply anchored in the community of Oslo in different areas of competency. We’re also building a coherent tourist strategy. The first cruise ship started to arrive last weekend into the fjord from Denmark and Sweden. There were many customers from overseas on Saturday,” he said, adding that it’s still important that department stores also cater for local shoppers.
Clifton noted that a department store’s tourist strategy depends on whether it is a catchment-based business versus being a destination. If a store is catchment based, then “you need to do your sums very carefully” to ensure it is attracting enough of the right customers. If the store is aiming to become a destination, the business needs to ensure that it has the right staff to attract customers and keep them entertained all day, beyond simply buying product off a shelf.
“It’s not just about having an interesting assortment of product, but things like hospitality, entertainment and experiences. ‘Experience’ is one of the most overused words when you’re talking about department stores,” Clifton said. “It just means delighting people, giving them joy and making sure you’ve got newness, whether it’s catwalk displays, personal styling, services. These are exciting things to bring people in to make it worth their while.”
Following on from that, Wilkinson talked about the “emotion and feeling” that department stores need to deliver in order to lure time-poor customers in. During his career, Wilkinson has worked at high-profile department stores including Harrods, Selfridges, Au Pont Rouge in Russia and Salam International in Qatar.
“I think department stores have to develop their own language and narrative, I don’t believe there’s a cookie cutter approach,” he said. “Originality and authenticity around people, the selection of product, brand, visual merchandising and services that define whether department stores can truly battle against the onset of online shopping.”
“Kicking the butt” of sustainability issues
In this day and age, it’s clear that genuine sustainable efforts from retailers have business, customer and social benefits. Department stores like Selfridges have ESG goals in mind, as the retailer is committed to achieving net-zero carbon emissions from 2050 to 2040.
Clifton emphasised the impact that genuine sustainability efforts can have for department stores, pointing out that investors, like Black Rock CEO Larry Fink, are now “kicking the butt” of those organisations that are yet to get on board.
“In business, for many years, I felt like I was banging my head up against a brick wall and if you ever talked about anything that was important in measurement other than finance, like customer satisfaction or employee engagement… people looked at you like a hippie communist. What’s interesting is I have almost got whiplash by the way companies have gripped the issue of sustainability in the round,” she said.
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“We’re all trying to develop relationships with each other and that’s the basis that we’re going to develop long-term sustainable businesses. You need to avoid risk and go for the opportunities and in my view, ESG embraces all of those.”
About the Author
Matt Newell is the founder and chief executive officer of The General Store, which specialises in retail strategy and innovation and works with retailers in Australia like Rebel, Freedom Furniture, BBQs Galore and Salvos Stores.