House of Fraser – What does the future hold for Department Stores?

By Dr. Ruth Marciniak (MSc Fashion and Lifestyle Marketing Programme Leader)

The iconic department store brand, House of Fraser’s recent announcement of closure of 31 of its 59 retail outlets, reflects a global trend.

House of Fraser, which began its life as a Victorian Drapers in Glasgow 170 years ago and, over the years has successfully, at one time or other, acquired Harrods, Kendals in Manchester, Rackhams in Birmingham, Jenners in Edinburgh and the chain of Scottish stores, Arnotts is following the trend of the shrinking department store sector.

Whilst once the department store format was seen as innovative, stocking a full range of goods for the home and high levels of customer service, little by little it’s point of difference has been eroded.

Up to the 1970s it secured customer loyalty by offering exclusive credit provisions via it’s store cards.  This was subsequently eroded with the arrival of bank credit cards that freed customers to shop wherever they liked.

Whereas department stores are known for their wide range of merchandise offering, the 1980 and 1990s category killers such as Toys R Us and later Sephora were able to offer a much deeper selection of goods, and, at much cheaper prices.

More recently, department stores have been affected by online retail.  Whilst we can touch and handle goods in a department store, buying from department stores also involves the consumer being willing to give up the time, money and effort it takes to get to a store plus the drive required to interact with sales staff.

Consumers will do this if they believe there is some payoff.  However, events at House of Frasers suggests to us that consumers may prefer the low effort and convenience of online purchasing.

Through buying online, we can experience choice, transparency regarding inventory levels, the ability to research prices and read reviews from customers who have already experienced the product.

The erosion of the department store as a viable retail format is not isolated to the House of Fraser, this is evident elsewhere in Britain and throughout the world.

Department store chain Myer in Australia has experienced poor sales performance in recent years as has Macys in the US, Sears in the US and Karstadt in Germany have both experienced store closures and Irish department store retailer, Brown Thomas, reported a decline in turnover and profit in 2017.  In all, the department store sector has reached maturity.

However, it may not be the end for department stores, their lifespan may be extended well into the future.  This could be in a transitional period.  There is evidence already that the store format is changing, for example, following Macy’s lead, in April 2018 US department store, Nordstrom, announced plans to test smaller and more experiential retail spaces.

Whilst ecommerce is great for functional shopping, department stores can create opportunities for leisure shoppers who are increasing shopping by lifestyle – where you shop is also where you will be entertained.  Adopting a positive outlook, it is anticipated for the future, department stores will be reimagined with omni channel services and personalised experiences.  Maybe the weakest will merge or withdraw from the market, but the department store will not be consigned to history.

At the British School of Fashion, the new MSc in Fashion and Lifestyle Marketing programme is at the forefront of changes taking place in the fashion sector, in particular, the module Fashion and Lifestyle Retail Experiences explores retail industry practice, examining retailscapes, both virtual and physical, in creating optimum retail experiences for the consumer.

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