Department stores must reinvent to survive

Department stores need to reinvent themselves to survive, according to some 75% of delegates at the annual ICSC European Conference in Berlin this week. Only 5% of the 550 conference delegates thought the existing format could be sustained.

The department store format was born out of the industrial revolution, the invention of steel-framed architecture and the rise of the middle class who could afford to shop in them. Fast-forward 150 years to the birth of shopping centres and it's not surprising their relevance is now being questioned. However, experienced department store specialists consider this star could be rising again.

Speaking at a panel session on department stores at the ICSC Conference, John Scott, head of international business development for Debenhams, said the UK chain wanted to double the number of stores outside the UK in the next five years. He added, however, that the format must change to meet changing consumer demands. 'The future is likely to be smaller, more flexible, convenient and embrace technology,' he said.

Debenhams is the second largest department store company in the UK and has 67 stores across Europe and the Middle East.

Department stores are failing to reinvent themselves because of cost, Scott added. 'We have spent most of our money in the UK in the last few years on renovation, and it's paying off.'

Some say department stores must shake off their 'middle aged' image, but Scott disputes this view. 'Our average customer is women aged 25-45 with children. We are a mid-market department store and she is the biggest spending customer out there.'

For Lauri Veijalainen, development director at Finland's Stockmann, downtown stand-alone stores work best. 'Convenient parking is a must,' he said, citing Russia's chaotic traffic systems.

Stockmann has stores across Finland, the Baltics and Russia and generated turnover of EUR 2 bn last year.

A relative newcomer to the department store industry is Turkey-based TKM. Just 60 years' old, TKM has 65 department stores in its home country. Nusim Oral, director of TKM, said: 'Department stores can no longer offer everything under one roof. Our slogan was 'Everything to everyone'. Now it's 'Choose yourself'.

Interestingly, the growing shopping centre industry in Turkey that has provided an impetus for the development of the department store in that country. 'People want to mix and match brands to reflect their personalities,' Osram noted. 'A department store fashion customer can understand a whole season’s fashion in one visit.'

Given that 50% of Turkey’s population is under 25, TKM is working on the 25-35 age range as they will soon be starting families and will be customers for longer albeit that younger customers generally have more disposable income.

The unique selling point for department stores will always be exceptional customer service, according to Veijalainen - a concept which is talked about a lot, but which is more difficult for shopping centres to deliver with consistency.