A rosy autumn for department stores – partly attributable to retailers’ investment in design – is predicted by trends monitor Verdict Research, despite signs of a slowdown in the consumer economy.
Verdict lists three factors fuelling a resurgence in the sector. These are the ‘strong forward momentum’ at Marks & Spencer, increased spending on both refurbishments and new-build projects and an anticipated sales boost from the opening of 1.7 million m2 of additional space – 18 new department stores – by 2004.
However, Marks & Spencer apart, the sector will still grow more slowly than Verdict’s predicted rate of 12.4 per cent for total retail sales over that period. For all their investment in ‘classy and contemporary’ environments, department stores face ‘an increasingly tough battle for market share growth’, Verdict says.
The research adds, ‘The main challenge for department stores will be driving up footfall and average spend by increasing their “want” appeal with exciting, differentiated ranges sold in modern and appealing “destination” stores.’
Although many companies, including Debenhams and House of Fraser, are committed to expansion, market pressures will mean retailers will also be looking to ‘cull’ poorly performing stores, Verdict suggests.
It warns that big operations don’t always profit from scale: ‘Store groups with the smallest numbers are among those with the greatest profitability (Selfridges, Harvey Nichols and Fenwick), whereas the larger chains of House of Fraser and Allders languish on much lower margins,’ it says.