Mintel: department stores future bleak

European department stores are in for a rough ride, according to findings from Mintel. In general, research has shown that consumers are becoming more discerning and less forgiving in their shopping habits, making survival in the sector increasingly tough.

The report forecasts that sales among department stores across the UK, France, Germany, Italy, Spain, The Netherlands and Ireland will only rise ‘very marginally’, with an increase of just 8 per cent in five years, from 2004 to 2009. German sector sales are predicted to drop by 12 per cent and the Netherlands is also expected to post a fall in sales between 2004 and 2009.

Overall, there is a downward trend in the mixed retailer sector – the liquidation of Allders in the UK and the problems of German department store, Karstadt, are highlighted as a case in point. In 2003, a ‘worrying’ number of department stores posted lower sales than the previous year and conditions have shown little sign of improvement for 2004.

According to Richard Perks, director of retail research at Mintel, ‘Very few of these companies have performed consistently well in recent times. Indeed, there are more examples of struggling businesses – Allders, Beatties, Coin, Karstadt, Vroom & Dreesmann – to name a few. Coin, V&D and Karstadt all now have new business plans in place.’

Added pressure is coming from property companies circling ailing department stores, ‘ready to pounce’ on the large, well-placed department store sites with plans for more profitable redevelopment schemes. Perks concurs. ‘Those that have performed less well are increasingly falling victim to property developers,’ he says.

As a result, department stores are now being viewed for their property potential, rather than as valued trading entities.

In general, fashion, accessories, beauty and leisure goods are performing better than floor coverings, furniture and household appliances but to cut costs and retain higher margins, department stores are broadening their product mix. Retailers are also actively courting younger shoppers, favouring contemporary brands, to attract a ‘new breed of middle-aged, young at heart’ shoppers.

The report suggests that department stores should also look at developing private-label collections as a way to create a point of difference and provide a cheaper but good quality alternative to established brands.

John McConnell, who is resigning his directorship of Pentagram at the end of March, is design consultant for John Lewis Partnership. He has been working on own- brand packaging for the retailer and also helped revamp the Peter Jones department stores in London’s Sloane Square, developing a ‘quiet’ signage system (DW 21 October 2004).

McConnell argues that the success of a department store is less to do with design and more to do with good business.

He explains, ‘John Lewis is a very consistent brand. It has loyalty, great shopkeepers, and the company cares about [its] customers. It has not rushed around pretending to be something else. A lot of others have lost their way and listened to the City, many are confused.’

If, as Mintel gloomily claims, ‘the future is not bright’ for department stores, both developers and designers should take heed of the warning signs.

Europe’s top department stores (by sales)

• Karstadt (Germany)

• El Corte Ingles (Spain)

• Kaufhof (Germany)

• Marks & Spencer

• John Lewis