What's next for department stores?
Back in the day department stores unique selling point were that they were multi-category retailers. Today there’s no incentive to go to a department store that sells the same brands and look exactly the same. It’s no news that 78% of millinnials would prefer to spend their money on experiences to products and today department stores are considered bland and predictable next to online retailers, the brands own retail universes and concepts stores. The fact that the younger demographic would rather spend money on experiences means that they are more demanding than ever when they want to purchase a product, they are more educated and will do a lot of research before purchasing, 41% of millennials said they practise show-rooming, the act at looking at merchandise in the store and then purchasing online later at the best sourced out price. Having knowledgeable staff that can provide the customer with 1-on-1 interactions, unlike the depersonalised environment of online selling and for that matter other interactions these days.
One thing you can do to stand out is having sought after products or labels that’s only available in your store. Take Bergdorf Goodman who opened a Kith shop-in-shop which is owned by Ronnie Fieg, a big name in the street wear and trainer community. For the launch he created a limited edition capsule collection exclusively sold at the shop in Bergdorf. The street style brands offer a way to drive customers into the store that hasn’t been there before. Street wear labels engage with their customers with a weekly product drop, announced on social media and the drops create a repetitive customer who wants to come and spend time in the store. Young consumers want to stand out and want to by rare, less distributed items, they want more exclusivity and securing exclusive distribution with emerging designers makes you a destination retailer.
Some department stores have chosen to modernise their space in a bid to re-establish their relevance. Some are now changing from being multi-category to creating concepts dedicated to single product types. One example is Level Shoe District in Dubai; they have nearly 100.000 sq. ft. just dedicated to shoes. Another example is HR2 a sup brand to the Canadian chain Holt Renfrew, the concept is contemporary clothing and accessories targeting the millennial consumer with affordable design and featuring digital signage throughout.
“The shop-within-shop format is gone - replaced by a more free flowing layout, no walkway demarcation – and departmental fragmentation has been replaced by the mix/ integration of brands within a specific look, like a boutique, customers are relying more on their own sense of mixing and creating their own style.” - Carlos Virgile, Director at Virgile + Partners
The benefits of have a single category are that the consumers enjoy a greater depth of choice and the retailers position themselves as experts in one area – which shows territorial leadership. Some department store are categorising by lifestyle or theme rather than price, age or brand. This creates a more fluid store layout and brings in an element of exploration and surprise for the consumer. The Exploratorium in Bangkok is all about shoppable installations, 13 thematically retail labs are spread across 6 floors and are organised by lifestyle/ sector regardless of brand. Also Selfridges Design studio pushes product type over brand or gender.
“People want to browse for things the way they do online. We’re going to de-departmentalise the department store.” – Mare Metrick, CEO at Saks.
Like it’s the case with any store at the moment, department stores need to become destinations, somewhere that will entertain people. Many already boast restaurants, food halls, cinemas and bowling; all things that help people socialise and relax. They have the space to create something different, but what else can department stores do to entertain their customers and make them stay. VIP services are becoming mainstream. The New World department store in China have created loyalty scheme clubs to fit any type of customer, one thing the clubs do is offering high value experiences, like events or even English courses. Or take Selfridges who provide their customers with personalised services, like a made-to-measure salon. Nordstrom has a rotating pop-up shop curated by the vice president of creative projects Olivia Kim, every four to eight weeks her and her team build a new concept within the Seattle flagship. “We don’t want it to feel temporary, with every change, we want the customer to walk in feeling like they’re somewhere different.” Says Olivia Kim.
“It’s about giving people a reason to come back every week.” - Giacomo Santucci, Italian creative consultant.
Saks began publishing a bi-annual, hardcover magalog that features all the latest in their fashion offerings and it was sent to their top tier clients. They then changed it so that before receiving a finished copy, they would receive a binder containing a preview with hand-written notes from the chief merchant, which they got unbelievable response to, as the customers wants to be part of it and have their say. Also Barneys have created a magazine ‘The Window’ which started out as an online version only, but has been expanded into print.
Technology in department stores needs to make peoples lives easier, not just be there for the sake of it. There are clever technologies used in a category like jeans, something most people find really hard to shop. Bloomingdales has a Denim seeker tool, a touchscreen that recommends styles based on the user’s body type and preferences and Selfridges have the Body metrics lab, a body-mapping system designed to help customers find the perfect pair of jeans located in their Denim studio.
Another technology used is tapping into people’s interests, preferences and previous purchases. Barneys new flagship in Chelsea NYC has a new personalised in store experience. When shoppers with the Barneys app enter the store, they’ll receive content from Barneys editorial blog and personalised recommendations and offers on their smartphone. Liberty London is doing something similar, they’re releasing the beacon-based app Tapestry, bringing social media in store. When customers enter and have the Tapestry app, they’re made aware of brands in store that they follow on Instagram, the app will then show exclusive offers, products and personalised discounts.
“The ones that are really clear on who their customer is are the ones that are ahead of the game.” – Robert Burke, Chief Executive of Robert Burke Associates.