Department Stores – Urban Destinations or Retail Dinosaurs?

By Alistair Parker

After half a century of decline, are department stores merely the dinosaurs of a past retail era or are they possibly the harbingers of future urban destinations? Despite large scale closures over the past decade in North America and Europe, there have been a surprising number of new store openings. Companies like Karstadt, Nordstroms, Peek & Cloppenburg, Galerie Lafayette and La Rinascente have recently confirmed plans to open more new stores. And many of the grand old flagship stores – celebrating well over 100 years of trading – are performing rather well. Selfridges announced a 16% sales increase for last year.

Increasingly the destinations of choice for affluent and sophisticated shoppers, many department stores today are now offering authoritative omnichannel engagement, distinct brand characteristics and authentic urban experience. Operating from real landmark buildings, adorned with architectural detail and reflecting historic layers, these survivors prosper at the heart of our metropolitan cities, testament to the fused digital and physical worlds.

Yet hundreds of dull big retail boxes still remain in forlorn off-centre locations or small-town centres where their future is likely to abruptly end, at best, with residential-led redevelopment.  Many markets are over-malled and over-stored. Do department stores have any future beyond the Harrods, Nordstrom’s, Selfridges or Galerie Lafayette luxury formats?

Kohl’s, America’s second largest operator with 1,100 stores, is making impressive progress in ‘operational excellence’; improving margins from stores with declining revenues by rightsizing, local editing, faster proprietary brands and new retail partnerships. Can others follow suit in local markets?

And for the mid-sized stores in the middle market, is there only space for the premium positioning with unique – and continually re-edited and refreshed – offers?

This report looks at department store history, compares the American and European markets and notes recent store performance and expansion. It highlights new formats and sets out case studies for John Lewis, La Rinascente, Fenwicks and Fondaco dei Tedeschi. It concludes that flagship city centre department stores increasingly appear to be the retail trailblazers that they originally were in the late 1800s. Arising before the emergence of multiple retailers, the first department stores were ‘palaces of consumption’ offering accessible retail, a social experience, unique products, and popular entertainment.

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