The role of department stores

I have spent much of the past couple of months visiting stores in Asia, Australia and New Zealand, and I’ve seen that there is a lot going on in the department store sector around the world, including Harrods, Nordstrom, Myer, David Jones, Tangs, Isetan and Parkson.

If you include the mainstream discount department stores such as Kmart, Sears, Target, and Big W in Australia, there really is an appetite for change and a desire to try things that never would have been attempted during the last decade.

This is happening because of the change in shopper habits, which first occurred about three years ago and caused a significant drop in footfall into stores and revenue for department stores. In some cases the revenue drop was terminal, leading stores to change hands or close up completely.

New Zealand’s established Farmers brand is now under new ownership and been able to celebrate 100 years of trading, but it almost didn’t make it.

I heard the story of the Farmers turnaround from CROSSMARK’s Managing Director in New Zealand, Grant Leach. Farmers was purchased in 2003, after it had lost its way, lost its reputation as a quality retailer and was in pretty dire situation. If it hadn’t have been acquired then, there is very little chance it would’ve survived the high interest rates and slow trading periods of 2007 in the lead up to the GFC.

Fortunately it was bought by a very well respected and very private New Zealand family who are merely referred to as the Normans. And even more fortunately, the Normans understand retailing very, very well.

Over the course of three years they fundamentally changed almost every aspect of the store, from the range and depth of items sold, pricing policy, interior layouts, marketing communication, store staff and locations, where possible.

During the journey, they shifted the brand in the minds of shoppers, both younger shoppers who had never visited the stores, and older lapsed shoppers who had not had a good shopping experience in a Farmers store for years. By the time the cold winds of recession were blowing through New Zealand in 2007, Farmers had a loyal shopper base who continued to visit their stores when money got tight.

I am not suggesting that Farmers used a magic formula to see them through the recession, but having shoppers return to your stores, willing to see what new items or pricing you are offering, is a key element in the survivability of a department store.

Remember you don’t ever have to visit a department store. Almost everything they sell is sold in other stores. Shoppers visit department stores because they like the shopping environment.

Nordstrom in the US understood this, and were able to hold sales revenue though 2009 – albeit on the back of deep discounting and the integration of online shopping into their mix.

I visited a Farmers store in an Auckland store last week to see what Grant was talking about. I had little intention of buying, but was met by a clean bright clear and uncluttered shopping environment that did a limited number of things very well. I was greeted by smiling staff and served by a confident, knowledgeable staff member.

My irony is that I bought, at full price, an item of clothing I’d had on my list for a month and had failed to find in Asia’s largest and most impressive departments stores.

A simple, uncluttered and friendly shopping experience won the dollar.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.