Department stores: are their days numbered?

I'm not really much of a shopper, especially when it comes to clothes. I really dislike the experience of browsing for and trying on clothing. I don't mind browsing for books of course, but when it comes to clothing I like to get in and out as quickly and painlessly as possible. I'm also not one for haggling at markets - I enjoy the colour and activity of a foreign market environment, but when it comes to actually buying something I feel much more comfortable with a fixed price, thank you, and I prefer to try my clothes on in the air conditioned privacy of a change room with a good mirror.

These are some of the reasons that I like the department store and its everything-under-one-roof concept. When I say department store, I mean the old fashioned, service focussed, mass emporium of awe inspiring variety and choice - not the trumped up discount chain stores that pass as "department stores" today. I mean the kind of place with a food hall in the basement (or on the top floor, as they often seem to be in continental Europe) and reassuringly knowledgable sales staff who know their products and don't think twice about whipping out a tape measure to take your inner thigh measurements to get you the right suit pants. Sadly, it seems that this fabulous creation - the department store - is dying out, a victim not only of changing retail tastes and a failure to keep pace with those changing tastes, but also of the increasingly low margins provided by a shop that sells "everything" and requires a lot of expensive floor space to do so. Even in Japan, department stores are losing favour (except for their food halls, thankfully - I must say, I do love a good department store food hall - I think that will be the subject of a future post).

I like department stores. I study them. Wherever I travel, I visit the top department stores of the city and the mid-range ones (seldom the discount ones, as I have found they are all alike) and make copious mental notes about their interior design, product range and sales formats. I read extensively in the business media about their flailing fortunes around the world and in once reliable markets such as Japan, western Europe and the US. It seems to me that the department stores that are surviving are those, such as the two remaining chains in Australia (David Jones and Myer) which enjoy a duopoly market, or those in Hong Kong (Lane Crawford, Hong Kong Seibu, Hong Kong Sogo) which have (a) reinvented themselves primarily as purveyors of high-end fashion and luxury homewares and cosmetics, and (b) adopted very trendy, modern and quite chic interior designs that challenge the stodgy outdated notions of what a large format store looks like. I think Lane Crawford's IFC Mall and Pacific Place stores are simply the most beautiful stores that I have ever been in (mind you, in Hong Kong the standards for high end retail spaces are set very high and modern, gallery/nightclub-like spaces are de rigeur, unlike here in Australia where retail formats seem to me to be very outdated and boring). I'd also cite Harvey Nichols in Hong Kong and Bloomingdale's in San Francisco as excellent examples of modern, forward-looking and exciting interiors for department store concepts.

It has to be said though that these examples are the exceptions. I admit that I was pretty unimpressed with the famous Printemps and Galeries Lafayette stores in Paris (though I do like the Galeries Lafayette store in Berlin, housed in a stunning Jean Nouvel building and feauturing a marevelous conical inverted dome flooding the store with natural light - I especially love its intimate food hall). These Paris grands margasins are large but tired and boring in their design. Who would want to go to them, outside of sales periods, when there are so many more interesting boutiques all over Paris, many of them providing a far more pleasing and better designed shopping environment?

It's the same in Germany. I love the food hall at KaDeWe - I love its three champagne bars, the fact that any food from any corner of the globe is available there any time of the day, I love everything about it. But the rest of the store is pretty bland in terms of design and product - the problem with peddling luxury these days is that luxury is available everywhere, so it is no longer the sole domain of high end department stores. KaDeWe apparently still turns a profit, but is up for sale anyway as its owner plans to focus on the larger, but often troubled mid-range Karstadt chain. I think KaDaWe will survive, unlike other famous German department stores which are closing.

Department stores in Japan are having a tougher time. The expansion of Japanese deparment stores into Hong Kong, Singapore and Australia was ultimately unsuccessful and led to the withdrawal of all Japanese-owned department stores from those markets (I think there may still be a few of them in the US, Paris and London, and that they are also trying to get into China - like every other retailer is trying to do). At home, it seems the department store concept which has dominated Japanese retailing for hundreds of years is declining in popularity with ever decreasing retail market shares and subsequent ever decreasing profit margins for their huge premises.

In Singapore, which seems to be constantly building new shopping malls, the latest shopping malls have pointedly decided to ditch department stores - once considered vital "anchor" tenants for any shopping centre but now despised by landlords for the lower rents they pay per square metre and the realisation that they no longer attract the shoppers. Basically, department stores usually pay a lower per square metre rent, in recognition of their "anchor" role and necessary for their financial success because they require such large floor spaces; recently developers have discovered they can get more per square metre if they forget about the department stores. This effectively blocks department stores out of the malls, and since most department stores sold their own city centre properties decades ago and moved into malls, this creates a serious problem for the department stores - they face being locked out of the market. They can't afford to pay the higher rents for their large format premises, and they can't afford to buy new stand alone downtown properties - and even if they could, they may not attract the customers. From the original 1960s idea that a mall needed a department store to anchor it, we seem to be coming to a situation where the department stores need the malls to provide them with customers.

So what does all this mean for department stores? The evidence seems to suggest that the chain department stores will need to go down market to survive, and that there will be even further culling. We will get to a point where the high-end malls push the department stores out, and the low-end malls will only want discount department stores. I hope though that there will always be a space for a few "flagship" department stores at the top of the retail chain and giving an important sense of place to the downtowns of our major cities: every metropolis should have its KaDeWe. But maybe it will have only one of them. And maybe that will make them more special, desitnations in their own right, as they once were. For that to happen though, I think they need to raise their game and adopt the superior standards of interior design and sales formats evident in stores like Lane Crawford. We'll just have to wait and see I suppose.