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E-commerce Retail trends Store closures Store of the future

Debenhams: department stores doomed?

Weather. Calendar shifts. Experiential spending.

Retailers have many “dog ate my homework” excuses for when trading is less than stellar, but when a late snowstorm forces you to temporarily shut over half your stores, it’s bound to impact the top line.

While it’s important to acknowledge the impact of the Beast from the East, it doesn’t take away from the fact that Debenhams, like many department stores today, is struggling to stay relevant.

Strategically, Debenhams is doing all the right things, but today’s results highlight the scale of the challenges confronting UK department stores. Not only are they facing a perfect storm of rising costs and subdued demand, but the original concept of a department store – one-stop shopping – has become completely eroded by online retail. Unfortunately for Debenhams, many stores are tethered to long-term leases so there is no quick fix for addressing the shift to online shopping.

Twenty-five stores will be reviewed as their leases come up for renewal over the next five years. In an ideal world, they’d be more bullish but with an average lease length of 18 years Debenhams doesn’t have the luxury of simply closing stores overnight. Instead, the focus will be on reinvention and rightsizing – they see potential for at least 30 stores to be downsized, in a similar vein to competitors like M&S and House of Fraser.

But make no mistake – the department store model is under threat. In the past, it made sense for retailers to dedicate 100,000-plus square feet to these ‘palaces of consumption’, aggregating lots of brands under one roof. But today, shoppers have access to millions of products at their fingertips, so the idea that a bricks and mortar retailer can still offer ‘everything under one roof’ becomes laughable. Department stores must reposition themselves to be less about product and more about experience. Winning in retail today means excelling where Amazon cannot.

Under Sergio Bucher (ex-Amazon), Debenhams is trying to do exactly that. They’ve embraced store reinvention, recognising that the department store of the future will be a place not only to buy stuff, but also to eat, discover, play and even work. Partnerships with brands like Swoon and Maisons du Monde create a point of differentiation, while the installation of gyms and beauty bars and potential collaboration with WeWork allow Debenhams to make better use of excess space while simultaneously driving footfall. Store reinvention’s not cheap but it’s better than standing still.

But amidst all this talk of transformation, it’s easy to lose focus on the basics of retail – price, product, service. This is where Debenhams shoppers have arguably been left feeling underwhelmed. Pricing must be sharper and more trustworthy, range must be simplified (though more compelling) and the overall proposition must become more experiential and service-led. Otherwise, they risk a lot of empty treadmills and brow bars.

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Store closures Store of the future

The cost of complacency

A sad week for retail and a stark reminder of the dangers of complacency.

Toys R Us and Maplin ultimately collapsed because they failed to adapt to changing shopping habits. Let’s not ignore the elephant in the room. What would make a shopper choose Maplin over Amazon? The retail titan’s endless assortment, low prices and increasingly speedy delivery left Maplin with limited fighting power. The high street retailer was doing everything it could to distinguish itself from pure-play online rivals – focusing on customer service, product expertise and the instore experience – but clearly that wasn’t enough.

While Maplin may have been a victim of the Amazon effect, Toys R Us was simply a victim of complacency. The customer experience was, at best, underwhelming due to a lack of investment both in stores and online. They sat idly by as new competitive threats – from B&M to Smyths – chipped away at their business. In toy retailing, you need be either cheap, convenient or fun but Toys R Us failed to deliver in each of these areas, leaving them stuck in a retail no man’s land.

As a specialist, the Toys R Us experience should have been a magical one with instore events, dedicated play areas and product demonstrations. The reality was a soulless shed with very little innovation or technology to draw shoppers in. Saddled with debt, Toys R Us was unable to flaunt its specialist credentials and reposition its stores as genuine destinations.

The demise of Toys R Us should serve as a powerful reminder of the need to rejuvenate the instore experience. Bricks and mortar retailers can’t compete with Amazon’s breadth of assortment and delivery capabilities, so they must leverage physical assets and reconfigure stores to become proper destinations. As I say time and again, the future role of the bricks and mortar store will be less transactional and more experiential. But sadly, many more stores will need to close to reflect the shift in spending habits.

Meanwhile, the combination of rising prices and subdued demand is putting considerable pressure on retailers, and particularly exposing those with underlying issues. Burdened by debt, Toys R Us was simply unable to adapt to a changing retail environment.

You can hear me discuss more on Toys R Us on the BBC World Service here.

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Amazon E-commerce Fulfilment Retail trends Store closures Store of the future

INFOGRAPHIC: 2018 UK Retail Predictions

NBK Retail launches today with an infographic charting the forces impacting retail in 2018.

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Amazon E-commerce Retail trends Store of the future

Day one

After 15 years at two of the world’s leading retail analyst firms, I’m beyond excited to transfer those skills over to my new venture: NBK Retail.

I have always been captivated by retail and the way we shop. I have fond memories interning at a Connecticut shopping mall, where my career in retail started out by counting cars in the parking lot and, on Black Friday, making sure the store managers had access to endless donuts and caffeine ahead of the 6am craze.

Even in the quietest of times, retail is a fascinating sector. It is always evolving, becoming more convenient, more connected, more customer-dictated. But today, the scale and pace of change facing the sector is unprecedented.

A decade ago, Amazon was the 47th largest retailer in the world. Today, they’re number 3 – and could very well become the world’s first trillion dollar company.

A decade ago, online retail was the holy grail. Today, pure-play e-commerce is dead. As technology breaks down the barriers between physical and digital retail, having a bricks & mortar presence becomes vital for both brand engagement and ultimately driving online sales.

A decade ago, multi-day lead times were acceptable. Today, Amazon wants same-day delivery to become the norm.

A decade ago, we put the success of the discounters down to temporary effects of the recession. Aldi and Lidl’s share of the UK market has more than doubled in that time.

A decade ago, click & collect was just something Argos did. Today, virtually every high street retailer offers click & collect, as it enables shoppers to marry the benefits of online shopping – assortment and price – with the convenience of collecting instore.

A decade ago, the purpose of the bricks & mortar store was predominantly transactional. Today, the store is being reconfigured as a hub for both experiences and fulfilment. It must become a place not only to buy but also discover, play, eat, work, and collect.

A decade ago, the thought of food in our cupboards being automatically restocked sounded like science fiction. Today, frictionless commerce is becoming a reality thanks to the rise of voice technology, simplified and auto-replenishment capabilities.

And the list goes on.

I’m looking forward to sharing my views on both UK and global retail via this blog. In the meantime, if you’re attending the Summit E-Commerce Scorecard event this morning, I’ll be there taking part in a panel debate. Please come say hello!