What Can U.S. Department Stores Learn From An Old World Retailer Like Selfridges?

After all, Dillard’s, Macy’s, Nordstrom as well as luxury stores like Sacks Fifth Avenue or Neiman Marcus have many branch storers and a diverse clientele.

I will explore B of F viewpoint since it is a serious approach to a very serious subject. The article is written with the Selfridges Department store as a background. Selfridges recently received an offer for $5.7 Billion. It is a very high figure, albeit the real estate is estimated at $2.8 Billion by itself. For fiscal2020, the company reported sales of £1.97 Billion ($2.72 Billion) with pre-tax earnings dropping two thirds from £98 Million to £34 Million ($135.2 Million to $46.9 Million). The pandemic caused by COVID-19 was responsible for the sharp drop in earnings.

Selfridges has stores in London (Oxford Street), Manchester, Birmingham and Ireland. It is owned by the W. Galen Weston estate. (W. Galen Weston passed away on April 12, 2021.) The estate is now run by W. Galen’s children, William Galen Jr and Alannah, who is chairlady of Selfridges..

The company has undergone many changes since its founding in 1908. Recently, in 2017 or 2018, the company opened a Body Stand for women’s lingerie, swimwear, pajamas, and party gear and accessories. It has been very successful.

The company has also adopted the concession model. Suppliers now control large parts of the selling floor and Selfridges has become a landlord; it maintains a new tenant relationship leasing space to top fashion brands. I had seen the concession arrangement working well at Galeries Lafayette in Paris, where major designers had taken over real estate space and displayed their newest creations attractively. Concessionaires have to adhere to such store rules as opening or closing hours and manning their space with effective sales people. However, there was no underselling, as we often expect in US department stores.

Selfridges has special events such as art installations and a skateboard bowl for young customers. It also has a number of restaurants and a Face Gym. There are constantly new experiences in London’s Oxford Street store. There is also a new accessories hall designed by David Chipperfield that cost $415 Million.

Selfridges opened on Oxford Street in 1909 and is about 540,00 square feet in size. It is second in size to Harrod, which is about 1 million square feet is size (900,000 square meters) and was founded in 1834. Selfridges created such mottos as ‘Give the Lady What She Wants’ (also adopted by Mashal Fields in Chicago) and ‘The Customer Is Always Right’ (adopted by everyone). Clearly, this is a very creative and forward-thinking organization and the reason B of F looks to it as a role model for U.S. retailers.

Among the suggestions B of F makes for U.S. Department stores are

1.   Sell products the consumer cannot find elsewhere. That means selling exclusive brands. B of F states, “whether or not DKNY resonates with younger customers is unclear, but attractive product – consider Matches Fashion’s hit private label Racy – certainly does”.

2.   Reduce physical footprint. Department stores will have to shrink their footprint either by closing more locations or by making those locations smaller and filling them with a tightly edited range of products that cannot procured anywhere else.

3.   Understand that off price is not a savior. Department stores must accept the fact that discounting is not a long-term solution. The report points out that in the first quarter of the current fiscal year, comparable sales of HBC Off Price – the off-price division of Hudson’s Bay Company which includes Saks Off Fifth and Gilt Group – decreased 6.8 percent.

4.   Embrace the concession model. American stores only dabble with this model, which has shown tremendous success internationally. Concessions – or shops in shops – allow brands to better control the customer experience. B of F points out that Le Bon Marche in Paris does this well, as does Selfridges. It is interesting to note that Ralph Lauren also announced that it expanded its “high ROI concession network” in the past year.

One wonders whether the term department store is still viable. So many departments are no longer important in the stores; it seems to me that one should call them specialty retailers and specialty chains. Each specialty chain must have a focus on a specific customer and curate its merchandise to that specific profile. It may be that the same specialty chain has a different focus in different stores to accommodate what the customer in that market wants. It could be that some locations are more Hispanic (as Walmart has found out) or other locations more Asian and have preferences for smaller sized clothes.

In this post-pandemic period in the United States, we have an opportunity to witness the reawakening of good merchandising, directly dealing with loyal customers and generating real excitement in stores. We can learn, and we must act.

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