British department store group Debenhams announced this morning (25 October) it is to shutter almost one-third of its store base – putting around 4,000 jobs at risk – amid what is understood to be the biggest loss in its 240-year history. The news, analysts say, is the starkest indication yet that the high street is floundering as, just a few years ago, it would have been unthinkable that retailers were planning on cutting staff levels ahead of Christmas. With the department store model seemingly “unfit” for purpose in today’s retail environment, the brands set to thrive will be those agile enough to offer consumers flexible ways to shop and pay while those who refuse to move with the times will be left to suffer the consequences.

Harsha Wickremasinghe, head of business intelligence at Livingstone, says:
“The Debenhams announcement highlights just how unfit for purpose the department store model is in today’s retail environment. The embattled retailer has outlined hard-hitting plans to transform itself into a relevant retail entity for the 21st century…but it smacks of desperation and begs the question as to why it has taken so long to address basic issues.

“Debenhams sits firmly in the squeezed middle and it’s lackluster stores, uninspiring brand mix, and poor digital capabilities has left it woefully exposed at a time of intense structural change in retail. This has inevitably enabled more focused competitors to rip chunks out of its soft, bloated underbelly.

“Whilst highlighting ‘above market growth’ in digital sales – they remain well below 20% – which is simply unacceptable. The new concept store is a good start. Culling 50 stores shows how years of underinvestment has taken its toll on yet another legacy retailer that has simply lost its focus and risks losing its relevance entirely if it fails to adapt in short order.”

Rob Cottingham, credit director at Duologi, says:
“As retail casualties continue to stack up – Debenhams being the latest in a long line of businesses that have closed stores to focus on their online strategy – the question of consumer confidence and spending power is of particular importance. The high street as we know it is shifting. The brands set to thrive will be those agile enough to offer consumers flexible ways to shop and pay.

“Optimising digital processes will be key to this; however, retailers need to get the basics right. Offering online finance options, for example – which our research shows can increase sales by up to 40% – is being ignored by even major UK brands. This will prove particularly important for big-ticket purchases, which can both boost consumer loyalty and increase average basket values.”

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Richard Stables, CEO of Kelkoo, says:
“A few years ago it would have been unthinkable that a fifth of retailers were planning on cutting staff levels ahead of Christmas but this cost-cutting is the new normal for bricks and mortar retailers. This is the starkest indication yet that the high street is floundering.

“Traditional retail players need to up their omnichannel approach, as increasing numbers of shoppers will turn to e-commerce for value deals online from the comfort of their own home. Debenhams closing a third of its stores indicates that investment in its online offering and a focus on omnichannel delivery is more worthwhile than maintaining a portfolio of uninspiring department stores that lack choice and a wide product offering. Retailers who refuse to move with the times will suffer the consequences.”

Richard Lim, chief executive at Retail Economics, says:
“Plans to close up to 50 stores reflects the mighty challenge faced by the retailer. They operate in a part of the market under the most intense amount of pressure. Put simply, department stores are incredibly expensive to run. The combination of too much space, inflexible leases and spiralling operating costs are set against the backdrop of an accelerating behavioural shift towards online and experiences. This is eroding their profitability and changes in the business need to occur at a pace if they are to survive.

“They will need to push forward right-sizing initiatives and form strategic partnerships with other third parties to sweat assets more effectively, as they attempt to pivot towards a sustainable business model.”

Craig Smith, vice president of customer success at Amplience, says:
“Closing 50 physical locations in the UK would be a drastic move for Debenhams. But it’s no secret that department stores in the UK have been struggling a while, and it’s an understandable strategy. Faced with competition from online retailers with huge product ranges, it’s difficult for retailers to continue with a traditional approach to retailing.

“But this doesn’t mean that our most beloved brands must disappear from the British high street. Remaining stores need to make more impact on potential customers by becoming experiential branded spaces which reflect and enhance the retailers online offering. Today’s consumers shop on their own terms, on multiple devices, and expect a constant stream of tailored, high-quality content to stay engaged. In a highly personalised online environment, all retailers must churn out large quantities of content, and fast.

“Retailers must streamline their content production processes and adopt the latest tools. This is not only to ensure content is planned consistently across all channels, but also to ensure an agile approach to delivering content which is time-sensitive, on-trend or promotional. Only by adopting the right tools can a retailer deliver the continuously fresh content, and the proactive streams of engagement, that will capture the hearts and wallets of shoppers.”

Sofie Willmott, senior retail analyst at GlobalData, says:
”News that Debenhams is planning to shutter 50 stores over the next three to five years will be yet another blow to landlords, in a tumultuous year for the UK high street and department store retailers in particular. Debenhams is closing underperforming locations to focus on its top 100 branches and its digital channels with the aim to increase reliance on the online channel, which outperformed in FY2017/18, with UK online sales rising 10% on last year (UK store sales slumped 6.3%). Although the strategy is wise considering that retail spend is shifting away from physical stores, the closures will have a significant impact on smaller town centres, many of which are unlikely to have another major anchor store. Footfall to town centres will be affected and as a result other retailers on the high street will be hit by Debenhams’ closures.

“Although the Debenhams’ Redesigned strategy targets its problem areas, we are yet to see clear evidence that it is paying off with the retailer’s sales and share price following the same downward trajectory over the past year. Reducing its store estate will allow the brand to focus on its biggest cash-driving branches but remodelling 100 stores, as the retailer is likely to want to do following the ‘store of the future’ template being trialled in Watford, is going to be a costly business. Its announcement that it will slash capital expenditure by 50% in FY2019 makes it difficult to see how it will be able to replicate the Watford ‘wow’ factor across its estate.”

Manu Tyagi, associate partner for retail and consumer goods at Infosys Consulting, says:
“Debenhams’ record losses and planned store closures come as no surprise, particularly as we’ve recently seen the likes of House of Fraser and John Lewis also struggle to maintain sales. So where are these retailers going wrong – and is this the end of department stores as we know them?

“In-store sales revenues and operational issues are often cited as the main factors behind the squeeze on department stores. However, other retailers like Selfridges, Harrods, and Harvey Nichols tell a different story – they have not just survived but are thriving in the Internet age. The most likely answer is that retailers are struggling because they have lost sight of how important the customer experience can be. For department stores struggling to combat the relentless march of online retail, the key is to use technology to enhance – not replace – the traditional shopping experience.

“Current news surrounding department store closures might suggest the impending downfall of brick-and-mortar retail, but traditional department stores have huge advantages over online rivals. Department stores give shoppers the opportunity to touch and try-on, and to talk to knowledgeable sales assistants. Creating a unique and meaningful customer experience is the crucial element to battling the brunt of online – bricks-and-mortar stores can’t compete on price, so they have to work much harder. 

“Instead of replacing the traditional shopping experience, technology can help provide a stand-out experience by bringing together the benefits of online and offline. These technologies range from self-check-outs and chatbot-powered interactive kiosks, to ‘magic mirrors’ using augmented reality (AR), microtargeting and loyalty applications. Creating a unique shopping experience will make the customer value a visit to a department store. 

“But technology alone isn’t the panacea to online competition: department stores must use it wisely to create ambitious shopping experiences that are unique and fit with their brand.  By combining the powers of online and offline shopping, department stores have the ability to regain the magic of awe-inspiring retailing – re-staking their claim as the great cathedrals of commerce they once were.”