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Real talk: Can department stores survive in this new era?

Real talk: Can department stores survive in this new era?

Survival of the fittest

Text: Joan Kong


Are we witnessing the death of department stores as we know it?

When was the last time you set foot in a department store (passing through doesn’t count), let alone buying something from them? If your answer is “I don’t remember”, you’re not the only one. Once considered shopping meccas, these retailers were the one-stop-shop for all of our shopping needs. Need some new outfits? Check. Looking for household appliances? Check. Want to replenish your skincare products? Check. I remember following my mum to her favourites—Sogo and Isetan—on a weekly basis, and we would spend hours browsing through different sections. Those trips used to be the highlight of my weekends.

However, in recent years, I'm sure we’ve all come across news on “the death of department stores” and how retailer after retailer are filing for bankruptcy. Restructuring, declining sales, and liquidations have become the new norm, and it’s not hard to understand why. In this new era where the retail industry is competitive and constantly evolving, all the factors that make them irreplaceable are no longer valid.

With the world at your fingertips, more and more consumers are turning to online shopping for all their needs (clothing, furniture, groceries—even diamonds), so what place do the department stores have in today’s retail landscape? Their model is struggling, and they have to fight to stay relevant or face extinction.

The harsh reality

According to a New York Times article, now is the time when retailers “should be putting in orders for the all-important holiday season” (aka its most lucrative time of the year). Instead, (no) thanks to the current pandemic that has deeply affected almost all sectors, the department stores are retrenching tens of thousands of employees, while some have filed for bankruptcy.

In the UK, Debenhams closed a third of its stores and went into administration in April (to protect itself from legal action from its creditors). In Australia, Myer has continued to close more stores since late last year, and they’ve furloughed around 10,000 employees over a month ago. In the USA, Barneys New York filed for bankruptcy in November and began liquidation sales not long after.

The first to be deeply impacted by the pandemic? Luxury department store Neiman Marcus. Reports regarding the group’s preparation to file for bankruptcy—it has about USD 4.8 billion in debt—first made waves two weeks ago, but according to the latest news by Bloomberg, it’s “closing in on a deal with lenders led by Pacific Investment Management Co. that would slash the department store chain’s debt load by more than half in exchange for control of the company.” Other bankruptcy rumours involve JCPenney and Sears; while Macy’s is trying to raise USD 5 billion to avoid bankruptcy, and according to Reuters, it has even hired bankers from Lazard to explore new financing.

The changing retail landscape has also impacted the department stores in Malaysia. The Parkson group has been streamlining its presence in recent years, having closed its Maju Junction and Sungei Wang Plaza stores in 2018, and the Suria KLCC outlet and the Parkson M Square Mall last year. Earlier this year, the group shut down its MyTown store as well. A spokesperson from the group told The Edge Markets via e-mail, saying: "In Malaysia, shopping malls are mushrooming everywhere and the demographics are ever-changing. Understandably, we are always cautious and selective when choosing new store locations; however, when sales do not meet expectations, we have to cut losses and move on."

Aside from that, according to a report by The Edge in March, Singaporean chain Robinsons is also considering to shut down one of its two stores in Kuala Lumpur—either The Shoppes in Four Seasons Place or The Gardens, to be exact—by the third quarter of this year due to the difficult retail conditions.

Openings and closures in the retail industry are only normal, but as the department stores are seemingly suffering a harder hit across the globe, the way they navigate the challenging and ever-changing market dynamic is of the utmost importance. The retail apocalypse is real, but the ones that adapt and transform can make it out alive.

Staying relevant

Compared to the retailers in the US, our local department stores may not be in such a dire situation (yet), thanks to our mall culture that is still very much alive. That being said, the declining footfall and sales are not to be ignored.

The big question is: How can they adapt according to the changing consumer behaviour?

A quick research on the US counterparts and you’ll notice that almost all the department stores have online sites and apps which you can shop from, with fuss-free in-store exchanges and free shipping to boot. But when it comes to our local retailers’ website, instead of e-commerce, you’re welcomed with a page full of promotional announcements, newsletters, and a brand directory. Redundant, considering how most of these pieces of information can be found on social media.

Unless they’re only targeting the older consumers who still prefer a more traditional approach to shopping—for e.g. those who will be there every Member Day—they should fully embrace digital technologies to meet the changing needs. After all, the tech-savvy millennials are said to have the most spending power of any generation. Just imagine: Would they prefer to comb through aisle after aisle to look for the perfect black dress, or getting to browse all of the store’s offerings with just one swipe?

We’re not implying that going digital is the only way to survive—it’s not about the battle between online vs. brick-and-mortar retail. If the news of department stores filing for bankruptcy in the US is of any indication, it has proven that these retailers still depend heavily on their physical outposts. Adopting a mixed retail model—where digital and brick-and-mortar channels seamlessly support one another—might just be what the consumers need. It’s what’s missing in their strategies.

According to this research done by Statista, it’s proven that millennials still love to shop in physical stores for four main reasons.

  • There’s no waiting time for the items to be delivered
  • They can have a touch and feel of the items before they make their purchase
  • They enjoy browsing the stores
  • They can seek advice from the store associates

While there’s no denying that e-commerce companies such as Lazada and Shopee are killing it nowadays, these are the experiences they can never provide to their customers.

Just take a look at Selfridges London and Galeries Lafayette in Paris—they’re no stranger to one-of-a-kind in-store experiences, be it transforming their store into an art gallery or collaborating with different brands and industry creatives for special installations and immersive pop-ups. These strategies entice people to visit, linger and discover the highly curated experiences—which cannot be found anywhere else—and products. And they have proven to work. Selfridges, in particular, has been recognised as the Best Department Store in the World by the Intercontinental Group of Department Stores for four times and will hang on to the title until this year.

In this ever-changing (and ever-challenging) retail landscape, it's clear that department stores have to reinvent themselves and leverage all platforms to survive and thrive. 

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