The death of the department store?

With the troubles of House of Fraser and now Debenhams, continuous news of department store branch closures and high profit losses both in the UK and the US, should the department stores be worried? 

Last summer we saw the drama that was the possible end of the House of Fraser. Then the news came that Debenhams suffered a £491.5m loss and is due to close 50 stores nation-wide, with a potential loss of up to 5,000 jobs. Profit warnings followed soon after Debenhams secured a £40m cash injection and yesterday news came that the department store is now in the hands of its lenders and its future is unclear.

Debenhams has 165 outlets and employs 25,000 people. Photograph: Peter Nicholls/Reuters Source: The Guardian

“It has been a tough year for retail in 2018 and our performance reflects that." -- Sergio Bucher, Debenham's Chief Executive

This is not just UK related. The US is witnessing a wave of store closures, with Sears, J.C. Penney and other 2187 closures since the 1st of January, the world of outdated retail is being wiped out organically. So, what contributes to this domino effect of department store closures? It is a number of factors, which over time, contribute to the difficult trading and business conditions, thus resulting in the closures of such large department stores. Lagging fashion trends, a large chain of costly stores, continuous sales and discounting, store debts and costs, high-street slowdown and, most importantly, a non-evolving retail concept, which consumers have lost interest in.

Yet, with all the contributing factors and the difficult trading conditions, we can argue that it is not the death of the department store, it is the death of an outdated retail concept, which is not advancing with the times and consumer expectations.

If we take a moment to consider the luxury industry and all its challenges and developments, why is it that the luxury boutiques and stores are not facing these issues at such rate? This is a fairly easy question to answer. Luxury being luxury has to be at the forefront of the industry. They have to be the innovators with an entrepreneurial spirit. Without continuously addressing the changes in retail and consumption, the formats would be irrelevant and outdated, a similar position to how a number of department stores find themselves in now. 

Sources:

https://www.theguardian.com/business/2018/oct/24/debenhams-to-close-up-to-50-stores-in-further-blow-to-high-streets

https://www.theguardian.com/business/2019/mar/05/debenhams-profit-warning-sales-close-stores

https://www.cnbc.com/2019/02/13/another-wave-of-retail-store-closures-coming-no-light-at-the-end-of-the-tunnel.html

https://www.cnbc.com/2019/01/03/us-malls-handle-store-closures-by-sears-others-better-than-expected.html

https://www.bbc.co.uk/news/business-47868020

https://www.bbc.co.uk/news/business-47867001