A look at the future of department stores and how technology can help evolve this troubled store format.
The department store was once king of Main Street, a shopping mecca that brought everything consumers could possibly want together in one place. But today, the rise of internet shopping and the endless “aisles” that the online experience offers is undermining the value of department stores and challenging their very business model.
Increasingly, department stores are finding they need to offer consumers something extra to remain relevant. If they can’t give consumers a compelling reason to shop in-store, or incentivize them to do so, they will very quickly become redundant.
The death of the department store?
The death of the department store has been widely discussed, with a number of reputable brands announcing Company Voluntary Arrangements (CVAs) as a result of their failure to adapt their business models to fit a changing retail landscape.
Ensuring that department stores remain relevant to consumers is essential for survival, as is their need to possess an inherent strategic differentiator. In the absence of a unique product, they can redefine themselves by focusing on distinctive offerings, for example providing excellent customer service, offering extended warranties, employing staff with expert product knowledge, delivering a luxury shopping experience or developing new in-store innovations.
UK-based high-end department store Selfridges is a great example of a retailer making a success of this approach. It offers its customers products that are luxury in nature and hard to source elsewhere – and it has developed a well-established brand that is recognized and valued for these qualities. And don’t rule out the lure of that bright yellow bag that loudly broadcasts these facts.
To survive, some department stores have developed innovative propositions designed to draw consumers into the store and deliver an alternative experience to the online one. Take another high-end department store chain John Lewis & Partners, for example, which has recently undergone a rebranding exercise to emphasize the unique partnership structure that forms the heart of its business. Its rebranding encompasses its Main Street stores, the mobile app and the online shopping experience, with brand consistency across the board. The long-established retailer has, at the same time, made a considerable feature of improving customer service across all channels. It is now positioning itself as a leader in personalized customer experience, including personal shopping outside of normal business hours when a customer guarantees a minimum spend threshold.
The key to survival
As well as understanding who they are and being clear about what their unique offering is, department stores must be open to adapting their business models to incorporate new technologies that will help them remain competitive. Here they could learn from other main-street retailers that are launching innovative customer offerings to draw in customers.
Clothing store H&M, for example, is developing unique services by putting new technologies at the heart of the business model. Recently the retailer introduced new tech into their stores through things like “smart mirrors” that allow customers to try on outfits digitally. By creating an interactive in-store shopping experience that adds customer value, the retailer is taking steps to set itself apart from the competition.
Leveraging new and intelligent technology to increase efficiency could be the key to department stores being able to develop unique offerings. A comprehensive technology strategy can play a pivotal role in simplifying a business process and allowing a retailer to focus attention where it’s really needed. For example, introducing robotic process automation (RPA) into a traditional retail business would free up hours of staff time that can be used to focus on providing a frictionless start-to-finish customer experience.
Finding an objective, trusted partner who specializes in digital transformation is essential to follow this path. They will guide you to select the right processes to automate and the best technology products for your business without losing focus on the core requirement to generate customer value.
Securing the future
Despite recent high-profile collapses of department stores and other Main Street retailers, there is still very much a place for them within the retail landscape. This is because a physical presence on Main Street remains the best way to be able to deliver some forms of unique customer value, such as personalized shopping and the opportunity to browse a curated set of products.
In a highly competitive environment, it’s now imperative that department stores concentrate on defining core purpose and focus the business and technology strategy on what makes them stand out from the crowd. This is no small undertaking and requires a holistic cross-business approach, but it’s clear that department stores that can successfully leverage technology to achieve their business goals will be the ones that remain relevant and profitable into the next decade. In fact, putting technology at the heart of the retail business will be fundamental to survival.
This article originally appeared in Essential Retail.
About the author
As a Director in ISG’s UKI & NL business, Matt is responsible for strategic client relationships, with a specific focus on Retail and Consumer Packaged Goods clients. He works with clients to drive large scale transformational change through, sourcing, automation and business change programmes to deliver operational efficiency, allowing for redistribution of cost which clients can reinvest in Digital led services. Additional focus is on revenue uplift through enhanced digital customer experiences and improved speed to market from idea to product – helping understand the technology landscape required to achieve this.