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EDITORIAL Is this the end for department stores – and will marketplaces take their place?

By Paul Skeldon June 11, 2018 - 12:09 am

It’s been a bad couple of weeks for department stores, the marketplaces of the High Street. First, BHS.com, the online only offshoot of failed High Street stalwart BHS had to shut down, then House of Fraser, still very much a multi-channel pioneer announced plans to shut 31 stores and axe some 6000 jobs.

These are just two high-profile names: a wander along any local High Street reveals a gap-toothed grimace of empty shops where once proud retailers stood. Gone are the Walworths, Toys R Us and many more local shops.

And it won’t end with BHS and House of Fraser either. Debenhams and many others are teetering on the brink.

Much has been written about why they are failing – the shift in consumer habits, the failure to keep pace with those habits, Brexit worrying people into being more circumspect about their spending and, I think, brand death among these old players – all these things add together to make for a very poor environment to run such an operation.

What interests me is that the reasons for the failure of these brands is both complicated and simple. On the one hand, there are myriad reasons why they are having a tough time. Consumer habits are changing, but not just shifting online, but changing in how they want to use stores. For instance, a survey by market analyst I-AM finds that 80% of people went shopping as a day trip in the last month, with 50% of those going in the last week, while 74% still prefer physical stores compared to just 26% preferring online shopping.

More startlingly, it also found that, while 73% of people prefer home delivery over click and collect, 56% would like their click and collect point to offer them a space to try on clothes and facilitate their returns and refunds.

This shows the level of the issue: even the stuff that retailers have done to meet the changing needs of shoppers isn’t enough.

On the other hand, the fact that shoppers now are increasingly coming from the demographic who have grown up surrounded by the web, means that all old bets – and brand loyalties – are off. This is the simple reason: Amazon they ain’t, BHS and HoF are dead or dying brands.

So where does this leave the world of online marketplaces? Well, they are the online equivalent of the department store, offering a broad range of goods from a broad range of suppliers. What the marketplace offers that the department store doesn’t is the infinite aisle – the stock never really runs out and the choice, in many ways, is infinite.

Marketplaces such as Amazon clearly benefit from the death throes of High Street retailers like HoF, but it is the likes of ASOS and Missguided, JD sports et al that benefit. BHS thought that by ditching its stores and going online-only, it could leverage its well known brand and compete because it had much lower overheads, stripped as it was of paying ground rent.

It didn’t work. Why? Dead brand and, online, way too much competition.

HoF is likely to find itself in a similar predicament. It is keeping some of its store footprint, but online it is going to face very stiff competition.

And let’s not forget that the likes of Amazon et al are opening pop ups stores when it suits them, as well as vying to enter the grocery business – which these days is a multi-goods offering.

With Asda and Sainsbury’s merging the market to sell anything to anyone on any channel is getting more and more competitive and tight. Can HoF pull it off: does it have a unique enough brand and experience to compete with these behemoths and with the raft of upstarts that will offer a unique and new experiential spin on what HoF already does?

With so much tech, so much market and so much at stake, the brand name House of Fraser starts to look hardly worth anything at all – almost an anachronism  from a bygone age. That isn’t going to shift much make up.

With brands increasingly shifting to selling through marketplaces as well as all the other channels – including what is left of High Street and department stores – the competition is only going to get tighter. It may well be too late: the avalanche of big name collapses may have begun.

Image: House of Fraser

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