TOTAL LICENSING
RETAIL
REPORT RESEARCH PREDICTS BRIGHTER FUTURE
FOR DEPARTMENT STORES GLOBALLY
Department store retailing, a concept counteracted any positive develop- well as bringing in more shoppers.
that appeared to be heading for ter- ments. However, Verdict forecasts Thirdly, operators are expanding
minal decline globally only a few years growth will double between 2007 and again. In the US, JC Penney, Kohl’s and
ago, now has a much brighter future 2012 to 17%, due primarily to three Nordstrom all have active develop-
says a new report* by retail analysts main factors. ment plans that will see them add
Verdict Research, part of the Data- Firstly, consolidation is strengthening over 600 stores to their combined
the sector. Though mergers tend to portfolio by 2011. While the former is
disrupt trading, this trend is ridding the extending its already strong presence
sector, especially in mature economies, across the US, the latter two are filling
of many weaker operators, and giving gaps in their regional coverage. In the
retailers with stronger propositions case of Nordstrom, with 155 stores,
the opportunity to gain scale benefits it still has some way to go. Likewise in
and invest in growth. In the US, which the UK John Lewis is reaping the ben-
accounts for nearly half of all global efits of its investment in its existing
department store sales, Macy’s acqui- store portfolio and is on an expansion
sition of May department stores has trail that will mean nationwide cover-
not been problem free, but is creat- age over the next decade.
ing a much more cohesive nationwide
New markets offer high
group. In Japan, the sector has entered
a period of prolonged consolidation.
growth potential
Sogo and Seibu, and Daimaru and Mat-
Apart from the recovery in the most
suzakya have been brought together
mature and largest markets, there will
Source: Verdict Research,
monitor Group. Following a period under holding companies and more
also be explosive growth from devel-
part of Datamonitor
of consolidation, investment and ex- recently Daimaru and smaller depart-
oping economies. Verdict Research
pansion in both mature markets and ment store operator Matsuzakaya
forecasts that China, as well as new
fast developing economies has given a announced the setting up of a joint
markets like India (where department
new lease of life to the sector. Verdict holding company, J Front Retailing,
stores are only just developing as an
Research forecasts that this sector’s to integrate the two companies, with
important format for the first time)
growth rate will double over the next the aim of cutting costs and improv-
will continue to see explosive growth.
five years. ing profitability. Meanwhile in Europe,
Rising real disposable incomes and
Three factors fuelling
a merger between Kaufhof and Kars-
a class of consumers whose wealth
tadt would allow the new group to do
is expanding fast will spur a wave of
future growth
the same and rationalise the sector in
development led by franchisees and li-
Between 2001 and 2006, growth in
Germany.
censees. These markets are attractive
the US$302.6bn (£151.3bn) global de-
Secondly, greater investment is
for iconic department store operators
partment store market was subdued
meeting the demand from consum-
such as Saks and Harvey Nichols that
(8.7%). The ongoing recession in the
ers for more aspirational shopping
can leverage the global recognition
experiences. Many department store
of their names in new markets. The
groups have underinvested in their ex-
Middle East market and other oil pro-
isting store portfolios, instead focus-
ducing economies will continue to be
ing on cost cutting, which has made
boosted by higher oil prices, which
them not only less attractive desti-
will have a positive knock-on effect on
nations for consumers but also for
luxury spending, supported by a grow-
suppliers. Luxury brands have devel-
ing local store infrastructure.
oped ‘brandalone’ stores making them
Furthermore, increasing numbers of
less reliant on department stores as
local retailers will also upgrade their
a distribution channel. However, re-
store environments to levels where
tailers are upgrading and refurbishing
they can attract international designer
stores to a much higher level, as well
and premium brands. This will be a
as opening new stores. This is attract-
particularly important effect in mar-
important Japanese market, declining
Source: Verdict
ing back aspirational brands and pro-
kets such as Latin America.
Research, part of
sales in Germany, the second largest
viding department store operators
Datamonitor
market in Europe, and a downturn in
with the opportunity to participate in * Global Department Store Retailing
the largest market - North America
the strong growth in luxury goods, as 2007
46
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