Debenhams: Where did it all go wrong?
Old vs new. Last week, TechHQ brought you news of a buoyant pureplay (Asos). This week, the focus is on a struggling bricks and mortar retailer.
Debenhams has just posted record annual losses (GBP491.5 million / US$630 million) and announced the closure of up to 50 stores, putting 4,000 jobs at risk.
Critics put the blame on lacklustre stores, an uninspiring brand mix and poor digital capabilities, which have left it exposed at a time of intense structural change in retail.
Like Mothercare and Carpetright before it, Debenhams is trying to press the reset button. Optimists will style the move as a reboot of a trusted brand, but it looks more like a bout of emergency surgery on a business on the brink, according to Fiona Cincotta, Senior Market Analyst at City Index.
At its last trading update, Debenhams talked about a possible rebound in profit performance but that hasn’t materialized.
Like-for-like sales and margins have both continued to slide while cautious consumers flock to online retailers or shop at physical stores with more appeal, she observes.
To survive on today’s UK High Street, it helps to be fast a ‘la Zara, cheap a ‘la Primark or original a ‘la Ted Baker. Debenhams is none of those things. It may well get through this restructure and emerge as a leaner, meaner, more attractive and more innovative outfit.
But getting there will be far from easy. Management will somehow have to successfully release enough capital to improve the business, while at the same time slashing costs and covering what could be thousands of staff redundancy payouts.
We’ve also recently seen bad results from the likes of House of Fraser and John Lewis. Manu Tyagi, Associate Partner, Retail and Consumer Goods Practice at Infosys Consulting, notes that in-store sales revenues and operational issues are often cited as the main factors behind the squeeze on these ventures.
However, the likes of Selfridges, Harrods, and Harvey Nichols have not just survived but are thriving in the internet age.
For those struggling to combat the relentless march of online retail, the key is to use technology to enhance – not replace – the traditional shopping experience.
Department stores give shoppers the opportunity to touch and try on, and to talk to knowledgeable sales assistants.
Creating a unique and meaningful customer experience is the crucial element in battling the brunt of online. Bricks and mortar stores can’t compete on price, so they have to work much harder.
Instead of replacing the traditional shopping experience, technology can help by bringing together the benefits of online and offline, argues Tyagi.
This includes self-check-outs and chatbot-powered interactive kiosks, ‘magic mirrors’ using augmented reality (AR), microtargeting and loyalty applications.
But technology alone isn’t the panacea to online competition. Department stores must use it wisely to create ambitious shopping experiences that are unique and fit with their brand.
By combining the powers of online and offline shopping, they have the ability to re-stake their claim as the great cathedrals of commerce they once were.