Neri Karra walked into Macy’s in Washington DC last month and was amazed at how different it was from her Parisian department store home.
Karra, a brand consultant and professor of entrepreneurial strategy at the University of Oxford, said:
She was visiting family in America’s capital and wanted to do some shopping for the holidays. The single-brand Georgetown boutiques were great, she said. But the big box retailers? Not really.
American department stores have je ne sais quoi of their European counterparts. Consumers, industry veterans and even brands agree that the shopping experience at stores such as Selfridges in London and Le Bon at his LVMH in Paris is unparalleled. doing.
Indeed, department store formats are losing momentum everywhere. The rise of e-commerce has taken away the convenience of department stores, and the pandemic has also been a devastating blow. According to Euromonitor, in the United States, the market size of department stores as defined by retail prices has shrunk by more than 40% between 2016 and 2021. In Europe, the decline has been more moderate. Over the same period, department store sales fell by 27% in Western Europe and by 12.5% in Eastern Europe.
As the world reopened from the pandemic, brick-and-mortar stores nevertheless enjoyed a renaissance. Consumer demand for multi-brand spaces where experiences can be delivered to customers is also increasing.
“The competition in the fashion world is getting more and more intense… so physical [experience] It is a point of differentiation, a challenge and an opportunity,” said the founder and CEO of the Budapest-based portfolio company Vanguard Group, which owns the contemporary brands Nanushka, Aaron and Sunnei. Peter Baldasti, author, said:
For U.S. department stores, competitiveness with single-brand retailers and e-commerce often requires them to excel in everything from assortment and restaurant concept to display and lighting. We should take our cues from the regarded European department stores. Saks Fifth Avenue is spending millions to renovate its New York City flagship store, and Neiman says his Marcus is now investing heavily in the store concept.
This is not an entirely fair comparison. European multi-brand chains are often anchored in tourist cities where tourists from Asia, the Middle East and increasingly the US stock up on duty-free luxury goods. The world’s first department store, Le Bon Marche, which opened in 1852, has a stronger tradition in the sector, where consumers are less discount-conscious than in the United States.
The rise of luxury travelers has created a virtuous cycle of increasing investment in iconic European emporiums. At the same time, a vicious cycle of rampant discounting and cash flow scarcity has accelerated the decline of American multi-brand players.
European department stores were also largely privately owned, allowing ultra-high net worth owners to keep investing during a recession in ways that U.S. public companies couldn’t.
“Once things become profit-driven, it becomes difficult to improve,” said Robert Burke, a former Bergdorf Goodman executive and retail consultant. “The U.S. trend is more transactional and less open-ended.”
Differentiation by design
A fundamental difference between American and European department stores is the design of the store, from the layout of the space, to the materials used for floors and displays, to finishes such as lighting fixtures and paintings on the walls.
George Yabu, who founded the design firm Yabu Pushelberg with his partner Glenn Pushelberg, says the approach to store look and feel is very “systematic” given the profit-driven mentality of large American chains. said to have a tendency.
American companies claim to meet certain standards, such as racks with multiple hanging features, but “you can’t get standards for La Samaritaine store plans, for example,” Yabu said. increase. “[Just] Be responsible and build a temple of noble desires. “
As a result, European stores are creating a more creative and engaging atmosphere for consumers. Rather than a sprawling open layout, it is divided into various styled rooms and shop-in-shops, contrasting high ceilings with open spaces with small corridors for shoppers to discover and explore. Variation is important, whether it’s different lighting, the openness of the space, the furniture in the store, or the art that adorns the walls.
For example, inside London’s memorable Tudor-style Liberty, there are numerous smaller rooms flanked by three large atriums, each designed to stand out with details such as vintage furniture rather than standardized décor. I’m here. Liberty also sells each room in different style tones rather than by category or brand.
“We turned the clock tower into an intimate bar, created a gallery-like accessories section in the center of the store, gave our architecture a central stage, and sprinkled interesting pop-ups throughout the store.” Liberty’s says. Her director of retail management, Sarah Coonan, told her BoF in an email. “One of the ways we operate differently is to start with creative ideas rather than commercial ones.”
Transforming a lackluster interior into something a little more special doesn’t always have to be a big deal. Glenn Pushelberg says that even small changes like reducing the number of clothes on each clothing rack or changing the lighting can make a big difference. For example, using lights of different heights at different temperatures can evoke different emotions in shoppers. Product displays and tables are recycled materials or even found objects. Also, retailers should not forget fitting rooms and bathrooms. This can make or break the overall experience, Pushelberg added.
Upgrading the details adds luxury and increases the value of the products displayed.
“We used to joke that if you have good lighting and a good mirror, you can sell anything,” Burke said.
transition to concessions
American department stores have adopted the European model wherever possible. Luxury brands like Chanel, for example, have put pressure on their American wholesale partners to adopt a concession model, a common way of operating multi-brand retail in Europe.
Under the concession model, trusted brands manage their own products and in-store experiences within department stores that acquire a portion of each sale, rather than buying inventory wholesale.
For companies like Neiman Marcus, mixing wholesale with concessions means giving up control over choice and service. Anchor retail locations are often more profitable than holding inventory and running the space yourself.
For customers, a brand-run shop-in-shop is often a more engaging experience, with salespeople employed by the brand who are product experts.
“Concessions really make a big difference,” Kara said. “It means that it is the people of the brands themselves who serve the customers in the department store and represent the brand in the way customers want it.”
Commitment to experience
“Experiential” may be the ultimate buzzword in retail, but a truly immersive and enjoyable shopping experience is still somewhat of a rarity.
In recent years, some American department stores have invested seriously in enhancing the experience factor. Shortly after renovating its beauty floor, Manhattan’s Saks Fifth Avenue opened the only American outpost of popular Parisian bistro L’Avenue in 2019. Every two months the space will be reclaimed based on a new theme.
These moves echo London’s Selfridges strategy of reserving some of its most coveted visible corner spaces for brand acquisitions and art installations, rather than merchandise and prime shop-in-shop tenants. It reminds me.
Some of these efforts are effective. But by and large they do not compare to the frequent and large-scale activations carried out by Le Bon Marche, Selfridges, Harrods, etc. in Europe. Selfridges on Oxford Street alone has more than 20 eateries, some scattered throughout the sales floor. Last fall, to mark its 170th anniversary, Le Bon Marché staged his two-hour play, inspired by New York City’s “Sleep No More,” in-store every Friday and Saturday.
The goal, Le Bon Marché told BoF, is to provide a customer experience that evokes an emotional response. European department stores ensure that local customers keep coming back by constantly offering new and unpredictable activations and pop-ups.
US department stores are not without special events and installations. Nordstrom has hosted numerous “pop-ins” and collaborations under its Creative Her Projects department, led by Opening Her Ceremony alum Olivia Her Kim.
The missing piece of the puzzle is the cumulative effect of a multitude of products, experiences, and services that help you reach different customers and create the perfect shopping experience. Initiatives are often most effective when executed with the goal of surprising and delighting customers (building connections or exceeding expectations) rather than simply making a sale.
“At the end of the day, fashion is about fantasy and selling dreams,” Carla says.