Fashion is the most important product category for most department store retailers, with 80% of those who shopped at a department store buying clothing, footwear and accessories. However, fashion has been one of the hardest-hit of all retail sectors by COVID-19, further weakening sales at the main retailers.

Department stores have been rocked significantly by COVID-19, which has exacerbated many of the issues already facing the sector, such as increased online shopping and declining footfall. The demise of Debenhams and the closure of all of its stores has removed a major player and further dented the sector’s value, which Mintel estimates declined by 25% to £11 billion in 2020. Debenhams has seen its share of the market fall from 15.2% in 2019 to 10.5% in 2020. While we expect department stores to see some growth over the next few years, particularly once international travel resumes, we will continue to see some erosion among the mid-priced chains, including John Lewis, House of Fraser and M&S.

As the way people shop changes and the pivot towards online continues, department stores face increased competition from cheaper and more flexible pureplays such as Amazon. Many fashion retailers such as Next have expanded their non-fashion offering and added new home and beauty brands both online and in-store, putting them in direct competition with department stores.

Department stores will need to respond by widening and elevating the in-store services they offer, such as Selfridges with its spinning classes and out-of-hours children’s parties in the toy department, to encourage customers to visit stores. They can also blend in-store and online through the use of the latest digital investments/tools, such as online personal styling parties via Zoom to create a standout shopping experience.

Key issues covered in this Report

  • The impact of COVID-19 on the department store sector

  • Changes in current shopping behaviour due to changing lifestyles and shift online

  • Levels of satisfaction with department stores and their retail offering and services

  • How department stores can use in-store experiences and services to drive footfall

  • Understanding why people are choosing other types of retailers over department stores

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It was not until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hoped end to all restrictions by 21 June, although the growth of the Delta variant means this final lifting of restrictions was delayed. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

Even before the full reopening of the economy, retail sales and Mintel’s own household finances tracker provided encouraging signs of a rapid return to consumer confidence and a willingness to spend at least some of the savings that many households were able to build up over lockdown period.

The UK’s vaccination programme started on 8 December 2020. As of 15 June, nearly 80% of the UK population had received their first dose of the vaccine, and more than 57% had received their second dose.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report, but also take into account predictions made by other economic forecasts, including the Bank of England.

After the fall of 9.9% over the course of 2020, the OBR’s scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022. GDP is not expected to return to pre-COVID-19 levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster than expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

The rapid vaccine rollout and the continued efficacy of the vaccine, however, means that more recent economic forecasts have been significantly more optimistic than the OBR’s March forecast, even given the rise of the Delta variant. We have factored this rise in optimism into our market analysis and scenario forecasts.

Products covered in this Report

For the purposes of this Report, Mintel has used the following definitions:

It is difficult to define a department store, and, as a result, there are no hard and fast rules to Mintel’s definition. However, we would expect stores to trade from a minimum of 1,000 sq m typically and stock at least half a dozen different broad product categories, with one category unlikely to account for more than two thirds of turnover and usually significantly less than this. Stores must carry a range of brands and be clearly departmentalised – so we include M&S, but not Next. Most department stores trade in stores with multiple floors, though this is not necessarily a defining factor.

As a minimum, all department stores covered in this Report sell adults’ and children’s clothing, underwear, footwear, fashion accessories, beauty/grooming products and some homewares. Larger full-line stores have a much wider product assortment. They should also have at least one café or restaurant. Some department stores retained their food halls through the 1990s, and others have been reintroducing them. The food offer is typically upmarket and geared towards fine foods and delicatessen, and therefore differentiated from the everyday supermarket. Most department stores operate with a mix of own-bought and concession departments.

Back to top