What you need to know

In an increasingly competitive retail market there are many department stores that are outperforming. But sector growth is held back by the weakness of the largest company in our sector definition, M&S. In fact we estimate that sales growth in 2015 was only 1%, less than a third of the rate seen in 2012 and 2013.

All retailing is becoming more demanding, but we think that the most successful in recent years – John Lewis and House of Fraser - provide a blueprint for successful stores in the future. They stand out for their great brands, complemented by strong own brands, combined with first-rate service in attractive, well maintained stores with plenty of places to take a break. But on top of that they have a slick online proposition which must be as compelling as the physical outlets.

Areas covered in this report

There are no hard and fast rules. But, we would expect stores to typically trade from a minimum of 1,000 sq m 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 (though not all) trade off many floors.

As a minimum, all department stores covered in this Report sell adults’ and children’s apparel, lingerie, fashion accessories, footwear, beauty products and some homewares. Larger full-line stores have a much wider product assortment. They should have at least one café or restaurant.

Some department stores retained their food halls through the 1990s and others have been re-introducing 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.

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