Department Store Retailing - UK - March 2011

INTRODUCTION
Department store definition
Sector benchmarks
Department stores
Mixed goods retailers
Accounting policy
Market shares
Abbreviations
Financial definitions
ISSUES IN THE MARKET
Is multi-channel the holy grail for department store retailers?
How can department stores expand through bricks and mortar?
How can department stores broaden their appeal?
How can department stores engage the younger generation?
Which core values resonate with older department store shoppers?
EXECUTIVE SUMMARY
The market
Volatile performance through the downturn
Figure 1: Department store retailers’ sales* at current and constant prices, 2005-15
Figure 2: Department store retailers’ sales, 2005-15
Mixed reactions to recession
2010 rebound
Market factors
Volatile consumer confidence
Austerity and inflation = uncertainty
Tourist trade
The consumer
John Lewis wins more customers
Private label will score in 2011
Figure 3: Attitudes to department store shopping, January 2011
Regular shoppers biased to the ABC1 demographic
Quality and Service Led target group underpins demand in 2010
Figure 4: Department store target groups, January 2011
Companies, brands and innovation
Figure 5: Major department store retailers, 2009/10
What we think
FUTURE OPPORTUNITIES
 GUIDING CHOICE
 PROVE IT
BROADER MARKET ENVIRONMENT
Key points
Austerity + inflation = uncertainty
Figure 6: GDP, Personal Disposable Income (PDI), consumer expenditure and savings, at current prices, 2005-15
Figure 7: GDP, Personal Disposable Income (PDI), consumer expenditure and savings, at constant 2010 prices, 2005-15
Implications for retail sales
Consumer confidence remains volatile
Figure 8: GFK NOP monthly consumer confidence index, Jan 2005-Dec 2010
Chinese tourism boosts spend
Inflation to remain high
The benefits of getting older
Figure 9: Trends and projections in the UK population (‘000s), by age group, 2005-15
Figure 10: UK: % of total population aged 65+, 2010, 2015 and 2020
COMPETITIVE CONTEXT
Key points
Consumer spending in main department store categories
Figure 11: Consumer spending on key department store markets, 2005-10 (Q1-Q3)
Competition with other sectors
Beauty specialists
Clothing specialists
Electricals specialists
Grocers
CPI remaining high
Figure 12: UK: Consumer prices inflation for various categories, Jan 2010-Jan 2011
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Pop-up stores
Online initiatives
Harvey Nichols – a mobile pop-up?
Daimaru Shinsaibashi targets the twenty somethings too
Selfridges steps up with its ‘open to the world’ philosophy
Harrods taps into workplace learning trend
And from across the pond
SECTOR SIZE AND FORECAST
Key points
Technical note
Past performance
Forecast
Figure 13: Department store retailers’ sales* at current and constant prices, 2005-15
Figure 14: Department store retailers’ sales*, 2005-15
Figure 15: Department store retailers sales as % all retail sales, 2003-15
Forecast methodology
Department store prospects
Who will be the key customers?
Managing price increases and value perceptions
Private label – a compelling alternative to premium brands
Multi-channel support
Store expansion at home and overseas will drive some medium term growth
Department store outlet data
Figure 16: Identified department stores, outlet numbers, 2003-09
Mixed goods retailers
Sector sales and forecasts
Figure 17: Mixed goods retailers’ sales, 2005-15
Outlet data
Figure 18: Non-specialised retail outlet numbers, 2004-08
RETAIL COMPETITOR ANALYSIS
Key points
Market leaders continued to invest
Older consumers return to the market
House of Fraser stands out
Debenhams impacted by constrained family shopper?
Premium players boosted by overseas tourists and luxury bounce back …
... and continue to gain market share
Figure 19: UK: Combined market share of Selfridges, Harrods and Harvey Nichols, 2005-09
Further fallout
Figure 20: Major department store retailers, 2009/10
Market shares
Figure 21: Department store retailers, market shares, 2009
RETAIL ADVERTISING AND PROMOTION
Key points
Figure 22: Main media advertising spend, by department stores, 2007-10
Figure 23: Annual % change in main media advertising spend, by leading department stores, 2007-10
Spending as percentage of turnover
Figure 24: UK: Main advertising spending as percentage of total sales for the ten leading department store chains, 2007-09
Figure 25: Major department stores’ main media advertising spend as % of sales, 2008 and 2009
Spending by media
Figure 26: Main media advertising by department stores, by media used, 2010
BRAND ELEMENTS
Brand map
Figure 27: Attitudes towards and usage of department store brands, December 2010
Brand attitudes
Figure 28: Attitudes by Department store brand, December 2010
Brand personality
Figure 29: Department store brand personality – macro image, December 2010
Figure 30: Department store brand personality – micro image, December 2010
Correspondence analysis
Brand experience
Figure 31: Department store brand usage, December 2010
Figure 32: Satisfaction with various department store brands, February 2010
Figure 33: Consideration of department store brands, December 2010
Figure 34: Consumer perceptions of current department store brand performance, December 2010
Figure 35: Department store brand recommendation – Net Promoter Score, December 2010
Brand index
Figure 36: Department store brand index, December 2010
Figure 37: Department store brand index vs. recommendation, December 2010
Target group analysis
Figure 38: Target groups, December 2010
Figure 39: Department store brand usage, by target groups, December 2010
Group One – The Conformists
Group Two – Simply the Best
Group Three – Shelf Stalkers
Group Four – Habitual Shoppers
Group Five – The Individualists
THE CONSUMER – WHICH DEPARTMENT STORE THEY SHOP
Key points
Figure 40: Department stores bought from in the last six months, January 2011
Changing face of the sector
Figure 41: Which department stores consumers have bought from in the previous six months, 2001-04, 2006, 2008 and 2011
Winners and losers
M&S likely to have gained general merchandise shoppers
John Lewis forges ahead
Debenhams expansion fails to drive significantly more shoppers
House of Fraser nudges up on same size network
Is Selfridges losing shoppers to House of Fraser?
TJ Hughes loses out
Retailer market positioning
Figure 42: UK: Market positioning of leading department stores, January 2011
Figure 43: Most popular department stores bought from in last six months, by gender, age and socio-economic group, January 2011
Figure 44: Next most popular department stores bought from in last six months, by gender, age and socio-economic group, January 2011
Repertoire – less promiscuous shoppers in this sector
Figure 45: department stores bought from, by repertoire of department stores, January 2011
THE CONSUMER – DEPARTMENT STORE SHOPPER HABITS
Key points
High conversion rate among the frequent visitors
Figure 46: Department store shopping habits, January 2011
Grabbing the attention of male shoppers
Figure 47: Department store shopping habits, by gender, January 2011
ABC1 bias
Figure 48: How often they visit and buy from department stores, by gender, age, socio-economic group and lifestage, January 2011
THE CONSUMER – ATTITUDES TO DEPARTMENT STORE SHOPPING
Key points
Figure 49: Attitudes to department store shopping, January 2011
On the whole men quite like department stores
 TARGET GROUPS
Figure 50: Department store target groups, January 2011
Figure 51: Attitudes towards department stores, by target groups, January 2011
Group 1: Convenience Seekers (20%)
Who are the Convenience Seekers?
Group 2: Quality and Service Led (15%)
Who are the Quality and Service Led?
Group 3: Specials Seekers (15%)
Who are the Specials Seekers?
Group 4: Browsers (6%)
Who are the Browsers?
Group 5: Indifferent (44%)
Who are the Indifferent?
 WHERE PEOPLE SHOP BY TYPOLOGY
Figure 52: Target groups, by department stores bought from in last six months, January 2011
THE CONSUMER – OCCASIONAL SHOPPER ATTITUDES
Key points
Figure 53: Why they only shop occasionally, January 2011
Figure 54: Why they only shop occasionally, by gender, age and socio-economic group, January 2011
Young people find better value elsewhere
Lower socio-economic groups find department stores a bit pricey
Convenience is important for the ABC1s
Older people not prepared to travel
Families in particular find them pricey
Figure 55: Those that think they are a bit pricey, by lifestage and presence of children, January 2011
Figure 56: Those that think they are a bit pricey or can find better value elsewhere, by special group, January 2011
Figure 57: Why they only shop occasionally, by lifestage, presence of children and special group, January 2011
APPENDIX – BROADER MARKET ENVIRONMENT
Population
Figure 58: Europe top 7: Population breakdown, by age group, 2005
Figure 59: Europe top 7: Population breakdown, by age group, 2010
Figure 60: Europe top 7: Population breakdown, by age group, 2015
Figure 61: Europe top 7: Population breakdown, by age group, 2020
GDP
Figure 62: Europe top 7: GDP (in current prices) 2000-Q4 2010
Figure 63: Europe top 7: GDP growth rates (in constant prices), 2000-Q4 2010
Consumer spending
Figure 64: Europe top 7: Consumer spending (in current prices) 2001-Q4 2010
Figure 65: Europe top 7: Consumer spending growth rates (in constant prices) 2001-Q4 2010
Consumer prices
Figure 66: Europe top 7: Consumer prices, 2001-Jan 2011
Unemployment
Figure 67: Europe top 7: Average rate of unemployment, 2001-10
Interest rates
Figure 68: UK and Eurozone: Interest rates, 2004-Q4 2010
Consumer confidence
Figure 69: Europe top 6: Consumer confidence, April 2009-December 2010
APPENDIX – WHICH DEPARTMENT STORE THEY SHOP
Figure 70: Most popular department stores bought from in last six months, by demographics, January 2011
Figure 71: Next most popular department stores bought from in last six months, by demographics, January 2011
Figure 72: Repertoire of department stores bought from in last six months, by demographics, January 2011
APPENDIX – THE DEPARTMENT STORE SHOPPER HABITS
Figure 73: Most popular how often they visit and buy from department stores, by demographics, January 2011
Figure 74: Next most popular how often they visit and buy from department stores, by demographics, January 2011
APPENDIX – ATTITUDES TO DEPARTMENT STORE SHOPPING
Figure 75: Most popular attitudes towards department store shopping, by demographics, January 2011
Figure 76: Next most popular attitudes towards department store shopping, by demographics, January 2011
Target groups
Figure 77: Target groups, by demographics, January 2011
BEALE
Figure 78: Beale Plc: Sales as share of department store and mixed goods retailers sales in the UK, 2006-10
Strategic evaluation
Financial performance
Figure 79: Beale Plc: Group financial performance, 2005/06-2009/10
Store portfolio
Figure 80: Beale Plc: Outlet data, 2006-10
Retail offering
e-commerce and home shopping
DEBENHAMS
Figure 81: Debenhams: Sales as share of department store and mixed goods retailers sales, 2005-09
Strategic evaluation
Overseas franchises increase brand exposure
Recent history
Financial performance
Figure 82: Debenhams: Group financial performance, 2005/06-2009/10
Store portfolio
Figure 83: Debenhams: UK and Republic of Ireland outlet data, 2006-10
Figure 84: Debenhams: International franchise outlet numbers, 2004-Feb 2011
Figure 85: Debenhams: International franchises – countries of operation, February 2011
Consumer profile
Figure 86: Debenhams shoppers in last six months, by gender, age and socio-economic group, January 2011
Figure 87: Debenhams shoppers in last six months, by region and ACORN group, January 2011
Retail offering
Figure 88: Debenhams: Own bought product mix, 2006/07 and 2009/10
e-commerce and home shopping
Figure 89: Debenhams: Online profile of unique visitors, three month average to December 2010
FENWICK LTD
Figure 90: Fenwick Ltd: Sales as share of department store sales in UK, 2005-09
Strategic evaluation
Financial performance
Figure 91: Fenwick Ltd: Group financial performance, 2005/06-2009/10
Store portfolio
Figure 92: Fenwick Ltd: Outlet data, 2005/06-2009-10
Retail offering
e-commerce and home shopping
HARRODS
Figure 93: Harrods Ltd: Sales as share of department store retailers’ sales in UK, 2005-09
Strategic evaluation
Recent history
Financial performance
Figure 94: Harrods Ltd: Group financial performance, 2005/06-2009/10
Store portfolio
Figure 95: Harrods Ltd: Outlet data, 2005-2009
Retail offering
e-commerce and home shopping
Figure 96: Harrods.com: Profile of online UK unique visitors, three-month average to December 2010
HARVEY NICHOLS GROUP
Figure 97: Harvey Nichols Group Ltd: Sales as share of department store and mixed goods retailers sales in UK, 2005-09
Strategic evaluation
Recent history
Financial performance
Figure 98: Harvey Nichols Group Ltd: UK and Ireland retail financial performance, 2005/06-2009/10
Store portfolio
Figure 99: Harvey Nichols Ltd: Total domestic versus overseas retail floorspace, 2000-12
Note: 2011 and 2012 projected based on planned store openings.
Figure 100: Harvey Nichols Group Ltd: UK and Ireland outlet data, 2005/06-2009/10
Figure 101: Harvey Nichols Group Ltd: Group outlet data, February 2011
Retail offering
e-commerce and home shopping
Figure 102: Harveynichols.com: Profile of unique visitors, three-month average to December 2010
HOUSE OF FRASER
Figure 103: House of Fraser: Sales as share of department store and mixed goods retailers sales in the UK, 2005-09
Strategic evaluation
Online and multi-channel
Recent history
Financial performance
Figure 104: House of Fraser: Group financial performance, 2007/08-2009/10
Store portfolio
Consumer profile
Figure 105: House of Fraser shoppers in last six months, by gender, age and socio-economic group, January 2011
Figure 106: House of Fraser shoppers in last six months, by region and ACORN group, January 2011
Retail offering
e-commerce and home shopping
Figure 107: House of Fraser.co.uk: Profile of unique visitors, three-month average to December 2010
JOHN LEWIS
Figure 108: John Lewis Plc: Sales as share of department store and mixed goods retailers sales in UK, 2005-09
Strategic evaluation
Financial performance
Figure 109: John Lewis Plc: Group financial performance, 2005/06-2009/10
Figure 110: John Lewis Plc: Half year to end July 2009 and 2010
Store portfolio
Figure 111: John Lewis Plc: Outlet data, 2005/06-2009/10
Consumer profile
Figure 112: John Lewis shoppers in last six months, by gender, age and socio-economic group, January 2011
Figure 113: John Lewis shoppers in last six months, by region and ACORN group, January 2011
Retail offering
e-commerce and home shopping
Figure 114: John Lewis: Online profile of unique visitors, three month average to December 2010
MARKS & SPENCER (M&S)
Figure 115: Marks & Spencer: Non-food sales as share of UK department store and mixed goods retailers sales, 2005-09
Strategic evaluation
Recent history
Financial performance
Figure 116: Marks & Spencer: Group financial performance, 2005/06-2009/10
Store portfolio
Figure 117: Marks & Spencer: Outlet data, 2005/06-2009/10
Figure 118: M&S: UK Outlets not specialising in food, by type, 2008-10
Consumer profile
Figure 119: Marks & Spencer UK: Consumer profile – demographics, 2010
Figure 120: Marks & Spencer UK: Consumer profile – location, 2010
Figure 121: Marks & Spencer UK: Consumer profile – ACORN group, 2010
Retail offering
Figure 122: Marks & Spencer: own brand portfolio, 2011
e-commerce and home shopping
Figure 123: M&S: M&S Direct sales, 2006/07-2009/10
Figure 124: M&S: Online profile of unique visitors, three month average to December 2010
SELFRIDGES RETAIL LTD
Figure 125: Selfridges Retail Ltd: Sales as share of department store and mixed goods retailers sales in the UK, 2005-09
Strategic evaluation
Financial performance
Figure 126: Selfridges Retail Ltd: Group financial performance, 2005-09
Store portfolio
Figure 127: Selfridges Retail Ltd: Outlet data, 2005-09
Consumer profile
Figure 128: Selfridges: Consumer profile – demographics, 2010
Figure 129: Selfridges: Consumer profile – location, 2010
Figure 130: Selfridges: Consumer profile – ACORN group, 2010
Retail offering
e-commerce and home shopping
Figure 131: Selfridges: Online profile of unique visitors, three month average to December 2010
TJ HUGHES
Figure 132: TJ Hughes Plc: Sales as share of department store and mixed goods retailers sales in UK, 2005-09
Strategic evaluation
Financial performance
Figure 133: TJ Hughes Plc: Group financial performance, 2005-09
Store portfolio
Figure 134: TJ Hughes Ltd: Geographical location of outlets, January 2011
Figure 135: TJ Hughes Ltd: Outlet data, 2005-10
Consumer profile
Figure 136: TJ Hughes: Consumer profile – demographics, 2010
Figure 137: TJ Hughes: Consumer profile – location, 2010
Figure 138: TJ Hughes: Consumer profile – ACORN group, 2010
Retail offering
e-commerce and home shopping
Figure 139: TJ Hughes: Online profile of unique visitors, three month average to December 2010