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The Taste with Vir Sanghvi: Are the shutters going down forever on legendary department stores?

Most department stores, all over the world, are doing much less well than they used to. Some of this has to do with the success of standalone stores and malls. But the real reason is that the golden age of retail is over.

vir sanghvi Updated: Jan 24, 2018 08:40 IST
Vir Sanghvi
Vir Sanghvi
Hindustan Times
The Taste with Vir Sanghvi,Vir Sanghvi,Department Stores
The iconic Harrods, London.(Shutterstock)

Over a decade ago I was at Dickins and Jones, a famous, historic department store on London’s Regent Street when they suddenly shut off the muzak. A voice on the PA system announced. “The store will now close. All customers are requested to leave.”

A bomb threat? Some emergency? I asked the guy who was serving me whether I should be worried. No, he replied. He was the one who was worried.

Really? And why was that?

Well, because he reckoned the store was closing down forever. He would be unemployed tomorrow.

This seemed hard to believe. Dickins and Jones had been a Regent Street landmark since 1835. I simply could not imagine Regent Street without it. But obviously, the sales person knew something that I did not judging by the air of fatalism and weary resignation with which he greeted the announcement.

The papers had the story the next day. The store had indeed closed. Its owners were fed up of losing money and had finally signed a deal to sell the property. Dickins and Jones was now history.

In retrospect, I should not been so surprised. Something similar had happened to B Altman, a classic New York department store in 1989. And even in London, the great department stores of Kensington High Street had closed. Derry and Toms, and Pontings were dead by the mid-1970s. And Barker’s was on its deathbed. (It closed at around the same time as Dickins and Jones.)

But at the time, I believed that department stores were forever. The first time I went to London as a child, I had marvelled at the sheer size of Selfridges on Oxford Street, which was about the size of say, Mumbai’s Mantralaya or Delhi’s Shastri Bhavan. In India we could never conceive of stores of that size.

Likewise, in New York, I was fascinated by the scale of Macy’s. How could any shop be so big? And how far behind were we in India that these huge department stores had already been around in the West for over a century.

A Selfridges store in England. (Shutterstock.)

It turns out I was not alone in my fascination. Department stores are now routinely portrayed as great 20th Century glamour showpieces People make TV shows about them: The Paradise and Mr. Selfridge were big hits on British TV; The Magnificent Mrs. Maisel, which is partly set in B Altman, is currently showing on Amazon. And I imagine that Harrods will be the subject of a soap-opera one day too.

Department stores epitomised the country they were located in. Rarely, if ever, did a store brand travel. Printemps will always be associated with Paris, El Corte Ingles with Spain, Macy’s with America, Isetan with Japan, Lane Crawford with Hong Kong, Central with Thailand and so on. Yes, there have been attempts to export brands but these have met with limited success. Printemps and Sogo have flopped outside of their home countries and Saks and Harvey Nichols can only open tiny fashion outposts that do not hint at the scope of the original brand.

But now, I suspect it is all ending. Most department stores, all over the world, are doing much less well than they used to. Some of this has to do with the success of standalone stores and malls. But the real reason is that the golden age of retail is over. It is downhill from now on, not just for department stores but for the retail sector in general.

Macy’s, New York. (Shutterstock)

In Britain, most department stores reported a drop in Christmas sales last year compared to previous years. John Lewis is sacking employees. Debenhams has seen its share price halve over the last year or so. House of Fraser (itself the subject of a distress sale to the Chinese some years ago) may well go bust in a couple of years. Profits are down at Fenwicks, the prestigious family-run store and a new (non-family) chief executive has been brought in.

And that is just England: the situation in America is even worse.

Even in London, where tourists from all over the world come to shop. you can tell the difference. There was a time, till about a decade ago, when New Bond Street was the smartest shopping street in the world. Now, it is a dismal wasteland full of To Let signs and downmarket shops. Harrods still gets the Arabs, the Russians and the Chinese but it is anyone’s guess how long they will keep coming. Lower down the food chain, Marks and Spencer has struggled for years to recover its mojo and the tourist-friendly shirt-makers of Jermyn Street are deserted.

It is not difficult to see what the problem is. The philosophy behind a department store was that people would walk in to buy, say, a shirt, but would pause at a cosmetics counter downstairs and perhaps, buy a fragrance. Then, they might decide to check out the suits and then perhaps the shoes.

The trouble is: nobody shops like that any longer.

A Debenhams store in Nottingham. (Shutterstock)

Market research tells us that shoppers (in the West at least) are now more focussed on what they want to buy. They have read about the product (usually on the net) and have compared prices before they set out. There is much less uninformed or impulse shopping than before. So a department store holds very little appeal for them.

And then, there is internet shopping. Would you want to brave traffic, find a parking spot, wander through the aisles of a store (or even a mall) to buy one or two items when you could buy them at home for much less by just clicking a couple of times on your phone?

The one area where people may still want a physical retail experience is luxury where customers regard touch and feel as crucial and want full service. Many luxury brands (Chanel, Hermes etc) have traditionally been reluctant to cooperate with luxury websites and prefer to draw customers to their own stores.

But even that is changing. A few years ago I interviewed Angela Ahrendts who was then head of Burberry (in the days when it made a lot of money). Her view was that the luxury business could not be immune to wider trends in the retail sector forever. Eventually a large proportion of luxury customers would prefer to buy products online.

The key lesson for luxury companies, she said, was to rethink the retail model so that the stores became experiential.They needed to become bigger, grander places that celebrated the brand not just places that flogged products (A little like the Apple stores. I guess. Eventually, Ahrendts left Burberry and joined Apple!)

People should love the experience of being in a luxury store and draw their perception of the brand from that experience. Brands should recognise that the actual purchase transactions may take place online later.

H&M billboards in New York. (Shutterstock)

I am coming around to the view that except perhaps for that tiny Hermes-Chanel sliver at the top. Ahrendts was right. Even luxury retail will move out of the shops in a few years.

These are Western trends, of course, and the big global companies are hoping that India and other new markets will still follow the old rules and give them a few more years of success. That is why there is such a rush to open stores in India.

We don’t always realise this but many of the big brands that have come to India are on a downward trajectory in the West. Last year H&M shares hit their lowest level in eight year after it missed sales targets. Analysts blame the fall on H&M’s refusal to embrace online sales as completely as it should have. Even Inditex (owners of Zara), the world’s largest fashion retailers. saw sales fall last year.

Both H&M and Zara are now pinning their hopes on India and China (where H&M is collaborating with Alibaba to sell its products online).

This is a valid strategy but I suspect it is the equivalent of putting a bandaid on a gaping wound. Indians are bound to make the shift to online shopping far more quickly than the foreign companies realise. Think about it: why would you fight the crowds at the Zara store where you can’t even try the clothes unless you queue up for half an hour, where the sales staff know nothing about the merchandise and where it takes 20 minutes to pay for a T-shirt?You are much better off going online.

The Zara flagship store in Mumbai. (Shutterstock)

How the luxury stores do, will I think, largely depend on service. So far, Hermes runs the best luxury stores in India in both Delhi and Mumbai with world-class service. Of the others, the brands run by Genesis (especially, Canali, Armani and Tumi) offer luxury experiences. But too much of the rest of the luxury retail sector in India is sloppy which is one reason why so few stores actually make any money.

So what’s the future? I think department stores are dying and can only cling on to life by becoming more like hotels. They occupy great real estate so they should make more of it and open more restaurants, beauty salons etc.

The malls will be the next to die.Our malls survive because Indians treat them as fun places for an outing. With the notable exception of Delhi’s Select City Walk (deliberately and consciously mid-market), most Indian malls have never achieved their full potential as shopping destinations.

And once global trends reach India, they never will. Fun places to eat fast food and see movies? Oh yes.But shopping? No. That will become an online activity.

First Published: Jan 24, 2018 08:39 IST