Department stores under pressure from online retailers

New store Fenwick at Lexicon in Bracknell

24 Jul Department stores under pressure from online retailers

Department stores having to get creative

Store sales are under pressure from online retailers, the rise of Amazon and our increasing preference for spending money on experiences rather than things.  Looking at the share price of Debenhams which is down about 20% so far this year you can see the damage these trends are inflicting.

Shutting stores that are underperforming.

This is not always as easy to do as it sounds because a lot of stores are tied into long-term leases. BHS’s demise can partly be blamed on its enthusiasm for signing long leases years ago and today, agents say House of Fraser looks particularly exposed.

How to use excess retail space

Department stores therefore have to think of new ways to use up excess space and attract customers to their shops. John Lewis has been particularly creative in this regard. Its new Birmingham store at Grand Central has its own spa and elsewhere it has brought in popular cafés and restaurants such as Benugo and Comptoir Libanais.

Thinking outside the box

Adding flexible office space to its stores is another example of innovative thinking from John Lewis. Whether the idea has legs remains to be seen. Carving off parts of a store for flexible workspace wouldn’t drive footfall in the same way that introducing a hospitality brand does and it remains unclear how the office space would be separated off.

Department stores are not the only ones trying to think of new ways to use up excess space. If short of ideas, they could take a lesson or two from Britain’s biggest supermarket chains, which have come up with a number of innovative solutions in recent years to fill space they no longer need in their largest stores.

Tesco acquires Giraffe & Harris + Hoole

Tesco’s acquisitions of the Giraffe restaurant chain and Harris + Hoole coffee shops haven’t worked out – but Britain’s biggest grocer appears to be enjoying more success opening up concessions for other major retail brands such as the Arcadia fashion chains.
These deals are generating substantial rental income, as well as giving customers more reasons to visit.

Sainsbury’s is also benefiting from extra footfall and sales as a result of putting Argos units in its stores and the deals it has struck up with gym groups to take space on mezzanine floors. As one agent points out, having lots of hungry people coming out of the gyms can only be good for food sales.

Department stores and supermarket chains alike have to innovate in order to survive and thrive against online retailers

Other retailers have successfully adapted to new market realities. The Lexicon in Bracknell, a new retail heart for the town, will be home to Fenwick, a 80,000 sq.ft store opening autumn 2017, which will be home to Jo Malone London and Kate Spade New York.  There will be Cafe Nero and Fuego; a beautiful, new mediterranean restaurant and Mason + Rye, a bakery and patisserie.  There will be a denim studio, Glow Bar and Regis hair and beauty.

WHSmith has adapted to stay profitable by having the Post Office in its stores and launching an online store which even sells furniture and office equipment such as computers & printers . Their  share price has tripled during the past five years because the retailer wasn’t afraid to shake up its product range and store estate.

If you would like to speak to us about retail space please contact James Page on 01344 311344 or send us an enquiry.

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Source: Property Week and The Lexicon

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