GLOBAL DEPARTMENT STORE RETAILING
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Dated, boring and drab store formats and me-too merchandise
offerings impact midmarket department store performance.
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Fast-fashion chains and off-price retailers take share from mid-tier
department store segment.
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Omnichannel investments abound but are not a panacea.
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Desirable product and exciting in-store experiences are key.
Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 deborahweinswig@fung1937.com Cam Bolden cambolden@fung1937.com Sunny Chan sunnychan@fung1937.com Marie Driscoll, CFA mariedriscoll@fung1937.com John Harmon, CFA johnharmon@fung1937.com Aragorn Ho aragornho@fung1937.com John Mercer johnmercer@fung1937.com Charlie Poon charliepoon@fung1937.com Kiril Popov kirilpopov@fung1937.com Stephanie Reilly stephaniereilly@fung1937.com Lan Rosengard lanrosengard@fung1937.com Jing Wang jingwang@fung1937.com Fung Business Intelligence Centre (FBIC) Publication: for internal use only
Copyright © 2015 Fung Group. All rights reserved.
Table OF Contents EXECUTIVE SUMMARY ........................................................................................................................................... 4
GLOBAL ISSUES ..................................................................................................................................................... 14
THE UNITED STATES .............................................................................................................................................. 18
THE UNITED KINGDOM .......................................................................................................................................... 24
FRANCE ................................................................................................................................................................... 28
GERMANY ............................................................................................................................................................... 31
CHINA ...................................................................................................................................................................... 34
JAPAN ...................................................................................................................................................................... 39
CONCLUSIONS: WHERE NEXT?............................................................................................................................ 44
COMPANY PROFILES ............................................................................................................................................ 46
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Executive Summary
This report dissects the department store sectors in the US, the UK, France, Germany, China and Japan. Sector maturity is a common theme in all but one of these markets—China is the exception—and each of these mature markets has experienced consolidation and contraction as newer retail formats have attracted shoppers. Across several Western markets, dated, boring and drab store formats and me-­‐too merchandise offerings are hitting the financial performance of midmarket department stores. We have seen chains such as Marks & Spencer (UK), Karstadt (Germany) and Sears (US) post declining sales. In the core apparel category, these retailers face heightened competition—from more sharply targeted specialists such as Zara, Primark and T.J.Maxx/TK Maxx, and from fast-­‐growing, often well-­‐positioned Internet pure plays such as Zalando and ASOS. These more fashionable or better targeted rivals are likely to steal younger shoppers, we think, threatening to leave some department stores without an upcoming generation of loyal customers. As a result of difficulties, store closures are the order of the day among some of the hardest-­‐hit department stores, such as Sears and Karstadt. At the same time, stronger performers and some midmarket players are venturing into new formats, such as smaller travel stores. And a number of big department store chains have been making investments in omnichannel capabilities, adding services that include next-­‐day click-­‐and-­‐collect and in-­‐store ordering points. But we think omnichannel services do not address the fundamental problem afflicting middle-­‐
ground retailers, which is one of sitting in the very middle of the market and seeking to appeal to all shoppers indiscriminately. Premium retailers are generally performing better than their midmarket peers. The upscale segment provides attractive, “browsable” store experiences that offer a strong complement to the functionality of Internet shopping. Global
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More upscale chains have also benefitted from growing spending by tourists. With outbound Chinese tourist numbers expected to more than double between 2013 and 2020, there are still major potential rewards in catering to tourist shoppers. China is an exception, so far, with a faster-­‐growing, less mature sector. International retailers like House of Fraser are moving in to grab some of the growth that the Chinese market offers. But China’s department store market is poised for consolidation, and lessons from Western markets may prove valuable to retailers that want to drive that consolidation in the coming years. For the mature, multichannel retail markets of the West, FBIC sees the opportunity for improved department store metrics, from traffic to sales to profits—but only if retailers offer appealing and worthwhile in-­‐store experiences as well as desirable product. Today’s shoppers are spoiled by choice and are more demanding than ever. Global
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The Long, Slow Death of the Midmarket … in Charts Losing Share of Spending In a number of countries, big-­‐name department store retailers are struggling with falling sales, narrowing margins and, in some cases, deepening losses. Many big, established chains are finding it tough to maintain sales momentum as rival sectors pile on the pressure. Some markets have seen department store sector declines for years or even decades. This has principally been the result of stores failing to inspire or excite customers in response to successive waves of competition: from mono-­‐brand apparel specialists like Gap in the 1980s and 1990s, then from e-­‐commerce pure plays and fast-­‐fashion stores in the 2000s and 2010s. The US represents the nadir of Western department store sectors, turning in a miserable long-­‐
term performance as a result, we think, of uninspiring stores, unexciting propositions and an addiction to discounting. US department stores’ share of all retail sales halved between 2002 and 2014, and in annual $ sales, the sector lost 28% of its value from 2000 to 2014. Figure 1. The United States: Department Store Sales, in Value Terms and as % of All Retail Sales, 1992–2014 As % of All Retail (Right Axis) Value Sales (Lee Axis) 300 14 250 12 10 8 % $ Billion 200 150 6 100 4 2014 2013 2012 2011 2009 2010 2008 2007 2006 2005 2004 2003 2002 2001 1999 2000 1998 1997 1996 1995 0 1994 0 1993 2 1992 50 Source: Census Bureau/FBIC Global Retail & Technology Global
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… In Countries Where Middle-­‐Market Players Dominate Not all countries and not all retailers are facing difficulties. Long-­‐term declines are an affliction unique to midmarket and lower-­‐end retailers. We see sector-­‐wide declines only in countries where midmarket players dominate the sectors. In the US, big retailers clustered around the middle ground—think Sears, JCPenney and Kohl’s—
predominate. The contrasting fortunes of the sector in Germany and France illustrate this point vividly. Unexciting middle-­‐ground players Galeria Kaufhof and Karstadt dominate Germany’s department store sector; by contrast, aspirational, premium retailers like Galeries Lafayette and Printemps lead France’s sector. And the sectors in these countries have performed very differently over the last decade and a half. While the German decline echoes that seen in the US, the French sector has broadly maintained its share of all retail sales. Figure 2. Germany and France: Department Store/Mixed Goods Retailers’ Sales as % of All Retail Sales, 2000–2014 Germany 7 France 6.0 6 5 3.5 % 4 3 2.1 2.0 2 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 0 2000 1 Sector data includes mixed-­‐goods retailers as well as department stores. Source: Eurostat/Insee/Statistisches Bundesamt/FBIC Global Retail & Technology Company-­‐level data backs up this picture of deviating performance in Germany and France. The aggregate sales performance of the two sector leaders in Germany—midmarket Galeria Kaufhof and Karstadt—has been markedly different from that of the two leading department stores in France, premium-­‐positioned Galeries Lafayette and Printemps. Global
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Figure 3. Germany and France: Aggregate Year-­‐Over-­‐Year Net Revenue Growth at the Top Two Department Store Chains in Each Country 10 7.9 7.6 Germany % 5 France 2.3 2.3 0 -­‐1.5 (5) -­‐4.5 -­‐5.5 -­‐8.3 2011 (10) 2012 2013 2014E Data is for Galeria Kaufhof and Karstadt (Germany) and Galeries Lafayette and Printemps (France). Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology M&S Illustrates the Difficulties in the UK The UK department store sector is a diverse mix of high-­‐end outperformers like Harrods, strongly performing premium stores like John Lewis and low-­‐growth midmarket chains like Marks & Spencer (M&S). This makes it difficult to get a clear picture from sector-­‐wide data. High-­‐street stalwart M&S has most prominently typified the midmarket malaise, posting 14 consecutive quarters of falling general merchandise sales between 2011 and 2014. In early 2015, the retailer finally registered a small uptick in comps for its general merchandise division. We’ll have to see if this is the start of a turnaround, but given the global indicators, we are not optimistic for the long-­‐term performance for these kinds of midmarket players. Figure 4. Marks & Spencer UK General Merchandise Comps, 1Q 2011–4Q 2014 0.7 1.0 0.0 (1.0) (2.0) (3.0) (4.0) (5.0) (6.0) (7.0) 2011 2012 2013 2014 Source: Marks & Spencer/FBIC Global Retail & Technology Global
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Japan and China, Too Even in high-­‐growth China, sales at general merchandise stores—the closest proxy we have for the department store sector—have been falling as a share of all retailing. Sales are rising in absolute terms, but this sector is losing share of retail spend as it confronts heightened competition, including from fast-­‐growing Internet pure plays. In Japan, the sector’s innate conservatism has cost department stores younger shoppers, who gravitate to e-­‐commerce retailers and more fashionable store-­‐based rivals. Figure 5. China and Japan: General Merchandise Store Sales as % of All Retail Sales, 2009–13 China 17 Japan 16.0 16 15 14.0 % 14 13 12 11.1 11 10 9.2 9 8 2009 2010 2011 2012 2013 Source: China Statistical Yearbook/Japan Statistical Yearbook/FBIC Global Retail & Technology Global
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It Doesn’t Have to Be This Way! Faltering performance is not an inherent result of the department store format. Premium players and high-­‐end stores have performed much more strongly than their midmarket and lower-­‐end peers. These stores typically provide the aspirational, sometimes indulgent, experiences and service that e-­‐commerce cannot—encounters that rival the experiences provided by best fashion specialists. Figure 6. Selected Department Stores: Compound Annual Growth Rate in Revenues, 2010–2014 High-­‐End Harrods* 11.2 Galeries Lafayeme* 10.1 Printemps 8.3 Premium Nordstrom 8.9 7.6 John Lewis House of Fraser** Midmarket 3.0 Kohl's 0.8 M&S UK General Merchandise -­‐1.5 Karstadt -­‐6.3 Sears US -­‐7.2 JCPenney -­‐8.9 -­‐10 -­‐5 0 % 5 10 15 Growth rates are in companies’ reporting currencies * CAGR 2009–13. ** CAGR 2009–13. Based on statutory revenues. Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology In this context, margin attrition has been a familiar theme. In the US in particular, midmarket chains saw depletion of operating margins between 2010 and 2014. Slimmer operating margins have been seen among some premium and high-­‐end chains, but this must be kept in context: as we show later, these segments typically still yield fatter margins. Operating profit data is not available for Marks & Spencer General Merchandise, which was included in the revenue chart above. Global
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Figure 7. Selected Department Stores: Percentage-­‐Point Change in Operating Margins, 2010–14 High-­‐End Harrods* -­‐2.0 Printemps** 2.6 0.9 Galeries Lafayeme* Premium House of Fraser*** -­‐3.0 John Lewis 0.8 Nordstrom Midmarket -­‐1.6 Kohl's -­‐2.5 Karstadt* -­‐4.6 Sears US -­‐4.7 JCPenney -­‐7.7 -­‐9 -­‐7 -­‐5 -­‐3 -­‐1 1 3 % * 2010–13 change. ** 2010–12 change. *** 2010–13 change. Based on statutory revenues. Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology Mid-­‐tier and lower-­‐end stores have seen operating margins hit by lower volumes of sales, aggressive price competition in the market or both. Premium and higher-­‐end retailers have, in general, continued to enjoy fatter margins. For retailers running with operating losses and still-­‐falling sales, the problem is where to go from here. Opportunities for investment and turning around such businesses are more limited than in the past. Global
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Figure 8. Selected Department Stores: Operating Margins, 2014 High-­‐End Harrods* 15.5 Galeries Lafayeme* 4.9 Printemps** 2.7 Premium Nordstrom 9.7 John Lewis 7.0 3.9 House of Fraser*** Midmarket 8.9 Kohl's -­‐3.0 JCPenney Karstadt* -­‐4.6 Sears US -­‐5.4 -­‐10 -­‐5 0 5 10 15 20 % * 2013 data. ** 2012 data. *** 2013 data. Based on statutory revenues. Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology Global
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The World’s Top Department Stores Sears has been leading the downward charge of the midmarket. If the company posts another year of double-­‐digit revenue declines in 2015, it will almost certainly lose the global top spot to Macy’s. The latter’s ownership of the premium Bloomingdale’s chain bolsters its prospects. Figure 9. The World’s Biggest Department Stores’ Revenues, 2014 and 2013 2014 2013 31.2 Sears Holdings 36.2 28.1 27.9 Macy's 19.0 19.0 Kohl's 17.0 16.1 Marks & Spencer* 13.1 12.2 Nordstrom 12.3 11.9 JCPenney 12.0 13.5 Isetan Mitsukoshi 11.1 11.2 El Corte Inglés Department Stores** 0 5 10 15 20 25 30 35 40 $ Billion Excludes other types of mixed-­‐goods retailers such as Target. * Total revenues including food as well as general merchandise. ** 2014 data estimated. Source: Company reports/S&P Capital IQ/FBIC Global Retail & Technology Global
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Global Issues No Room for Undifferentiated Propositions The global e-­‐commerce boom does not herald the end of large, broad-­‐
range department stores. In an era of near-­‐unlimited choice, we think the prospects are bright for stores that offer a great shopping experience and make a real connection to customer desires. The problem is that a number of big, long-­‐standing department store retailers across several Western markets are failing to do this. • In the US, Sears and JCPenney have seen sales fall. • In Germany, revenues are continuing to decline at long-­‐struggling Karstadt. • In the UK, Marks & Spencer posted 14 consecutive quarters of falling general merchandise sales, rival Debenhams has underperformed and loss-­‐making BHS has seen revenues slump. It is hard to be optimistic for middle-­‐ground department stores, whose pitch is traditionally based on a very broad appeal to the core of the midmarket. Consumers are likely to be unforgiving toward mediocre store experiences, indistinguishable product and undifferentiated positioning. Rival Sectors Stealing Younger Shoppers We expect to see a further splintering of shoppers from the middle-­‐ground department stores: their traditional unique selling propositions of reasonable choice and close proximity are no longer competitive advantages. Heightened competition for department stores comes not only from e-­‐
commerce but from the on-­‐going expansion of sharply positioned fashion chains such as H&M, Primark and Zara and from off-­‐price retailers such as T.J.Maxx/TK Maxx and Ross Stores. Even if some of these rivals are small relative to the biggest brick-­‐and-­‐mortar department store leaders, they are collectively chipping away at market share. At the same time, conformity is out of fashion: In an era of greater individuality and mass customization, broad-­‐appeal, middle-­‐ground retailers risk looking like products of a bygone age. Well-­‐targeted specialists and long-­‐tail pure plays appear to suit this sentiment more than middle-­‐
of-­‐the-­‐road generalists do. Global
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Younger shoppers look most likely to peel away to these rival sectors. The consequent risk for department stores is that they are left with a diminishing body of older customers. That may be fine in the short term, as they tap affluent baby boomers, but it may leave major chains struggling to find their next generation of loyal customers. Store Closures Among Underperformers In this context, it’s no surprise that we are seeing big chains shutter stores to bolster profitability. This is most apparent in the US, where total store numbers for the five biggest chains fell 12.5% (or 725 stores) in 2014 alone. Underperforming Sears, which shut 234 stores in 2014, has led this drop. Meantime, in Germany, Karstadt has confirmed six store closures, and we expect more. Once again, it’s worth underlining that only midmarket retailers—not premium players—have been downsizing, and that it’s not happening in all countries. Nordstrom, John Lewis, Printemps and Isetan Mitsukoshi are among the premium names that have continued to add new stores. Closure is not the only option for retailers attempting to shore up the bottom line. Sears is carving up seven of its stores to sublet space to budget-­‐fashion chain Primark while maintaining a Sears presence in these locations with smaller stores. But we don’t think this signals the end of the large-­‐space department store. We think the big, browsable, engaging spaces these chains (can) provide represent a competitive advantage in an age of functional online shopping. In short, this isn’t about an omnichannel age requiring less space; this is a failure of individual retailers to make their stores appealing destinations for shoppers who want not only great products but great experiences. Discounts Only Erode Value If there’s one lesson to take from the US market, it’s that a constant stream of promotions does little to boost business. In the 1990s and 2000s, US department store chains responded to competition from apparel specialists by discounting more heavily, and they have been running promotions almost nonstop since then. The latest iteration is off-­‐price chains, with Macy’s and Kohl’s among the names pushing into this segment. In 2012, JCPenney attempted to wean its customers off promotions by moving to a standardized, everyday-­‐low-­‐price model. It failed disastrously: shoppers walked away and sales plummeted. The company is still in the process of recovery and has returned to high/low pricing, which only goes to show how dangerous it is for retailers to embark on persistent price cutting. The UK has seen a spate of discounting in recent years, with Marks & Spencer responding to underperformance by running more promotions. Debenhams, too, was a persistent discounter until the strategy prompted a profit warning after Christmas 2013. Debenhams is now reducing its promotional periods, but this is a relatively modest reduction, with the company still running near-­‐continuous offers of some kind. Meanwhile, UK competitors with a less promotional stance—notably John Lewis and Next, but also House of Fraser—have outperformed M&S and Debenhams. Global
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We think the lesson from the States is, don’t let short-­‐term earnings targets devalue the business in the longer term. Once discounting becomes entrenched, finding your way back to full-­‐price sales can be a difficult process. Tourist Demand Boosts High-­‐End Segment At the premium end of the market, high-­‐spending tourist shoppers are proving increasingly important. The Chinese tourist, in particular, is key, and could become more so given the recession and the increasing diplomatic isolation of Russia. Chinese tourists spent US$165 billion overseas in 2014, up 28% over the year before. We expect the annual total overseas spend by Chinese tourists to rise above US$200 billion in 2015. (These figures include all overseas spend, such as hotels, attractions, local transportation, food and retail purchases, but exclude international air transportation.) The injection of tourist cash into retail markets is one reason premium and luxury players have outperformed their midmarket peers: travelers are seeking high-­‐end brands and the cachet of buying from prestige stores. Major players are adapting to cater to this market. For instance, Japanese department stores, including Isetan Mitsukoshi, are opening duty-­‐free stores. European chains including Galeria Kaufhof and Galeries Lafayette offer informational websites in Chinese. And Macy’s is among the companies that have hired sales associates fluent in multiple languages. We are also seeing Western names like House of Fraser and Galeries Lafayette tapping Chinese consumers at home by opening stores in China. With outbound journey numbers from China forecast to more than double, from 98 million in 2013 to over 200 million by 2020, premium-­‐positioned retailers in Western markets will reap the rewards of catering to Chinese shoppers. Omnichannel Investment Doesn’t Solve All Problems Across continents, major department stores have been investing in omnichannel capabilities, in part because some big retailers were lagging in their capabilities. • In Europe, Debenhams was the latest British department store chain to invest in next-­‐day click-­‐and-­‐collect. Germany’s Galeria Kaufhof is undertaking a major push to integrate stores and e-­‐commerce, which includes equipping in-­‐store staff with tablet computers for online ordering. • In the US, Macy’s and Nordstrom have invested in omnichannel strategies for years. Today they provide inventory visibility across their store fleets, click-­‐and-­‐collect services and transactional mobile apps. Impressive though many omnichannel services may be, we do not think they address the fundamental problems afflicting some retailers, which is one of sitting in the very middle of the market and seeking to appeal to all shoppers indiscriminately. In other words, omnichannel fulfilment is no good if shoppers are losing interest in a retailer’s proposition. Global
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It’s About Browsability and Leisure Experiences We are much more positive toward retailers, including premium and luxury department stores, that are differentiated with strong, convincing unique selling propositions. As we’ve already shown, higher-­‐end department stores and midmarket chains with more premium pitches have performed more robustly. A theme common to many of the more successful department stores is the quality of the in-­‐store experience. Great stores, good service and exciting products heighten a store’s “browsability.” Today’s shoppers can turn to the Internet if they are looking for a quick, functional transaction. More and more, in-­‐store shopping will be about the experience, and physical stores will be left with a greater proportion of leisure shoppers. Big-­‐space, premium stores with a wide array of products and brands cater well to these types of shoppers. So we see big-­‐space department stores dovetailing with the ongoing migration of sales online—if retailers can provide the experiences that take shopping beyond simply a utilitarian transaction. Global
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The United States The Issues Industry Consolidation Amid Technology-­‐Driven Disruption Today’s US department store landscape is a virtually unrecognizable from the environment just 15 years ago. Price competition, bankruptcies and acquisitions have reduced the playing field from more than 20 to eight department store names ranging from ultra-­‐high-­‐end Neiman Marcus to promotion-­‐heavy JCPenney. While US shoppers traverse price points and retail channels, FBIC sees the following issues impacting the department store sector: • The sector is mature and its demographic is aging. • Industry participants are competing on price rather than on differentiated product and services. • Store formats are out of date. • The death of bridge apparel continues to impact private label. • The in-­‐store experience lacks excitement, urgency and customer service. • New and exciting retail formats can better serve today’s consumers. Add to the mix e-­‐commerce, m-­‐commerce, free shipping, omnichannel shopping and a consumer with limitless access and insatiable demands, and you have a sector struggling to adapt to a rapidly changing environment using legacy IT systems and business practices. FBIC sees retail technology investments as a necessary cost of business, with no end in sight. A Brief Recap Macy’s expanded to national scale from its Federated roots via Federated’s 2005 acquisition of The May Company. Federated rebranded its newly acquired regional department store portfolio under the Macy’s banner. The perceived benefits included national advertising and economies of scale. Sadly, while revenues shot up 42% in the year following the acquisition, in the last seven years (2007 through 2014), revenues rose and fell, reflecting the Great Recession and industry pressures. Today, revenues are just $1.1 billion higher than they were in 2007. If we exclude revenues associated with licensed departments (Burberry, Sunglass Hut, Finish Line, Lids, Louis Vuitton and Gucci, among others), revenues have hardly budged from 2007 levels. Still, Macy’s has set the pace in adapting to changing times; only Nordstrom has matched its efforts. Both have invested in omnichannel strategies for years and today provide inventory visibility across their store fleets, offer shoppers the option to buy online and pick up in-­‐store, employ mobile apps for shopping and buying and more. Retail technology investments will continue to be top of mind as retailers attempt to attract and keep today’s consumers. Investing for Growth and Margins Will Suffer FBIC thinks department stores and retailers in general have a new awareness of what it will take to compete in today’s 24/7 retail market: continued investment in proprietary and exclusive product, mobile functionality, social media, in-­‐store beacons, omnichannel initiatives and improved service levels. Global
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2015 is shaping up to be a year of investments, and EBIT margins may suffer as a result. But it’s time to stop managing to an EBIT margin percentage and start counting currency! Perhaps in the intermediate to long term, margins will recover. For now, what’s needed is a realistic assessment of what it takes to compete. One path to growth remains acquisitions. The purchase by Macy’s of cosmetic retailer Bluemercury, Neiman Marcus’s acquisition of luxury e-­‐commerce site MyTheresa and Nordstrom’s purchase of online personalized menswear service Trunk Club have all been announced within the past 12 months. These three companies are busy exploring alternative retail formats and geographies as well. New Brands to Attract New Shoppers Since the birth of the department store in the mid-­‐19th century—Le Bon Marché in Paris, followed by Macy’s and Marshall Field in the US—the species has steadily evolved, focusing ever more on apparel, accessories and cosmetics, with diminishing selling space allotted to general merchandise categories. By the end of the 20th century, specialty apparel retailers targeting smaller niche markets had evolved. Simultaneously, the way Americans dressed became more casual, reflecting the lifestyle of the growing tech community, where khakis and even flip-­‐flops were accepted modes of dress for workers. Department stores consolidated while the channel contracted. Macy’s is the sum of Federated and The May Company (more than 20 onetime regional department store banners now sport the Macy’s moniker). In the meantime, on the supplier front, bridge brands—such as Dana Buchman and Ellen Tracy from the brand portfolios of Liz Claiborne and Anne Klein, and Jones New York Signature of Jones Apparel Group—were getting stale, as competing department stores anchoring both ends (and sometimes the middle) of the mall carried the same brands and competed on price and promotions. A race to the bottom! Youth retailers and women’s retailers flourished as they opened stores, generally provided better one-­‐on-­‐one service and offered comparable products and competitive prices. Department stores responded with promotions, slowly eroding their business and the brands they offered. While promotions continue to this day, a better strategy is to provide differentiated product. To that end, Nordstrom has brought Topshop and J.Crew’s Madewell into selected stores to attract a modern young fashionista. Macy’s began to seriously cultivate the millennial shopper in 2012, and 2014 marked its best business with this shopper in the past six years. The just-­‐launched Thalia Global
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Sodi line, which bears the name of the superstar Latin Grammy Award-­‐winner, is likely to draw a youthful and Hispanic shopper. Contemporary and premium lines have replaced the bridge lines of yesteryear, but none have the scale and volume of the popular bridge labels of 20 years ago. Moreover, with technology providing access to everything everywhere to anyone who’s connected, today’s designers can minimize their department store presence and go directly to the consumer if they can get mindshare. We’ve witnessed the rapid rise and fall of a number of brands in the past ten years, including Tory Burch, C Wonder and Reed Krakoff, as well as the resurgence of older brands DVF and Lacoste. A brand must be where its potential clients are, and the best approach is omnichannel—selected wholesale locations, e-­‐commerce, and flagship, full-­‐price and outlet stores. A number of bridge lines were reborn at midpriced department stores. For instance, Dana Buchman is now an exclusive at Kohl’s, and Liz Claiborne sells at JCPenney. This merchandise strategy elevates the fashion offerings at middle-­‐market retailers and allows for a robust price/value comparison with private-­‐label offerings, such as Sonoma at Kohl’s and A.N.A. at JCPenney. Cost cutting remains a fact of life, as indicated in store rationalization across the retail landscape that reflects, in part, consumers’ growing acceptance of online shopping as well as diminishing store traffic. The savings are increasingly plowed back into technology investments to better connect and service customers. Department store chains serving the middle market—from retail stalwarts Sears and JCPenney to the more recent retail concept of Kohl’s—have felt the same pressures as traditional department stores. Kohl’s benefited from a time-­‐starved mom who wanted to navigate a store quickly to purchase her own and her kids’ clothing along with some household items. Amazon changed the value proposition these retailers offered even as families grew and lifestyles changed. Retailers whose value proposition has been time savings rather than merchandise have lost in an e-­‐commerce environment that offers free shipping and the same brands. One of America’s oldest retailers, Sears, retains only a shadow of its former glory despite operating 979 Kmarts as well as 717 full-­‐line Sears stores. Company revenues peaked in 2007 at $50.7 billion, and seven years later revenues were just over 70% of 2007 levels. Interestingly, there’s a new twist to the Sears story: Primark, the Irish low-­‐priced fashion retailer, will lease about 520,000 sq. ft. in seven US Sears locations beginning in late 2015. Having just returned from London, we can attest that Primark is all the rage with millennials. It’s worth remembering that this demographic in the US grew up on fast fashion and cheap alternatives during the Great Recession. Branded apparel isn’t the status arbiter it was in the 1990s when Abercrombie & Fitch and American Eagle Outfitters were growing. Brands still matter, but today they are Apple and Nike. Global
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Value and a Treasure Hunt, Vintage and Thrift Since the Great Recession, value has been top of mind for most consumers, and arguably the fastest grower in the brick-­‐and-­‐mortar world during the last seven years has been the off-­‐price apparel channel. T.J.Maxx, Marshalls, Ross Stores and outlet stores have fared better than full-­‐
price department store competitors. So it’s no surprise that after digital upgrades, these channels have captured incremental investment funds. In addition to offering value (26% to 60% off suggested retail price), these stores provide consumers with a treasure hunt experience through aisles of different merchandise. As one ardent T.J.Maxx shopper put it, “You can buy a dress at T.J.Maxx and not see yourself coming and going on the street or, even worse, at an event.” We’re now seeing Macy’s and Kohl’s launch off-­‐price offerings, joining the likes of Nordstrom, to tap the clear demand for branded lines at below retail price. But more discounting is likely to entrench US customer resistance to buying at full price from department stores. It’s yet another nail in the coffin of full-­‐price retailing. Luxury Is Stumbling, Too High-­‐end retailers, from the luxury brand flagships to Neiman Marcus and its premium Bergdorf Goodman banner to Hudson’s Bay Company’s Saks Fifth Avenue, haven’t done much better than middle-­‐market department stores, despite the positives of a strong stock market and the ensuing wealth effect. Luxury shoppers are seeking experiences and opting for vacations, theater and sporting events rather than another luxury product. Retailers that can create a certain ambience will benefit from this trend. Trunk shows that provide the opportunity to meet the designer and shopping events that raise funds for causes are two of the ways retailers can delight clients. Some retailers are opening restaurants to allow for deeper lifestyle branding. For example, Urban Outfitters is home to the Intelligentsia coffee shop, and Macy’s houses a popular restaurant, Stella 34, on the sixth floor of its flagship. Tourism A major opportunity for department stores in US flagship cities such as New York, Chicago, Los Angeles, Miami and San Francisco is tourism. Tourists from developing nations with expanding middle classes have aspirational desires for premium and luxury products. Frequently the prices are considerably (30% to 60%) less than in their home country and the assortments are more current. A walk down New York City’s Fifth and Madison avenues is a testament to the number of international visitors to the area. One hears multiple Chinese dialects as well as Portuguese, Spanish and a host of other languages. Fifth Avenue is populated with luxury as well as accessible global brands such as Louis Vuitton, Zara, Abercrombie & Fitch, Hollister and H&M. The Midtown area is truly a shopping mecca. Global
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According to the International Trade Administration, the US travel and tourism industry represented 2.6% of 2013 GDP, or $1.5 trillion. The US was dominant, with a 14.5% share of world traveler spending, and was second only to France in terms of the number of foreigners who visited—and that was despite difficulties with visa applications. In 2013, Brazil ranked fifth in number of visitors to the US (2.1 million), and China was seventh (with 1.8 million). Estimates for 2014 indicate that the number of Chinese tourists visiting the US will grow by 24%, which would rank China fifth, leaping past Germany and Brazil. Easing US visa approval and accelerating the process will drive more Chinese travelers to US destinations. Tourists Love Shopping! Fully 58% of Chinese tourists focus their travel budget on shopping, according to an August 2014 report from the World Tourism Cities Federation and Ipsos. Sightseeing (86%) and leisure (75%) are the principal purposes of Chinese travel, followed by shopping (44%). The Chinese preference for buying luxury goods in overseas markets is primarily due to the price gap between domestic and overseas markets. In response to trends such as this, Macy’s has seeded its flagships with global luxury brands and hired associates fluent in 10 different languages to cater to international shoppers. Top Retailers Figure 10. North America: Leading Department Store Chains Ranked by Sales Sales 2013 ($ Million) Sales 2014 ($ Million) Sales Growth 2014 (%) Number of Stores 2013 Number of Stores 2014 Sears Holdings 36,188 31,198 -­‐13.8 2,429 1,725 Macy's, Inc. 27,931 28,105 0.6 854 839 Kohl's Corp. 19,031 19,023 0.0 1,158 1,162 Nordstrom Inc. 12,166 13,110 7.8 260 292 JCPenney Company, Inc. 11,859 12,257 3.4 1,104 1,062 Hudson's Bay Company (a) 4,692 6,439 37.2 251 255 Dillard's Inc. 6,692 6,780 1.3 296 298 Neiman Marcus Group LTD LLC 4,648 4,839 4.1 79 81 Belks Inc. 4,038 4,110 1.8 299 297 Bon-­‐Ton Stores Inc. 2,770 2,756 -­‐0.5 271 270 Excludes other types of mixed goods retailers such as Target. (a) Store count includes department stores and department store outlets. Source: Company reports/press releases/FBIC Global Retail & Technology analysis Global
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In 2014 Nordstrom paced North American retailers with a 7.8% sales increase, versus the composite 2.1% decline. Nordstrom benefitted from 32 additional stores (27 new Nordstrom Racks, with the remainder Jeffrey boutiques and Trunk Club showrooms) and a 4% comp store sales gain that included e-­‐commerce—+3.8% at Nordstrom Rack, -­‐0.5% at Nordstrom full-­‐line stores, +23% at Nordstrom.com and +22% at NordstromRack.com/HauteLook. Hudson’s Bay Company posted 37.2% sales growth, which reflects a full year of its Saks Fifth Avenue subsidiary following its fourth-­‐quarter 2013 acquisition. (Measured in Canadian dollars, the growth was even more robust, at 56.4%.) Global
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The United Kingdom The Issues Decline of the Middle Ground? We are seeing something of a malaise in the middle ground of the British department store sector. Marks & Spencer (if we consider it a department store) has seen an extended period of underperformance in UK non-­‐
food sales, with its full-­‐year general merchandise revenues falling by 2.5% in 2014/15. M&S’s performance has been worsened by e-­‐commerce difficulties that pushed its online revenues down by 5.9% in the key Christmas 2014 period, and by the unusually warm autumn of 2014 (M&S has something of a skew to outerwear such as coats). But these short-­‐term issues are not the company’s fundamental problems. • We think its general merchandise store formats look outdated, despite recent investments. They’re large, unwieldy and ultimately unfashionable, and they do not position M&S convincingly as a fashion retailer against the likes of Next and Zara. • Its long-­‐standing position in the very middle of the market, designed to appeal to all, looks to be a vulnerability in an age of greater consumer individuality and the decline of conformity. • And greater competition has only intensified this. Consumers have a surfeit of choices, from Primark and Zara to Amazon and eBay, so M&S struggles to give shoppers reasons to frequent its stores. Debenhams, its key midmarket rival, should have been making hay while M&S struggled. But it has turned in underwhelming sales growth, supporting our view that the middle ground is an increasingly tough place to do business. We think these retailers will continue to face a fragmentation of shoppers to apparel specialists that have stronger, more distinctive unique selling propositions (such as budget Primark, off-­‐price TK Maxx and fashionable Zara) and to Internet pure plays that are more sharply positioned, such as ASOS. Premium Players Outperform While the middle ground has stumbled, more premium retailers are performing well: • The high end has continued to progress: Harrods grew revenues by nearly 11% in 2013 (the latest year for which data is available) while Selfridges posted a 9% jump in sales in the same year. • The premium segment of the midmarket has boomed: John Lewis reported an 8.9% boost in revenue in 2014, while privately owned House of Fraser said comps jumped by 8% at Christmas 2014. Global
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The higher end benefits from immunity to some of the pressures faced by retailers catering to middle-­‐income shoppers, and from factors such as tourist spend in London and affluent immigration to the capital. But the most successful retailers are also those with sharply defined positioning that drives shoppers to their stores. Ramping Up E-­‐Commerce as Click-­‐and-­‐Collect Booms Investment in multichannel capabilities has been the order of the day among big chains: • M&S relaunched its consumer website in early 2014, bringing its back-­‐end technology in-­‐
house from Amazon. Unfortunately, this badly hit online sales, as all customers were required to register from scratch. Internet sales were down by around 6% for the first nine months of its 2014/15 year. Disruption at the Castle Donington e-­‐commerce distribution center, which opened in 2013, also impacted Christmas 2014 sales at M&S. • More positively, investment in infrastructure allowed M&S to extend next-­‐day cut-­‐off times to 10 p.m. for home delivery and to 5 p.m. for in-­‐store collection. • Debenhams invested in next-­‐day collection in 2014. It attributed weak performance at Christmas 2013 to its inability to offer online shoppers next-­‐day in-­‐store collection. • John Lewis, long a leader in multichannel retail, said that almost 99% of its click-­‐and-­‐collect orders were available for next-­‐day collection in its 2014 year. John Lewis utilizes its sister chain, Waitrose supermarkets, to extend its collection network. • A number of chains are reporting strong demand in click-­‐and-­‐collect: • At Debenhams, 22% of online orders were collected in-­‐store in 2014, up sharply from 7% in 2013, on the back of its new next-­‐day service. • At John Lewis, collection overtook home delivery for online sales in 2014, accounting for 54% of orders. • John Lewis click-­‐and-­‐collect orders were up 47% year over year in 2014. Given their destination status, department stores look to be appealing locations for click-­‐and-­‐
collect: aspirational stores provide an attractive way to combine collection with browsing. Multichannel Is Not a Panacea Multichannel retail is not a cure-­‐all. Some commentators appear to think that if faltering retailers can migrate to a multichannel model, then the future is bright. We disagree. We think that they fundamentally misunderstand the attraction of cross-­‐channel shopping. Convenience is undoubtedly a driver of online shopping. But so too is choice: online shoppers now have an abundance of retailers and products to choose from, including fast-­‐moving specialists such as ASOS and long-­‐tail generalists such as Amazon. And the boom in choice is an ongoing threat, especially to the more generalist retailers who will have to work harder in the age of the cross-­‐channel shopper. Retailers must give consumers convincing reasons to buy from them, and they must focus on product. The convenience of click-­‐
and-­‐collect alone is not enough. Global
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New Store Models Department stores have traditionally followed large-­‐store formats. But in an age of online shopping and click-­‐and-­‐collect, this is changing: • John Lewis opened a new, smaller-­‐format store in Exeter that was designed to offer a strong in-­‐store range coupled with multichannel options such as in-­‐store order points and click-­‐and-­‐
collect. The Exeter store is around half the size of full-­‐line John Lewis stores, at only 65,000 sq. ft. • John Lewis has also pushed into ultra-­‐small store formats, with convenience stores at Heathrow Airport and St Pancras International railway station. The latter store has been dubbed a “click-­‐and-­‐commute” store, allowing shoppers to collect their online orders on their journey home. • Upmarket Fortnum & Mason has also opened small stores at Heathrow and St Pancras. • House of Fraser operates a small “dotcom collection-­‐only” store—it stocks no physical merchandise—in Aberdeen, which opened in late 2011. We think smaller formats that sell an edited collection of merchandise for immediate purchase and serve as collection points offer a sound model for new store openings in the sector. Strong In-­‐Store Experiences Bode Well We are not of the view that big department stores are outdated. If their positioning is aspirational and attractive, these stores can be destinations for browsing shoppers. This leisure experience offers the perfect complement to more functional online shopping. We see a bright future for stores—particularly those that are positioned as upscale, with attractive environments and compelling ranges that serve as destinations for leisure shoppers. Top Retailers Note that some retailers report two measures of revenue: • Statutory revenues: revenues taken by the retailer itself • Gross transaction values (GTV): total sales made through stores, including any sales by third-­‐
party concessions in stores Figure 11. UK: Leading Department Store Chains Ranked by Sales Sales 2013 (£ Million) Sales 2014 (£ Million) Sales Growth 2014 (%) Number of Stores 2013 Number of Stores 2014 10,310 10,311 0.0 1,253 1,332 4,093 3,988 -­‐2.5 351 348 3,274 3,566 8.9 40 43 2,282 2,313 1.3 238 245 M&S Group Total -­‐ M&S UK General Merchandise John Lewis (a) Debenhams Group Total (statutory) Global
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Sales 2013 (£ Million) Sales 2014 (£ Million) Sales Growth 2014 (%) Number of Stores 2013 Number of Stores 2014 1,896 1,902 0.3 156 160 2,777 2,824 1.7 238 245 2,255 2,275 0.9 156 160 794 N/A N/A 1 1 (d) 732 N/A N/A 61 61 (e) 1,192 1,300 9.1 (c) 61 61 (e) BHS (b) 676 N/A N/A 171 171 (f) Selfridges (b) 530 N/A N/A 4 4 -­‐ Debenhams UK Only (statutory) -­‐ Debenhams Group GTV -­‐ Debenhams GTV UK Only Harrods (b) House of Fraser (statutory) (b) -­‐ House of Fraser GTV (c) (a)
(b)
(c)
(d)
(e)
(f)
2014 was a 53-­‐week year. No 2014 sales data available at time of writing. House of Fraser’s 2014 gross transaction values are rounded figures provided in year-­‐end press release, so 2014 sales growth should not be treated as definitive. Plus two small airport stores. Includes one international store. Excludes approximately 88 (as of March 2015) franchised international stores. Source: Company reports/S&P Capital IQ/FBIC Global Retail & Technology analysis Figure 12. UK: Leading Department Store Chains’ Sales in US$ Sales 2013 (US$ Million) 16,127 Sales 2014 (US$ Million) 16,988 -­‐ M&S UK General Merchandise 6,402 6,571 John Lewis 5,122 5,875 Debenhams Group Total 3,570 3,810 -­‐ Debenhams UK Only 2,966 3,134 -­‐ Debenhams Group GTV 4,344 4,653 -­‐ Debenhams GTV UK Only 3,527 3,749 Harrods 1,242 N/A House of Fraser 1,145 N/A -­‐ House of Fraser GTV 1,864 2,142 BHS 1,057 N/A 829 N/A M&S Group Total Selfridges See notes to Figure 11. Source: Company reports/S&P Capital IQ/FBIC Global Retail & Technology analysis Global
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France The Issues A Premium-­‐Skewed, Paris-­‐Focused Sector Upscale and Paris-­‐centric: these are the two defining characteristics of the French department store sector. FBIC estimates that stores located in Paris contributed just over half of the total aggregate sales of the top French department store retailers in 2013 (see Figure 13 below). • At the market-­‐leading Galeries Lafayette chain, the flagship store on Boulevard Haussmann contributed 47% of the chain’s total sales in 2013. Its contribution to profitability is reported to be even higher, at around 70%. • Printemps, Galeries Lafayette’s premium-­‐positioned rival, has a Paris flagship (also on Boulevard Haussmann) that is believed to contribute half of all the company’s revenues. • Two of BHV Marais’s four stores are in the capital, while Le Bon Marché operates just one store, in Paris. This bias toward the capital means that tourist shoppers, especially Chinese visitors, are crucial to most of these chains (although housewares-­‐focused BHV is likely an exception). That means these stores have the potential to comfortably outperform the tepid growth France’s consumer economy is experiencing. But it also means the stores are vulnerable to any volatility in the flow of high-­‐spending visitors to the French capital. Galeries Lafayette Follows the International Shopper As a result of their dependence on international customers, the big Paris stores, Galeries Lafayette and Printemps, are chasing tourist shoppers by paying commissions to tour guides and operators who bring travelers to their stores. Moreover, Galeries Lafayette has been leading the charge in global expansion in order to tap international customers closer to home. Printemps has been much less active internationally. It has established stores in cities such as Tokyo but hasn’t been pushing into faster-­‐growing markets recently. • In 2013, Galeries Lafayette opened its first store in Southeast Asia, a 12,000 sq. m. (129,000 sq. ft.) three-­‐story department store in Jakarta. • The same year, the company unveiled a new Beijing flagship that occupies 47,000 sq. m. (506,000 sq. ft.) over six floors. Global
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• And in 2014, Galeries Lafayette announced plans for a new 18,000 sq. m. (194,000 sq. ft.) flagship store in Milan. So far, Galeries Lafayette has focused on opening big, flagship outlets in major capitals. But we see opportunities for smaller stores in airports and other upscale transit locations, a strategy the company’s international counterparts, such as Harrods, have used. While revenue contributions from these types of small stores will likely be relatively minor, travel-­‐hub stores provide opportunities to target international travelers and build brand awareness. Room to Grow E-­‐Commerce Relative to shoppers in comparable markets such as Germany and the UK, French consumers are not enthusiastic about online shopping. Nevertheless, a strong multichannel proposition is becoming a necessity, and the two big premium players are developing their online channels in order to capture global shoppers. Printemps, for instance, offers its website in Chinese, Arabic and Japanese as well as English and French. Galeries Lafayette offers only a French version, which is starting to look like an oversight. (Its app, however, is available in 14 languages, from Arabic to Thai.) Private ownership of the major chains means that hard data is scarce, but in February 2014, it was reported that online sales contributed just 2% of Galeries Lafayette’s revenues. Galeries Lafayette has been boosting its online range and pushing the click-­‐and-­‐collect option to drive up Internet sales. Meantime, Printemps acquired pure play site Place des Tendances in 2013 and stated that it aimed to grow e-­‐commerce to 10% of its fashion sales “within 3–4 years.” There’s real scope to progress, although the service demands of the international shopper and the domestic customer are likely to be different—for example, in terms of click-­‐and-­‐collect versus delivery. Highly Concessionary Stores The upmarket, branded skew of major players makes the French department store sector unusually biased toward third-­‐party concessions. In Galeries Lafayette stores, for instance, more than 60% of in-­‐store brands are reportedly sold through independent concessions. For the department store, this tends to mean less risk, because it does not hold the inventory and does not take hits from markdowns. Printemps Uses Anniversary to Underscore Luxury Positioning 2015 marks the 150th anniversary of Printemps’s founding. The retailer is using the date to burnish its luxury credentials, decking out its Boulevard Haussmann store in pink and launching 1,000 products designed exclusively for the anniversary. The anniversary coincides with the opening of the first new Printemps store in 32 years, a smaller, 1,900 sq. m. (20,000 sq. ft.) store next to Paris’s Louvre Museum. This new location is dedicated to luxury goods; it will be a further weapon in the battle with Galeries Lafayette to win the high-­‐
spending shopper. Global
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Top Retailers The sector is marked by private ownership of the big chains, which means that up-­‐to-­‐date operational data can be hard to come by. Figure 13. France: Leading Department Store Chains Ranked by Sales Sales 2013 (€ Million) Sales 2014 Sales Growth (€ Million) 2014 (%) Number of Stores 2013 Number of Stores 2014 Groupe Galeries Lafayette Department Stores (a) 3,216 N/A N/A 63 63 (b) Galeries Lafayette (Fascia) (a) 2,905 N/A N/A 59 59 -­‐ Haussmann Store, Paris (a) 1,310 N/A N/A 1 1 -­‐ Other (a) 1,596 N/A N/A 58 58 310 N/A N/A 4 4 1,198 1,249 4.2 20 21 (b) 293 N/A N/A 1 1 BHV Marais (a) Printemps Le Bon Marché (a) (a) No 2014 sales data available. (b) French store numbers; excludes international stores. Source: Company reports/S&P Capital IQ/press reports/FBIC Global Retail & Technology analysis and estimates Figure 14. France: Leading Department Store Chains’ Sales in US$ 2013 (US$ Million) 2014 (US$ Million) Groupe Galeries Lafayette Department Stores 4,271 N/A Galeries Lafayette (Fascia) 3,858 N/A -­‐ Hausmann Store, Paris 1,739 N/A -­‐ Other 2,119 N/A 412 N/A 1,591 1,659 389 N/A BHV Marais Printemps Le Bon Marché Source: Company reports/S&P Capital IQ/press reports/FBIC Global Retail & Technology analysis and estimates Global
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Germany The Issues A Sector in Need of Reviving Two midmarket behemoths, Galeria Kaufhof and Karstadt, dominate Germany’s department store sector. But in the face of growing competition from high-­‐growth apparel retailers, from H&M and Primark to Amazon and Zalando, neither is growing quickly. Galeria Kaufhof is currently proving the more successful of the two big players, having overtaken Karstadt in annual revenues in recent years. But its “success” is still measured in revenue growth of less than 1% per year. The sector in Germany is low growth and somewhat uninspiring, with little of the diversity seen in some markets. The premium segment is minor relative to its counterparts in France and the UK: KaDeWe and its two sister stores (majority divested by Karstadt in 2013) and Breuninger represent the upper end of the sector. Karstadt Recovery Demands Investment The story of second-­‐place Karstadt is one of continuing struggles: • Karstadt entered administration in 2009, with Nicolas Berggruen subsequently acquiring the insolvent chain for €1. But he failed to make the investments needed to turn the company around, and it underperformed in the following years. • In July 2014, the company’s CEO, Eva-­‐Lotta Sjöstedt, quit after just seven months on the job, blaming Berggruen’s lack of commitment to an investment plan. • In August 2014, Berggruen sold Karstadt to Austrian real estate firm Signa Group for €1. Signa had already acquired 75% of the premium KaDeWe store and its two sister stores in 2013. The new owners are aiming to slash staff costs through actions including layoffs and pay cuts. And store closures are a recurring rumor: the company’s supervisory board confirmed in December 2014 that it plans to shutter six stores, but since about a quarter of its 83 stores are reported to be loss-­‐making, more closures may well follow. Cost cutting like this may boost the bottom line, but it’s not a strategy for growth, which is what this retailer really needs. We consider investment in stores and online overdue. Late to the Omnichannel Party E-­‐commerce makes a disproportionately small contribution to sales at Galeria Kaufhof and Karstadt. At Kaufhof, Internet sales totaled €63 million in 2014, equivalent to just 2% of total sales. The proportion is unlikely to be bigger at Karstadt. Global
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To put that in context, around 8% of all German retail sales were conducted online in 2014. Meanwhile, in the UK, e-­‐commerce contributed nearly 8% of M&S’s total sales in 2013/14 (despite M&S not selling food online). Both Kaufhof and Karstadt offer superficially appealing websites, and Karstadt offers a transactional app. Yet, like other big German retail groups, both have been slow to push multichannel shopping options to consumers, leaving the field open for pure plays such as Amazon and Zalando to grab share in apparel. Kaufhof is now making necessary investments aimed at “systematically dovetailing” stores and online. It has established a separate management department for multichannel retail, and in-­‐store efforts include the introduction of tablet computers to encourage multichannel shopping. Progress is welcome, as there is a great deal of lost ground to recover. Yet a multichannel proposition is of little use if shoppers are losing interest in the overall proposition. And with more exciting retailers emerging, that is a potential threat. Competitive Pressures Increase The low or negative growth at the top department stores is in the context of a fast-­‐changing German retail market, particularly in the core apparel category: • C&A has lost the top spot to Sweden’s H&M, as measured by annual revenues, signaling the shift in apparel retailing from long-­‐standing middle-­‐ground retailers to more fashionable newcomers. • Primark entered the German market in 2009, and its blend of fashionability and ultra-­‐low prices is likely to prove attractive to traditionally frugal German shoppers. It has 18 German stores as of March 2015, and we think there’s ample room for more, which would put further pressure on domestic clothing retailers (and possibly provide a buyer for any shuttered Karstadt stores). • Zara owner Inditex, too, continues to open new stores. • Apparel pure play Zalando has boomed: in 2014, its revenues for the DACH region (Germany, Austria and Switzerland) surged 17%, to €1.23 billion. • And value-­‐positioned UK pure play boohoo.com launched a German-­‐language site in 2014. At the same time, categories such as electrical/electronic goods have migrated online to a substantial extent, meaning that department stores are more reliant on apparel than they may previously have been. We foresee no let-­‐up in pressure on the midmarket department stores. These long-­‐standing retailers will need to work harder to convince shoppers to choose them. In order to avoid a future of simply managing declines, we think they need to add some excitement to their retail propositions. Global
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Top Retailers Figure 15. Germany: Leading Department Store Chains Ranked by Sales Sales 2013 (€ Million) Sales 2014 (€ Million) Sales Growth 2014 (%) Number of Stores 2013 Number of Stores 2014 Galeria Kaufhof 3,082 3,099 0.6 137 (c) 137 (c) -­‐ Galeria Kaufhof Germany 2,899 2,920 0.7 122 (c) 122 (c) Karstadt (a) 2,673 2,569 -­‐3.9 83 83 KaDeWe/Alsterhaus/Ob
erpollinger (b) 600 N/A N/A 3 3 Breuninger (b) 520 N/A N/A 11 11 (a) Sales estimated. (b) Sales estimated. No data available for 2014. (c) Includes 17 sporting goods stores. Source: Company reports/S&P Capital IQ/press reports/FBIC Global Retail & Technology analysis and estimates Figure 16. Germany: Leading Department Store Chains’ Sales in US$ 2013 (US$ Million) 2014 (US$ Million) Galeria Kaufhof 4,093 4,119 -­‐ Galeria Kaufhof Germany 3,850 3,881 Karstadt 3,550 3,414 KaDeWe/Alsterhaus/Oberpollinger 797 N/A Breuninger 691 N/A Source: Company reports/S&P Capital IQ/press reports/FBIC Global Retail & Technology analysis and estimates Global
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China The Issues Differences—and Some Similarities China’s leading department stores have been growing fast, unlike many big department store chains in the other countries covered by this global report. This is occurring in the context of a maturing Chinese retail sector. Nevertheless, some of the challenges facing retailers are similar to those in Western markets: how to develop omnichannel propositions that can win over online shoppers and how to offer differentiation that appeals to increasingly demanding consumers. A Long Tail of Retailers Further distinguishing China’s sector from the others covered in this report is the substantial number of department store chains. A ranking of the top retailers can stretch to dozens of significant players of gradually decreasing size; there are no dominant national chains whose scale far outweighs smaller local players. This is a reflection of the fragmented, localized nature of the market. In the years ahead, we expect the Chinese department store sector to consolidate—a process that the other markets in this report have already gone through. We will likely see chains race for dominance, with retailers developing their networks to build scale. … Plus New International Entrants Meanwhile, international retailers are moving in, with UK department stores among those leading the charge, both online and offline: • House of Fraser is set to open “as many as 50” stores in the country, according to its new parent company, Sanpower; the first shops and a transactional website will open in 2015. • Marks & Spencer intends to enter key cities such as Beijing and Guanzhou beginning in 2015/16, although in 2015 it announced closures in the Shanghai region. M&S also launched a kidswear store on Tmall.com and a clothing store on JD.com in 2015. • Galeries Lafayette of France opened a six-­‐floor Beijing flagship store in 2013. • And from the US, Macy’s has reportedly been sizing up the Chinese market; FBIC thinks its premium Bloomingdale’s fascia could tap demand for upmarket Western brands in the country. Global
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E-­‐Commerce to Omnichannel As e-­‐commerce has blossomed, an increasing number of domestic department store players—29 of the top 50 chains, according to FBIC—have begun to retail online. Given the popularity of third-­‐party platforms in China, operating a standalone website is not the only option open to stores: sites like JD.com can serve as the shop front online. Some retailers, such as Wangfujing Department Store, adopt a dual approach by setting up a wholly owned transactional website and launching a store on Tmall.com at the same time. Having built multiple sales channels, a growing number of department stores have started to implement omnichannel strategies (also called O2O, or online-­‐to-­‐offline strategies). These involve integrating online, offline and mobile, providing consumers with a consistent shopping experience across all channels. Retailers have taken a variety of approaches to launching their O2O initiatives, albeit not truly seamlessly across all shopping channels. The following are the most common O2O strategies adopted by stores: • Creating a shared customer database and loyalty program With a single integrated customer database and loyalty program, department store operators can capture data on consumers’ shopping behavior across different channels. Rainbow Department Store and Intime Department Store are pioneers in integrating online and offline membership programs, but increasing numbers of retailers have been working on such initiatives. • Offering more pickup points and supporting product returns Some retailers have made it possible for customers to buy online and pick up purchases in a physical store (click-­‐and-­‐collect service). In addition to offering pickup services at its physical outlets, Rainbow Department Store also allows customers to pick up their online purchases from its convenience store outlets in Shenzhen. • Integrating back-­‐end operations Some operators have integrated their back-­‐end operations and systems such as inventory, warehousing and logistics management systems. Wangfujing Department Store, for example, has integrated its store inventory system with those provided by suppliers and has tested the functionality in two of its department stores, the Wanfujing branch of Wangfujing Department Store and the Shuangan Department Store. • Offering different products online and offline To avoid competition between their online platforms and physical stores, some retailers have offered different products online and offline, sometimes even targeting different customer groups. For example, products available at Intime Department Store’s physical outlets are largely different from those available on its website. The physical stores sell relatively high-­‐
priced products targeting mid-­‐ to high-­‐end customers, while the website sells cheaper products targeting the mass market. The overlap rate between Intime’s online and offline assortment is reportedly lower than 50%. Global
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E-­‐Commerce Supported by Social Media The increasing popularity of social media in China has prompted many department stores to adjust their operational strategies. Many have leveraged social media in varying degrees to reach and engage with customers. Weibo and WeChat are by far the most popular and influential social media platforms. Accordingly, almost all major department stores have set up Weibo and WeChat accounts. For example, customers can contact Rainbow Department Store’s customer service team via its WeChat account and receive an immediate response. Some companies even have separate accounts for different branches. In recent years, some department store players have put increasing emphasis on social media marketing strategies, constantly informing consumers about the arrival of new products and exclusive promotions via these platforms. In May 2013, Intime Department Store launched a program called “guimiquan” or “circle of close friends” on WeChat. A guimiquan normally has between three and six members who are close friends or relatives. Members can earn double reward points when they make a purchase, whether online or offline. They can also share reward points or help other members accumulate them, and they can use points to offset online and offline spending. According to Morgan Stanley, the program resulted in a twofold increase in spending among young female consumers. It was estimated that sales generated from this program in 2014 contributed to over 5% of Intime’s total sales, up from 2% in 2013. Yet not all department stores are making the most of their social media accounts. While some constantly send customers their latest sales promotions, product updates and fashion information via social media networks, others let their accounts sit idle for months. Shopping Experience, Lifestyle Experience Enhancing the customer shopping experience is a central focus for department store operators, with some keen to turn their stores into “lifestyle” outlets—with more restaurants and leisure and entertainment features that include movie theaters, kids’ play areas, spas and exhibitions. To provide customers with a unique and personalized lifestyle experience, retailers such as Taifu Department Store have teamed with tenants to offer a variety of value-­‐added services, including personal styling, home catering and home cleaning. As online shopping grows, this kind of in-­‐store experience will provide differentiation for stores seeking to capture leisure shoppers. Tapping Other Retail Formats Competition in China’s department store sector is fierce, and many operators are seeking to diversify their income streams. Some have adopted other retail formats, such as shopping malls, convenience stores and discount outlets. Store operators especially favor shopping malls, which provide one-­‐stop shopping and recreation services under one roof and are able to drive customer visits. An increasing number of players have started to step into this lucrative segment and develop their own malls. For example, Better Life Department Store is reportedly opening a shopping mall, Better Life-­‐Meixi Plaza, in Changsha, Hunan Province, in September 2015. The company plans to open over 40 more shopping malls in China by 2020. Global
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Convenience stores are another popular retail format that has attracted the attention of department store operators. Rainbow Department Store, for example, has opened a number of convenience stores in Shenzhen to provide pickup services for online purchases; these are made in Rainbow Department Store outlets as well as in its higher-­‐end Dreams-­‐on Department Store. Some retailers have ventured into other business sectors, such as food and beverage, commercial property, logistics, finance, hotels and entertainment. One of the latest examples is Parkson Department Store, which reportedly set up a joint venture with AUM Hospitality, a food and beverage and entertainment company in Malaysia, to start a food and beverage business in China. Direct Sales and Private Labels Most department stores in China have been operating under the concessionary model for years. They understand the drawbacks of this model and have tried to develop a more sustainable approach. An increasing number of them have started to engage in merchandise direct sales by obtaining distribution rights from brand owners. For example, Parkson has secured exclusive distribution rights from fast-­‐fashion brand Mango and plans to open between 100 and 500 Mango stores in China over the next five years. It’s noteworthy that regional department store operators are more likely to engage in merchandise direct sales than their national counterparts. In some cases, the proportion of merchandise direct sales can reach 100%. Hebei Xinyulou Department Store leverages its strong local networks and long-­‐standing relationships with suppliers to purchase all of its products directly from suppliers. At the same time, some operators have sought to differentiate themselves by launching private labels. But the development of private labels in China is still at a nascent stage. Private labels accounted for less than 2% of revenues for department store operators surveyed by the China Chain Store & Franchise Association and the Fung Business Intelligence Centre—much lower than the 30% to 50% for retailers in developed markets. Lack of professional in-­‐house buyers, huge capital outlays, resistance from staff at different levels and inexperienced management are major reasons for the difference. Opportunities and Prospects Faced with increasing competition from retailers in other segments, together with the growing sophistication and changing needs of Chinese consumers, department store operators need to constantly innovate and improve business practices. Those who understand their customers, leverage technology to evolve the customer experience and seek to differentiate themselves have an opportunity to thrive. Global
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Top Retailers A number of prominent retailers have interests in non-­‐department-­‐store sectors, such as supermarkets and consumer electronics retailing. Group-­‐level sales figures compiled by the China Chain Store & Franchise Association form the basis for our ranking below. As a result, the ranking does not split out department store operations for most of the retailers that have other interests. The exception is the top three groups—Shanghai Baialian, Dalian Dashang and Chongqing—for which we provide figures for department store divisions as well as at group level. Figure 17. China: Leading Department Store Chains Ranked by Sales Sales 2013 (RMB Million) Sales Growth 2013 (%) Sales 2013 (US$ Million) 8,381 Store Numbers 2013 5,000** Shanghai Bailian Group 51,926 5.4 -­‐ Department Stores Division 17,031 10.5 2,749 45 Dalian Dashang Group 33,747 5.9 5,447 280** -­‐ Department Stores Division 20,484 5.7 3,306 200 Chongqing Department Store 30,247 7.6 4,882 N/A -­‐ Department Stores Division 14,642 9.9 2,363 292 Yinzuo Group 29,432 12.8 4,750 179 Changchun Eurasia Group 24,169 17.1 3,901 75 Beijing Wangfujing Department Store 20,209 9.6 3,262 29 Liqun Group (Department Stores) 19,540 6.8 3,154 580 Rainbow Department Store 18,823 8.1 3,038 62 Zhenghua Department Store 18,773 15.2 3,030 113 Jiangsu Wenfeng Great World Chain Store 17,707 6.3 2,858 921 Parkson Retail Group* 17,480 4.3 2,821 58 Hefei Department Store Group 16,068 11.2 2,593 190 Golden Eagle Retail Group 16,061 0.7 2,592 27 Intime Department Store (Group) 15,526 11.4 2,506 36 Wanda Department Store 13,248 38.6 2,138 75 Wei Bai Group 12,931 14.7 2,087 570 New World Department Store China 12,650 14.7 2,042 41 Zhengzhou Dennis Department Store 12,137 16.4 1,959 181 * Estimated. ** Group store numbers across all formats. Figures are approximate. Source: China Chain Store & Franchise Association/company reports/FBIC Global Retail & Technology Global
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Japan The Issues The Sector’s Medium-­‐Term Struggles The department store industry in Japan has been struggling badly. The aggregate turnover of the country’s department stores plunged by about 60%, from US$638 billion in 2007 to US$258 billion in 2013, according to the Japan Department Stores Association. Besides the financial crisis in 2008 and the devastating earthquake in 2011, strong competition from Internet pure plays and fast-­‐fashion retailing also helped drive the decline. The aggregate sales of Japanese department stores staged a short-­‐lived recovery in 2013, after 15 consecutive years of decline. As we show later, “Abenomics” and a consequent tourist boost helped. But sector stagnation followed in 2014, as confirmed by the slower or negative growth among the top tier of retailers, as a sales tax rise hit domestic spending power. Missing the E-­‐Commerce Boom Japanese e-­‐commerce is ballooning—but the department store sector has not been tapping this growth. E-­‐commerce sales in 2013 reached approximately US$93 billion, up 60% from US$58 billion in 2009, according to the Japan Department Stores Association. A culture of “Omotenashi” (hospitality), which emphasizes serving guests wholeheartedly, holds back Japanese department stores. Omotenashi advocates face-­‐to-­‐face interactions and serving clients passionately. The concept is prevalent among the country’s department stores, and it means that personal service has tended to trump investments in e-­‐commerce and omnichannel capabilities. As a result, Internet retailing contributes less than 1% of department store sector sales—just US$258 million out of sector sales of US$51.6 billion, according to the Japan Department Stores Association. It’s no surprise, then, that Internet-­‐only retailers look to have been winning shoppers at the expense of department stores: apparel pure play Zozotown, for instance, grew sales from US$143 million in 2009 to US$292 million in 2012 with a CAGR of 26.9%, as compared to the declining trend of department store sales. FBIC thinks that the department store sector in Japan is lagging and that the sector must adapt Omotenashi to an era of m-­‐commerce and omnichannel shopping. Some department stores are already moving to implement omnichannel strategies. Takashimaya claims to have an omnichannel strategic focus, while Mitsukoshi Isetan now offers an online reservation service for trying on clothes: customers can browse clothes online and book a time to try them on in store. But too many have fallen behind in Internet retailing, and they need to make rapid moves to catch up. Global
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Although some big players have established omnichannel capabilities, the sector as a whole retains a cautious, conservative approach. Losing Out to Fashion Specialists, Too At the same time, department stores are facing strong competition from fashion specialists, with H&M, Zara and Uniqlo among the strongest players chipping away at market share. For example, Fast Retailing, which owns the Uniqlo brand, saw sales grow from US$5.7 billion in 2009 to US$9.5 billion in 2013, representing a CAGR of 13%. During the same period, midmarket department store sales hardly budged. PARCO, one of the largest midmarket players, reported sales revenue of US$2.21 billion in 2013, up from US$2.18 billion in 2009—a CAGR of less than 1%. Focused on an Older Shopper? Spending power in Japan, as in some other markets, has increasingly become weighted toward older age groups. Baby boomers have enjoyed stable employment and growing affluence while younger age groups cope with temporary jobs, leaner salaries and reduced benefits. That means older consumers have been a more valuable target for department stores, which helps justify the culture of service and the relative absence of e-­‐commerce in the sector. Yet department stores must look to the future. Tying themselves to baby boomers means they are destined to die with their customers. Stores must offer something to younger age groups to sustain a flow of customers into the future. High-­‐End versus Midmarket As in the US and Europe, premium players have tended to outperform their midmarket and lower-­‐
end peers. In the recent past, they were helped by a tourism boom, which we discuss later. • Isetan grew sales 6.9% year over year in 2013. • Takashimaya saw revenues climb 3.9% in the same period. To place this in context, revenues grew by a total of just 6.3% from 2011 to 2014. • The lower-­‐end and midmarket department stores have not gained from tourists. In addition, they face heightened competition for domestic customers, not least from Internet-­‐only retailers: • Marui’s sales fell 2.8% in 2013. Its sales have stagnated at around US$3.4 billion for the past five years. • PARCO saw revenues fall 0.1% in 2013. Its revenue has remained at around US$2.2 billion for the past five years. Devalued Yen Prompts Tourism Boom A boom in tourists to Japan has proved to be a major opportunity for the country’s department stores. The depreciation of the yen as an effect of Prime Minister Shinzō Abe’s economic policies (“Abenomics”) provided a boost to inbound visitor numbers. Tourists are now flocking to Japan and snapping up premium brands at low prices. The prospect of getting luxury brands at low cost is particularly appealing to the middle classes in developing economies such as China. Tourism has breathed new life into a long-­‐flagging sector. FBIC believes that this recovery can be sustained and that the winners will be premium-­‐skewed department stores such as Isetan Global
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Mitsukoshi, J-­‐Front Retailing and Takashimaya, especially those with stores in key tourist shopping areas such as Ginza and Shinjuku. Initiatives to Grow Future Tourist Spending Boding well for some chains, Japan is aiming to sustain the boost in visitor numbers. The country has eased visa regulations for many other countries; for example, visitors from Thailand and Malaysia do not need to apply for visas, while Chinese visitors with high incomes can apply for multiple-­‐entry visas. The country has also introduced new tax exemptions for tourists. From October 2014, visitors have enjoyed tax-­‐free shopping on a broader range of goods, effectively taking 8% off prices. Additional exemptions apply to the customs tax, tobacco tax and alcohol tax. Retailers including departmentment stores, allow shoppers to make duty-­‐free purchases for collection at the airport of departure. We expect premium-­‐positioned department stores to gain from any future increases in inbound tourism, with some chains gearing up by opening duty-­‐free stores: • Isetan Mitsukoshi Holdings, Narita International Airport Corporation, NAA Retailing and JATCo will cooperate to open duty-­‐free stores in autumn 2015. The first store, and the first duty-­‐
free store in downtown Tokyo, will be at Mitsukoshi’s Ginza location, with a sales floor area of 3,300 sq. m. • Tokyu Fudosan and Lotte will open their first downtown duty-­‐free store in Ginza later in 2015. Lotte entered the duty-­‐free sector in 2014, opening a store at Osaka’s Kansai airport. • J Front Retailing and Lotte are reportedly planning to open a duty-­‐free store in Shinsaibashi, Osaka. Source: moodiereport.com Threats to Domestic Demand Persist At the same time, the raising of the consumption tax from 5% to 8% in April 2014 has muted domestic demand. It will increase again, to 10%, in October 2015. The 2014 increase proved to be a drag on department store growth, and the 2015 increase is likely to have a similar negative effect. Global
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Conglomerates Rule One feature of the sector is the strength of conglomerates such as J Front Retailing and Seven & i Holdings. Groups such as these combine department store operations with other interests such as supermarkets, finance, wholesale and even construction. In the West, conglomerates like these have long since fallen out of favor, with restructuring initiatives aiming to maximize shareholder value and allow constituent companies to focus on core operations. Given the sluggish growth in the Japanese sector, we wonder if spinoffs could benefit some of the country’s department store chains. Top Retailers Figure 18. Japan: Leading Department Store Chains Ranked by Sales Isetan Mitsukoshi Holdings (Isetan and Mitsukoshi) (a) -­‐ Department Store Division Sales 2013 (¥ Billion) Sales 2014 (¥ Billion) 1,321.5 1,272.1 Sales Number of Number of Growth Stores 2013 Stores 2014 2014 (%) (b) (b) -­‐3.7 23 27 1,201 N/A N/A 23 27 1,146.3 1,149.5 0.3 15 18 -­‐ Department Store Division 758.9 759.9 0.1 15 18 Seven & i Holdings Department Store Division (Seibu and SOGO) 871.1 875.0 0.4 24 24 Takashimaya Department Store Division 804.4 809.2 0.6 16 17 H Two O retailing (Hankyu and Hanshin) 427.3 420.6 -­‐1.5 15 15 Marui Group 416.5 404.9 -­‐2.8 24 25 Kintetsu Group (Kintetsu Department Stores) 277.1 279.9 1.0 9 10 PARCO 264.4 269.9 2.1 19 19 Tokyu Co. (Tokyu Department Stores) 193.9 188.3 -­‐2.9 14 14 Odakyu Group (Odakyu Department Store) 154.3 151.8 -­‐1.6 3 3 J-­‐Front Retailing (Daimaru and Matsuzakaya) (a) (a) Group sales figures, including non department store operations. (b) Store count excludes overseas stores. Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology Global
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Figure 19. Japan: Leading Department Store Chains’ Sales in US$ Sales 2013 (US$ Million) Sales 2014 (US$ Million) Isetan Mitsukoshi Holdings (Isetan and Mitsukoshi) (a) 13,543 12,019 -­‐ Department Store Division 12,308 N/A J-­‐Front Retailing (Daimaru and Matsuzakaya) (a) 11,747 10,861 -­‐ Department Store Division 7,777 7,180 Seven & i Holdings Department Store Division (Seibu and SOGO) 8,927 8,267 Takashimaya Department Store Division 8,243 7,646 H Two O retailing (Hankyu and Hanshin) 4,379 3,974 Marui Group 4,268 3,826 Kintetsu Group (Kintetsu Department Stores) 2,840 2,645 PARCO 2,710 2,550 Tokyu Co. (Tokyu Department Stores) 1,987 1,779 Odakyu Group (Odakyu Department Store) 1,581 1,434 Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology Global
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CONCLUSIONS: WHERE NEXT? While premium department stores are tending to perform solidly, the middle ground is an increasingly tough place to do business, as we’ve underlined through this report. In the Internet age, department stores’ traditional unique selling propositions of proximity and reasonably broad choice are no longer enough: shoppers need convincing reasons to opt for these stores. A number of midmarket generalists are seeing their shopper bases fragment—to fashion-­‐strong Internet pure plays, to more fashionable specialists and to budget options, including off-­‐price stores. A risk for retailers is that these channels steal younger shoppers, who are more likely to be buying online and more interested in fast fashion than older customers. This threatens to leave department stores with a remnant of older shoppers and no fresh blood to replace them. The ultimate result of this could be retailers dying along with their customer base. There’s no simple way to stem the loss of shoppers. But there are ways to minimize it. First, midmarket retailers need to stop playing catch-­‐up and start becoming more forward thinking. Whether it is in the fashionability of their products or in multichannel fulfilment, big names such as M&S and Debenhams in the UK, JCPenney and Kohl’s in the US and Karstadt and Galeria Kaufhof in Germany have too often realized the need for change only after sales stagnate or fall. To build loyalty among a new generation of shoppers, retailers like these need to be ahead of consumer expectations—in fashionability, in brand ranges, in options to buy and in in-­‐store experience. Second, stores must cater to those who want to shop more than those who need to shop. E-­‐
commerce is peeling away functional shopping occasions, leaving brick-­‐and-­‐mortar stores with a greater proportion of leisure shoppers. Done right, attractive environments filled with desirable merchandise and providing great service stand a good chance of capturing these shoppers. We are not of the opinion that big stores are redundant. But in a more competitive context, it is urgent that the department store format reassert its destination status through aspirational, enjoyable, brand-­‐filled experiences. Global
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COMPANY PROFILES
US ............................................................................................................................................................................. 48
UK ............................................................................................................................................................................. 72
FRANCE ................................................................................................................................................................... 92
GERMANY .............................................................................................................................................................102
CHINA ....................................................................................................................................................................112
JAPAN ....................................................................................................................................................................124 Global
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Company Profiles: US Global Department Store Retailing
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• Established: 1925 (catalog company opened first retail stores). • Sears is a lower midmarket department store with a broad product mix. It is an integrated retailer and operates through its subsidiaries, including Kmart, Sears Domestics and Sears Canada. • The company operated 1,725 Sears and Kmart stores at the end of 2014. • Planned store openings: Closures, rather than openings, are scheduled. The company is set to close 77 Sears stores in 2015; it shuttered 234 Kmart and Sears stores in 2014. • Employees: 249,000. MAJOR EVENTS OF THE PAST FIVE YEARS April 6, 2015 The US Environmental Protection Agency awards Sears a Sustained Energy Award for environmental protection through innovative stores and solutions. February 26, 2015 Sears Holdings reports that full-­‐year revenues fell 13.8% in 2014. The company says it is focusing on profitability rather than sales growth, although operating losses deepened to $1.5 billion from an operating loss of $927 million in 2013. Global Department Store Retailing
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October 2, 2014 Sears Holdings sells the majority of its ownership of the Sears Canada division to shareholders, cutting its stake from 95% to 51%. Sears Holdings increases its liquidity significantly with the transaction, raising as much as $380 million. July 8, 2014 Sears and Kmart focus on making shopping easier for Shop Your Way members by introducing a unique online/in-­‐store collaboration to allow pickup of sears.com or kmart.com orders at either brand’s stores. April 4, 2014 Lands' End separates from Sears Holdings. Its common stock begins regular-­‐
way trading on the Nasdaq Capital Market under the symbol "LE" on April 7, 2014. Sears Holdings receives aggregate gross proceeds from the spin-­‐off of $500 million, consisting of a cash dividend paid by Lands' End prior to the spin-­‐off to a subsidiary of Sears Holdings. November 19, 2013 Shop Your Way enhances its mobile app features to better connect in-­‐store and online shopping. September 12, 2013 ServiceLive, a wholly owned subsidiary of Sears Holdings, introduces a free online home improvement “matchmaking” service for homeowners. April 17, 2013 Sears launches Fulfilled By Sears, a turnkey fulfillment service that offers pay-­‐
as-­‐you-­‐go pricing for businesses to manage storage, picking, packing and shipping of customer orders from Sears Marketplace. April 10, 2013 A new business unit, “Shop Your Way,” focused on the development of entertainment-­‐driven fashion and lifestyle brands, launches. April 24, 2012 Sears Holdings announces the addition of a wholly owned subsidiary called MetaScale, a provider of technology managed services and data solutions. April 5, 2012 Sears Holdings announces that its Kenmore, Craftsman and DieHard business unit (KCD) has appointed Leveraged Marketing Corporation of America as its exclusive global licensing agent. The company will work closely with KCD to identify, evaluate and manage licensing opportunities around the world. December 31, 2011 The retailer completes its previously announced spin-­‐off of its interest in Orchard Supply Hardware Stores Corporation. Orchard is independent from Sears Holdings, and its Class A common stock begins trading on January 3, 2012, on the NASDAQ Capital Market under the ticker symbol "OSH." Orchard's Series A preferred stock is quoted on the OTCQB. October 26, 2011 Sears provides customers with relevant offers in real time through new digital local ads available on searslocalad.com and kmartlocalad.com. The new ads allow Sears to customize promotional offers to local communities. October 13, 2011 Sears announces the staged rollout of Apple iPads and Apple iPod Touch devices to instore staff, starting with nearly 450 stores nationwide as part of a strategic plan to enhance the relationship between customers and associates while improving the overall in-­‐store shopping experience Global Department Store Retailing
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KEY MANAGEMENT Title Incumbent Chairman, CEO and Chairman of Finance Committee Edward Scott Lampert has been Chief Executive Officer (CEO) since February 1, 2013, and Chairman since 2004. Louis D’Ambrosio was CEO from February 2011 to January 2013. CFO and EVP Robert A. Schriesheim has been Chief Financial Officer (CFO) since August 22, 2011, and Executive Vice President (EVP) since August 16, 2011. FINANCIAL OVERVIEW KEY METRICS Year to end-­‐January Net Sales 2013 $ Million 39,854 2014 $ Million 36,188 2015 $ Million 31,198 Net Loss -­‐930 -­‐1,365 -­‐1,682 EBITDA -­‐6 -­‐490 -­‐647 Source: Company reports/S&P Capital IQ COMPARABLE SALES Year to end-­‐January Kmart 2013 % -­‐3.7 2014 % -­‐3.6 2015 % -­‐1.4 Sears Domestic -­‐1.4 -­‐4.1 -­‐2.1 Sears Canada -­‐5.6 -­‐2.7 N/A Source: Company reports/S&P Capital IQ INVENTORY TURNOVER Year to end-­‐January 2013 2014 2015 Inventory Turnover 3.68 3.76 4.02 Source: Company reports/S&P Capital IQ Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Sears has offered this service for around 12 years and has diversified into in-­‐
car pick-­‐ups. If this process takes longer than 5 minutes, the customer receives a $5 coupon redeemable the next time he or she uses the service. Beacons Both the company’s website and mobile app are enabled for proximity-­‐based notifications and offers. Radio Frequency Identification Sears rolled out RFID tags to more than 200 locations in 2014. Browse & Order Hubs N/A M-­‐Commerce The “Shop Your Way” app allows customers to find coupons and deals, win points and prizes, compare products and scan items store. Mobile Payments Sears joined with Walmart and other retailers to create a shared mobile payment network in 2012. ADDITIONAL TECHNOLOGY ServiceLive • ServiceLive, a wholly owned subsidiary of Sears Holdings Corporation, connects customers through its website and call centers to technicians affiliated with Sears Home Services as well as local independent contractors. ServiceLive is a nationwide network of more than 30,000 independent contractors connected to help homeowners get what they need done quickly and economically. The network of specialized technicians includes repair and maintenance people, electricians, plumbers and other independent contractors. PRODUCT OFFER AND COMPETITION Type of Goods Sears: Apparel for men, women and children; home appliances; garden furniture; beauty. Kmart: Apparel for men, women and children; home appliances; garden furniture; beauty; groceries; celebrity brands such as the Sofia by Sofia Vergara line. Major Competitors JCPenney; T.J.Maxx; Dillard’s; Macy’s; Kohl’s; Bon-­‐Ton Stores; Belk; Walmart; Staples; Best Buy Co.; Bed Bath & Beyond; Amazon. Global Department Store Retailing
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Macys Source: Macy’s Hearld Sq NY • Established: 1858. • Macy’s is a national omnichannel retailer with iconic brands and high-­‐end private labels. • The retailer operates the Macy’s and Bloomingdale’s brands. • The company operated 823 stores as of January 2015; one additional franchised Bloomingdale’s store operates in Dubai. • Planned store openings: A new Bloomingdale’s store will open in 2017 with a new Macy’s opening in 2016. Fourteen stores will be closed by spring 2015. • Employees: 172,500. MAJOR EVENTS OF THE PAST FIVE YEARS May 5, 2015 Macy’s confirms a venture into off-­‐price retailing under the fascia Macy’s Backstage. The first four stores will open in autumn 2015, in New York City. The stores will be smaller, 30,000 sq. ft. outlets offering apparel, footwear, housewares, home textiles and jewelry. Global Department Store Retailing
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April 22, 2015 Macy’s announces a new collaboration with Heidi Klum to create a range of intimate apparel. March 31, 2015 A new 150,000 sq. ft. Bloomingdale’s store is to open in 2018. The location is a new shopping, eating and entertainment hub in Norwalk, Connecticut. March 27, 2015 John A. Bryant, former Chairman, President and CEO of Kellogg Company, joins the Macy’s Board of Directors. March 9, 2015 The acquisition of Bluemercury, Inc., announced in February, is complete. March 5, 2015 Macy’s announces the opening of a new Bloomingdale’s Outlet store toward the end of 2015. The store will be at 2085 Broadway on Manhattan’s Upper West Side. It will be the 14th Bloomingdale’s Outlet and the first in a major urban center. March 1, 2015 Macy’s announces that off-­‐price retail could be part of the third stage of its strategy. February 24, 2015 Macy’s report its sixth consecutive year of double-­‐digit growth in adjusted earnings per share. Diluted 2014 EPS is $4.22, or $4.40 as adjusted, +10% vs. prior year. Net sales for the year nudge up 0.6%. February 3, 2015 Macy’s announces a series of new senior executive appointments as the company continues to deepen its focus on driving profitable sales growth as a leading omnichannel retailer and innovator (see next section). Macy's signs an agreement to acquire Bluemercury, Inc., widely recognized as America's largest and fastest-­‐growing luxury beauty products and spa services retailer, for $210 million in cash. January 8, 2015 Macy's announces plans to restructure its merchandising and marketing and lay off thousands of workers in response to changes in the way customers shop in stores and online. The company also announces the closing of 14 department stores and the opening of two new locations, resulting in annual savings of roughly $140 million. December 22, 2014 Macy's, Inc. joins the S&P 500 Growth Index. October 28, 2014 The company says it plans to open Macy's and Bloomingdale's stores in Abu Dhabi, United Arab Emirates, in 2018. This will be the first international location for Macy's and the second for Bloomingdale's (in addition to Dubai). September 15, 2014 Macy’s and Bloomingdale’s announce that they will help launch Apple Pay. The brands will pilot same-­‐day delivery in fall 2014 and are testing new POS technology and customer service enhancements. They say they have launched new apps, web functionality and mobile wallet, and are expanding RFID to fashion categories. November 5, 2013 Macy’s enhances its mobile consumer engagement offerings with the launch of NantMobile iD visual recognition technology. Global Department Store Retailing
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May 23, 2012 Through a Macy’s section on omei.com, a newly established China-­‐based online retailer of in-­‐season luxury and fashion brands operated by VIPStore Co., Ltd., Macy’s will sell an assortment of its highly regarded private brand merchandise directly to consumers in China. September 28, 2011 Macy's and Bloomingdale's stores are adopting RFID technology on an accelerated timeline to more precisely manage item-­‐level merchandise inventories. June 27, 2011 Macy's announces the launch of international shipping on its e-­‐commerce site, macys.com, to 91 countries in Africa, Asia, Australia, the Caribbean, Europe, the Middle East, North America and South America. February 24, 2011 Macy's Backstage Pass customizes QR code and SMS technology to deliver exclusive and engaging video content to users' mobile phones. Backstage Pass will provide consumers with essential tips, information on the latest trends, advice and inspiration straight from their favorite style icons. September 14, 2010 Macy's begins piloting the use of Shopkick, a new location-­‐based shopping app, at about 150 stores. Customers can earn "kickbucks" reward points by simply walking into a Macy's store with their mobile devices. Kickbucks can be redeemed for Facebook Credits (since discontinued) to play games online, song downloads, in-­‐store gift rewards at Macy's and other Shopkick partner stores, magazine subscriptions, iPods and charitable donations. KEY MANAGEMENT Title Incumbent Chairman of the Board and CEO Terry J. Lundgren has been CEO since February 26, 2003. He began his retailing career in 1975 with Bullock's. Macy's Chief Stores Officer Jeffrey A. Kanto became Chief Stores Officer on January 31, 2015. He had been Chairman of macys.com since February 13, 2012, and served as macys.com President of Merchandising from August 2010 to February 2012. Chairman and CEO, Bloomingdale’s Tony Spring has been Chairman and CEO of Bloomingdale's, Inc., since February 1, 2014. He served as President and Chief Operating Officer of Bloomingdale's, Inc., from 2008 to February 1, 2014. President Jeffrey Gennette has been President of Macy's, Inc., since March 31, 2014. He served as Chief Merchandising Officer of Macy's from February 2009 to March 31, 2014. CFO Karen M. Hoguet has been CFO since October 31, 1997. Global Department Store Retailing
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FINANCIAL OVERVIEW Key Metrics Year to end-­‐January 2013 $ Million 27,686 2014 $ Million 27,931 2015 $ Million 28,105 Net Income 1,335 1,486 1,526 EBITDA 3,717 3,780 3,923 Net Sales Source: Company reports/S&P Capital IQ Sales by Category Year to end-­‐January Feminine accessories, intimate apparel, shoes and cosmetics 2013 % 2014 % 2015 % 38 38 38 Feminine apparel 23 23 23 Men’s and children’s 23 23 23 Home and misc. 16 16 16 Source: Company reports/S&P Capital IQ Comparable Sales Year to end-­‐January Comparable Sales Growth 2013 % 2014 % 2015 % 3.7 1.9 1.4 Source: Company reports/S&P Capital IQ Year to end-­‐January Inventory Turnover 2013 3.17 2014 3.08 2015 3.05 Source: Company reports/S&P Capital IQ TECHNOLOGY AND INNOVATIONS Click & Collect Macy’s currently offers the service in selected stores and is looking to extend it in the near future. Beacons In 2014, Macy’s launched iBeacons across all stores after a successful trial in 2013. The technology allows customers to receive personalized discounts, product recommendations and rewards. Global Department Store Retailing
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Radio Frequency Macy’s has been using RFID tagging technology for a number of Identification years across several categories. Browse & Order The company is experimenting with simple browse-­‐and-­‐order hubs Hubs in selected stores. M-­‐Commerce Various apps target different market segments. For example, an app for children encourages them to explore the store looking for hidden objects. A new app, Macy’s Image Search, allows customers to search the merchandise assortment on macys.com by submitting a photograph of any outfit they see in daily life. The visual search will take the customer to similar items they can buy on macys.com. Mobile Payments Macy’s is one of the first retailers to support the new Apple Pay system, which is in use with selected cards. ADDITIONAL TECHNOLOGY •
Macy’s Systems and Technology, Inc., a wholly owned indirect subsidiary of Macy’s, Inc., formed in 1985, provides operational electronic data processing and management information services to all of the company’s operations. •
Macy’s Systems and Technology consolidates the diverse data processing operations of Macy's, Inc. It provides an integrated line of high-­‐performance retail, electronic commerce and data warehouse systems for use at all levels within Macy's. •
Macy’s Logistics & Operations is a division of a wholly owned indirect subsidiary of Macy’s, Inc., formed in 1994. It supports Voluntary Interindustry Commerce Standards guidelines for shipping “floor ready” merchandise from manufacturers to retailers. •
Macy's, Inc., pioneered the use of UPC coding in the department store industry, an initiative that has dramatically improved customer service, sales information and inventory freshness. Today, more than 95 percent of merchandise is UPC-­‐coded by vendors and scanned by Macy's, Inc., at point of sale. In addition, more than 90 percent of vendors are linked to Macy's, Inc., via electronic data interchange. Macy’s Digital Edition •
Macy’s Digital Edition leverages the functionality of the tablet experience to introduce customers to an enhanced catalog featuring exclusive editorial content, fashion advice, closer looks at products and curated product suggestions. •
Digital Edition offers consumers the interactive opportunity to learn about the season’s top trends, get 360-­‐degree views of products and see fashion tip videos. They can also create new outfits using the Style Mixer feature, which allows the user to mix and match pieces. Macy’s Digital Edition also allows customers to shop styles directly from the virtual catalog. •
Bloomingdales.com launched an online Tabletop Builder on October 1, 2014, blending the expertise of its sales professionals with technology that allows customers to mix and match dinnerware, flatware and glassware in table settings. Bloomingdale’s Tabletop Builder Global Department Store Retailing
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•
The service enhances the Bloomingdale’s gift registry process on any device. •
Table setting advice provides for a variety of home entertaining situations. Smart Fitting Rooms •
Bloomingdale's has introduced smart fitting rooms, which have wall-­‐mounted tablets where selling associates and customers are able to scan merchandise items to view other colors and sizes available. In many cases, they can see additional product information, product ratings and reviews, and recommendations of complementary items to “complete the look.” PRODUCT OFFER AND COMPETITION Type of Goods Macy’s: Branded and private-­‐label apparel and accessories for men, women, and children; beauty; home furnishings; other general consumer goods. Bloomingdale’s: Branded and private-­‐label apparel and accessories for men, women, and children; jewelry; home furnishings. Major Competitors Kohl’s; JCPenney; Sears; Nordstrom; Neiman Marcus; Dillard’s; Belk; T.J.Maxx; Amazon; Best Buy Co.; Bed Bath & Beyond. Global Department Store Retailing
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Kohls Source: Wikimedia Commons/Caldorwards4 • Established: 1962. • Kohl’s is a midmarket family department store chain, operating around 1,123 stores across 49 states as of January 2015. • Planned store openings: Kohl’s plans to open 12 new stores in 2015. Eleven will be small, urban stores. • Employees: 137,300. MAJOR EVENTS OF THE PAST FIVE YEARS May 21, 2015 Announces it will launch an off-­‐price chain, called Off-­‐Aisle, consisting mainly of “like-­‐new” items that have been returned by customers. April 20, 2015 Kohl’s announces a collaboration with designer Thakoon Panichgul for the latest line in its DesignNation collection. April 6, 2015 The company receives a US Environmental Protection Agency Sustained Energy Award for its continued leadership in protecting the environment through innovative stores and solutions. February 4, 2015 Kohl’s reports fourth-­‐quarter comparable sales of 3.7% and updates its fiscal 2014 diluted earnings per share guidance to $4.20–$4.22. Global Department Store Retailing
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October 6, 2014 Kohl’s launches Yes2You Rewards™ nationwide. The program gives customers more ways to save by earning points for every in-­‐store and online purchase. The program facilitates a seamless, omnichannel shopping experience, allowing customers to shop when and where they want with added value and convenience. November 14, 2013 Kohl’s and Authentic Brands Group, LLC, announce the addition of lifestyle brand Juicy Couture® to Kohl’s stores and website by fall 2014. September 5, 2012 Kohl’s expands its electric vehicle charging station initiative with 36 new stations at 18 additional Kohl’s locations by the end of fall 2012. December 15, 2011 Kohl’s pilots electric vehicle charging stations at 33 stores nationwide. Drivers can activate stations in various ways, including radio frequency identification cards available at store customer service desks and via phone numbers provided on the charging stations. October 5, 2011 A new Kohl’s store prototype achieves LEED Gold precertification using LEED for Retail, making Kohl's the first company in the nation to achieve this designation in the LEED Volume Program launched in November 2010. The company announces that beginning in spring 2012, all new Kohl's stores will be designed and constructed using the LEED Gold precertified prototype and will pursue postconstruction LEED certification. KEY MANAGEMENT Title Incumbent Chairman, CEO and President Kevin Mansell was named President and Director in 1999. He has served as Chairman since September 2009, CEO since August 2008 and President and Director since February 1999. CFO and SEVP Wesley S. McDonald has served as CFO since August 2003 and Senior Executive Vice President (SEVP) since November 2010. He is responsible for financial planning and analysis, investor relations, financial reporting, accounting operations, tax, treasury, credit and capital investment. FINANCIAL OVERVIEW Key Metrics Year to end-­‐January Net sales Net income EBITDA 2013 $ Million 19,279 2014 $ Million 19,031 2015 $ Million 19,023 986 889 867 2,723 2,601 2,575 Source: Company reports/S&P Capital IQ Global Department Store Retailing
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Comparable Sales Year to end-­‐January Comparable Sales Growth 2013 % 0.3 2014 % -­‐1.2 2015 % -­‐0.3 Source: Company reports/S&P Capital IQ Inventory turnover Year to end-­‐January 2013 2014 2015 Inventory Turnover 3.53 3.17 3.15 Source: Company reports/S&P Capital IQ TECHNOLOGY AND INNOVATIONS Click & Collect Kohl’s is currently testing a click-­‐and-­‐collect option for a limited number of stores. At the moment, it is available only on the main website, not on mobile or via the app. Beacons Kohl’s currently has beacons in 22 of its stores with a view of increasing this in the near future. Radio Frequency Identification Kohl’s uses RFID tag technology at store level and in its distribution centers. Browse & Order Hubs Kohl's launched kiosks in 2012 to enable shoppers to place an online order for anything they couldn’t find in-­‐store and have it delivered free. M-­‐Commerce The Kohl’s app allows customers to receive rewards, collect points and manage their store accounts. Mobile Payments Kohl’s is a member of Merchant Customer Exchange, the main rival to Apple Pay. ADDITIONAL TECHNOLOGY • In October 2014, Kohl’s overhauled its core merchandising, inventory and pricing operations with the launch of a new Oracle Retail Merchandise Operations Management solution. It allows the retailer to coordinate a unified system of inventory records to better serve customers across channels, and to simplify its business user experience. • Kohl’s also deployed Oracle Service Cloud for web customer service, contact center and knowledge management. It enables Kohl’s to reduce costs while delivering a compelling customer experience through voice, e-­‐mail and chat; it supports millions of web interactions per month and more than 2,000 contact center agents. Global Department Store Retailing
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PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home appliances, furniture and furnishings; housewares; electronics; jewelry and watches; sports and leisure goods. Major Competitors Sears; Macy’s; JCPenney; Dillard’s; T.J.Maxx; Nordstrom; Neiman Marcus; Belk; Amazon; Best Buy Co.; Walmart; Staples; Bed Bath & Beyond. Global Department Store Retailing
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JC PENNY Source: Wikimedia Commons/Aranda56 • Established: 1902. • JCPenney is a midmarket, promotion-­‐heavy department store. • It is one of the largest apparel and home furnishing retailers in the US, operating 1,094 stores. • Store openings: JCPenney closed 33 stores in 2014 and opened one new store. • Employees: 117,000. MAJOR EVENTS OF THE PAST FIVE YEARS April 16, 2015 JCPenney named one of America's Best Employers for 2015. March 18, 2015 The company announces that Kent B. Foster will retire from the board of directors after 17 years. His term will end in May 2015. February 26, 2015 JCPenney reports a $1.1 billion increase in EBITDA for fiscal 2014. Same-­‐
store sales rose 4.4% in the fourth quarter, 4.4% for the full year. October 8, 2014 JCPenney outlines opportunities to achieve $1.2 billion in EBITDA by 2017. Key initiatives include revitalizing center core, driving increased home store productivity and maximizing omnichannel capabilities. Plans include opening more than 100 new Disney shops. Global Department Store Retailing
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January 15, 2014 JCPenney announces closures of 33 underperforming stores across the country in order to focus its resources on the highest potential growth opportunities. These actions are expected to result in an annual cost savings of approximately $65 million. October 25, 2013 JCPenney joins Shopkick mobile app to reward customers. April 5, 2012 JCPenney begins to dramatically simplify its business model to align operations with its changing objectives. The company says it will reorganize the workforce at its headquarters in Plano, Texas, where it will be taking a range of actions to realign its management structure. December 7, 2011 JCPenney and Martha Stewart Living Omnimedia, Inc., announce that they have entered into a strategic alliance and will join forces to create a unique and comprehensive retail experience featuring Martha Stewart products, know-­‐how and advice. February 7, 2011 JCPenney says it has rolled out its Findmore smart fixture to over 120 select stores across the country. KEY MANAGEMENT Title Incumbent CEO and Director Myron E. Ullman III has been CEO since April 8, 2013. He also served as CEO and Chairman from December 2004 to late 2011 and as CEO of Stores, Catalog and Internet beginning December 1, 2004. Ron Johnson was CEO from November 2011 to January 2013. Marvin R. Ellison will become CEO in August 2015. President and Director Marvin R. Ellison has been President since November 1, 2014. He served as an EVP of U.S. Stores at The Home Depot, Inc., from August 25, 2008, to October 31, 2014. CFO and EVP Edward J. Record has been the CFO and EVP since March 24, 2014. He has nearly 25 years of experience managing the financial and operational performance of multiple retailers. He spent over six years at Stage Stores Inc., serving as COO from February 2010 to February 12, 2014. FINANCIAL OVERVIEW Key Metrics Year to end-­‐January Net sales Net loss EBITDA 2013 $ Million 12,985 -­‐985 -­‐797 2014 $ Million 11,859 -­‐1,388 -­‐819 2015 $ Million 12,257 -­‐771 323 Source: Company reports/S&P Capital IQ/GuruFocus Global Department Store Retailing
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Comparable Sales Year to end-­‐January Comparable Sales Growth 2013 % -­‐25.2 2014 % -­‐7.4 2015 % 4.4 Source: Company reports/S&P Capital IQ/GuruFocus Inventory turnover Year to end-­‐January 2013 2014 2015 Inventory Turnover 3.39 3.17 2.86 Source: Company reports/S&P Capital IQ/GuruFocus TECHNOLOGY AND INNOVATIONS Click & Collect Click-­‐and-­‐collect is available, but goods take four to seven working days to arrive at a store or express center. Beacons JCPenney teamed with ShopBeacon to implement beacon and low-­‐energy technology throughout its stores. Radio Frequency Identification In 2012, the retailer invested heavily in RFID tagging. According to RFID Journal, it was not as successful as hoped and was subsequently scaled down. Browse & Order Hubs N/A M-­‐Commerce The app allows shoppers to browse, buy and pay with their store card and PayPal. It provides an integrated shopping experience as well as customizable search options. Mobile Payments According to reports from Bloomberg, JCPenney will accept Apple Pay in the near future. PRODUCT OFFER AND COMPETITION Type of Goods Clothing, footwear and accessories for men, women and children; fine and fashion jewelry; beauty; home furnishings. In-­‐house services such as hair salons, portrait photography and custom decorating. Major Competitors Sears; Kohl’s; Macy’s; T.J.Maxx; Dillard’s; Bon-­‐Ton Stores; Belk; Best Buy Co.; Walmart; Staples; Bed Bath & Beyond; Amazon. Global Department Store Retailing
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Nordstrom Source: Nordstrom • Established: 1901. • Nordstrom is a premium department store and specialty fashion retailer that sells high-­‐end designer brands. Its portfolio also includes off-­‐price Nordstrom Rack and Trunk Club, acquired in 2014. • Nordstrom also owns the HauteLook flash-­‐sales website and is majority owner of Jeffrey, which operates two luxury boutiques. • The retailer currently operates 116 full-­‐line stores in the United States and two in Canada. Nordstrom Rack has 177 locations, and Trunk Club has five clubhouses. • Store openings: 33 openings are scheduled for 2015, 16 for 2016, and five for 2017. These will be split between the Nordstrom and Nordstrom Rack fascias and include openings in Canada as well as the US. • Employees: 62,500. MAJOR EVENTS OF THE PAST FIVE YEARS April 7, 2015 The company announces that two new Nordstrom Rack stores will open in Pittsburgh and in Novi, Michigan, in 2016. Global Department Store Retailing
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February 19, 2015 Nordstrom reports fourth-­‐quarter and fiscal year 2014 earnings in line with expectations. For the year, the company recorded sales growth of 7.8% and a comparable sales increase of 4.0%. August 26, 2014 The retailer says it has partnered with Curalate and become the first company to launch Like2Buy, a platform that enables a more seamless shopping experience for customers through Instagram. July 31, 2014 Nordstrom announces the acquisition of Trunk Club, a personalized clothing service for men ranging from day-­‐to-­‐day basics to high-­‐end garments. May 5, 2014 Nordstromrack.com launches. The new e-­‐commerce site and mobile app is built on a shared platform with HauteLook, Nordstrom’s flash sale business. December 18, 2013 Nordstrom announces its investment in Shoefitr, which provides improved fit and sizing information for customers buying shoes online. August 16, 2012 The company introduces a new app designed to offer a simple, fast and intuitive way to browse and buy merchandise on the iPad. Additional features include a dressing room, customizable homepage and social sharing. July 12, 2012 Nordstrom announces a partnership with the UK’s Arcadia Group and says it plans to launch Topshop and Topman in 14 Nordstrom stores. May 31, 2012 Nordstrom, Inc., and GQ announce a multimedia strategy designed to integrate magazine editorial into the Nordstrom online shopping experience. Nordstrom hosts an online store and a selection of men's products handpicked from the pages of the magazine by the editors of GQ. August 29, 2011 Nordstrom.com offers customers free standard shipping and returns. February 17, 2011 Nordstrom, Inc., says it has entered into an agreement to acquire HauteLook, Inc., an online private sale marketplace. HauteLook offers discounts of 50 to 75 percent off on brands for women, men, kids, home, beauty, travel and local services. KEY MANAGEMENT Title Incumbent Principal Executive Officer, President and Director Blake W. Nordstrom has been President since August 2000; he also serves as Principal Executive Officer. CFO and EVP Michael G. Koppel has been CFO and an EVP of Nordstrom Inc. since May 2001. He serves as VP, Treasurer, Principal Accounting Officer and Principal Financial Officer of Nordstrom Credit, Inc. Global Department Store Retailing
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FINANCIAL OVERVIEW Revenues Year to end-­‐January Net sales By channel -­‐ Nordstrom -­‐ Nordstrom Rack -­‐ HauteLook and Jeffrey Net earnings EBITDA Source: Company reports/S&P Capital IQ 2013 $ Million 11,762 9,233 2,445 271 735 1,748 2014 $ Million 12,166 9,327 2,738 330 734 1,780 2015 $ Million 13,110 9,678 3,215 476 720 1,831 Year to end-­‐January Comparable Sales Growth 2013 % 2014 % 7.3 2.5 2015 % 4.0 Source: Company reports/S&P Capital IQ Inventory Turnover Year to end-­‐January Inventory Turnover 2013 5.37 2014 5.07 2015 5.15 Source: Company reports/S&P Capital IQ TECHNOLOGY AND INNOVATIONS Click & Collect Only selected items are available for click-­‐and-­‐collect; options depend on the shopper’s location. Beacons After an unsuccessful pilot test in 2014, beacon technology was not integrated in stores. Radio Frequency Identification Nordstrom uses RFID chips as part of its stock management. Browse & Order Hubs No ordering points but in August 2013 it was widely reported that Nordstrom was “considering” installing iPads in fitting rooms to improve the customer experience. M-­‐Commerce Nordstrom has a mobile-­‐compatible site and an app that aims to tie in with the in-­‐store experience. It enables customers to check size and style availability, find stores and watch blogs, videos and style tips. Mobile Payments Nordstrom is reportedly in talks with Apple to implement its newly launched Apple Pay platform. Global Department Store Retailing
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ADDITIONAL TECHNOLOGY Instagram App In 2014, Nordstrom partnered with Curalate and became the first company to launch Like2Buy, a platform that will enable a more seamless shopping experience for its customers through Instagram. When a customer sees a photo posted on Nordstrom's Instagram feed and wants to buy or learn more about the item, he or she simply clicks on the Nordstrom profile name, then clicks the link on the Nordstrom profile page. The app shows a gallery of featured products, and the shopper can select an item and go directly to Nordstrom.com to complete the purchase. Customers can also use the "My Likes" function in the gallery to curate items they love for future inspiration or to purchase at another time. Smart fitting rooms In November 2014, Nordstrom tapped eBay's tech to test fitting rooms with magic mirrors. Full-­‐
length mirrors double as web browsers and are equipped with barcode scanning to identify what is in the store, so if a customer needs an item in another size or color, she can see for herself if it is in stock and ask the associate to bring it. PRODUCT OFFER AND COMPETITION Type of Goods Fashion garments for women, men and children; accessories; jewelry; beauty. Major Competitors Gap; Coach; JCPenney; T.J.Maxx; Kohl’s; L Brands; Macy’s; Bloomingdale’s; Saks Fifth Avenue; Belk; Tiffany & Co.; V.F. Corporation; Ralph Lauren; Neiman Marcus. Global Department Store Retailing
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Company Profiles: UK Global Department Store Retailing
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Source: Marks & Spencer •
Established: 1884. •
Marks & Spencer operates midmarket general merchandise and food stores in the UK and internationally. In the UK, its general merchandise sales have been declining while its food sales have posted positive comps. •
M&S operated 798 UK stores and 45 international stores in 54 territories as of April 2014. •
Store formats: − Premier: largest, full-­‐range general merchandise and food stores. −
−
−
−
Major: large general merchandise and food stores. High Street: broad-­‐range general merchandise and food stores. Outlet: off-­‐price general merchandise and food stores. Simply Food: standalone food stores, some of which are franchised. •
Planned store openings: M&S is focusing on the Simply Food format, with 150 UK Simply Food openings planned for the three years from April 2014. Internationally, the company sees the potential for 250 new stores over the three years from April 2014, having added 37 net new international stores in 2013 (latest confirmed). Those included flagship general merchandise stores in India, the Middle East, France and the Netherlands. •
Employees: 85,813 as of April 2014. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS May 20, 2015 Posts a 6.1% rise in underlying pretax profit for the year to March 28 2015, the first increase in profit since 2011. Group sales nudge up just 0.4% for the year but profits are margins by more direct sourcing. April 2, 2015 M&S reports positive comparable sales growth in UK General Merchandise, after 14 consecutive quarters of declining comps. December 2014 Disruption at Castle Donington e-­‐commerce distribution centre contributes to 5.9% fall in online sales in 3Q. March 1, 2014 M&S hires Mark and Neal Lindsey, the architects of Next Plc’s supply chain, to boost direct sourcing capabilities. February 18, 2014 The company relaunches its customer website, bringing its web platform in-­‐house from Amazon. The relaunch requires all shoppers to register again, prompting falling e-­‐commerce sales in 1Q–3Q 2014. May 8, 2013 New e-­‐commerce distribution center opens at Castle Donington, Leicestershire. August 29, 2012 M&S opens its second-­‐largest store, at Cheshire Oaks, near Liverpool. It has dedicated click-­‐and-­‐collect desks, 70-­‐inch display screens, browse-­‐
and-­‐order hubs and in-­‐store assistants equipped with iPads. October 1, 2012 Kate Bostock departs as Executive Director of General Merchandise. September 1, 2012 Belinda Earl joins M&S as Style Director. May 2011 M&S announces plans to spend £600 million on store refits over three years. KEY MANAGEMENT Title Chairman Incumbent Robert Swannell has been Chairman since January 2011. His background is in investment banking; he spent over 30 years with Schroders/Citigroup. Chief Executive Officer Marc Bolland has been CEO since May 2010. He replaced Stuart Rose, who had been Executive Chairman and Chief Executive. Bolland joined M&S from grocery retailer Morrisons, where he had been Chief Executive since 2006. Chief Finance Officer Helen Weir joined M&S as CFO on April 1, 2015, replacing Alan Stewart, who had been poached by Tesco. Weir had been Finance Director of the John Lewis Partnership. Global Department Store Retailing
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FINANCIAL OVERVIEW Key Metrics Year to end-­‐March Sales 2013 £ Million 10,027 2014 £ Million 10,310 2015 £ Million 10,311 -­‐ UK General Merchandise 4,094 4,093 3,988 -­‐ UK Food 4,858 5,063 5,235 -­‐ International Franchised 393 404 341 -­‐ International Owned 683 750 747 Operating Profit 753 695 701 Net Profit 445 506 482 Source: Company reports/S&P Capital IQ Comparable sales Year to end-­‐March UK Comparable Sales Growth -­‐ UK General Merchandise -­‐ UK Food 2013 % -­‐1.0 2014 % 0.3 2015 % -­‐1.0 -­‐4.1 -­‐1.8 -­‐3.1 1.7 2.1 0.6 Source: Company reports/S&P Capital IQ Figure 20. Marks & Spencer UK General Merchandise Comps, 1Q 2011–4Q 2014 Source: Marks & Spencer/FBIC Global Retail & Technology Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect M&S offers customers the option to shop online and collect in-­‐store the next day. When they reach the checkout section online, it automatically defaults to the pickup option at their nearest store and shows a list of other collection options. The company is offering the service as a convenience to shoppers and as an opportunity to increase store visits. Beacons Not currently used. M&S has been investing in store environments in recent years, but given its aging customer base and more fundamental distractions elsewhere (i.e., improving performance in clothing), we doubt beacons are a priority. Radio Frequency Identification M&S uses RFID tagging across all its clothing and general merchandise. Browse & Order Hubs Using these hubs, customers can browse the website while in-­‐store and order items to be delivered or collected. They can also find product information not normally available in-­‐store and pay for purchases using the attached card machine. M-­‐Commerce M&S developed a mobile site in 2010 and has apps for clothing and general merchandise shopping. Mobile Payments The company tested an app in 2013 that allowed customers to pay by scanning a QR code. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares, kitchenware, garden products; beauty; food, wine, non-­‐food grocery items. Major Competitors Next Plc; Debenhams; House of Fraser; John Lewis department stores; Primark; BHS; Waitrose; DFS; IKEA; Homebase; Laura Ashley. Global Department Store Retailing
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DEBENHAMS Source: Debenhams.com •
Established: 1778. •
Debenhams operates midmarket family department stores in the UK and internationally. It has a more promotional stance than its biggest rivals, like House of Fraser and Marks & Spencer. •
Debenhams operated 160 UK stores and 85 international stores (including 68 international franchised stores) as of August 2014. •
Debenhams has owned the Magasin du Nord department store chain in Denmark since November 2009. •
The company has recently begun opening stores in retail parks, which is unusual for UK department stores. •
Planned store openings: Five new UK stores will open in autumn 2015, and three others will open over the following three years. The company would like to open stores in 10 other “priority markets.” •
Employees: 23,699 as of August 2014. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS August 21, 2014 First Debenhams store in a retail park opens at Cheshire Oaks. Retail-­‐
park stores at North Lincolnshire and Borehamwood open in October 2014. July 28, 2014 Company names Matt Smith its next CFO; he starts at Debenhams in January 2015. April 11, 2014 Debenhams opens its first store in Latvia, after launching in Estonia in 2013. January 2, 2014 CFO Simon Herrick quits following two profit warnings in 2013. December 31, 2013 Profit warning follows unexpectedly weak Christmas trading. Company subsequently cuts back on the number of days it runs promotions and invests in offering next-­‐day click-­‐and-­‐collect. December 12, 2013 Flagship Oxford Street store reopens following a major refit costing £40 million. March 4, 2013 Debenhams issues a profit warning, saying snowy weather cut into sales. September 5, 2011 Michael Sharp moves up from Deputy CEO to become Chief Executive. KEY MANAGEMENT Title Chairman Incumbent Nigel Northridge has been Chairman since April 2010. His background has included executive and non-­‐executive roles across a range of businesses, including tobacco firm Gallaher Group Plc. Northridge succeeded John Lovering, who retired. Chief Executive Officer Michael Sharp has been Chief Executive since September 2011, when he took over from retiring Rob Templeman. Sharp had been deputy CEO since 2008, having previously been Trading Director and then Chief Operating Officer. Chief Financial Officer Matt Smith has been CFO since January 2015. His predecessor, Simon Herrick, resigned in January 2014 and departed in February 2014 following a profit warning. Smith joined the company from baby and maternity wear retailer Mothercare, where he had been CFO. Global Department Store Retailing
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FINANCIAL OVERVIEW Key Metrics Year to end-­‐August Gross Transaction Value 2012 £ Million 2,708 2013 £ Million 2,777 2014 £ Million 2,824 2,230 2,282 2,313 Operating Profit* 175 155 129 Net Profit 125 116 87 Revenue * Before exceptionals. Source: Company reports/S&P Capital IQ Sales Mix by Product Type Year to end-­‐August 2012 2013 2014* Own-­‐Bought Core Brands % 28.9 % 28.4 % 27 Own-­‐Bought Designers at Debs 17.2 16.9 17 Own-­‐Bought International 30.6 31.4 32 Concessions 23.3 23.3 24 * Rounded data provided. Source: Company reports Comparable Sales Year to end-­‐August Comparable Sales Growth 2012 % 1.6 2013 % 2.0 2014 % 1.0 Source: Company reports/S&P Capital IQ Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Debenhams offers free click-­‐and-­‐collect service; orders can be placed until 7 p.m. and picked up in-­‐store the next day. Beacons Not currently used. Debenhams targets the midmarket family shopper, and FBIC does not see cutting-­‐edge tech like beacons being a priority. Radio Frequency After a £6 million investment, RFID tagging rolled out across all Debenhams Identification stores in 2007. The company still uses that system. Browse & Order Debenhams has interactive screens that customers can use to browse the Hubs company’s website and order items for in-­‐store delivery. M-­‐Commerce Mobile Payments When the company launched its mobile site in 2011, it was described as the first mobile package to cover all mobile technologies. Debenhams has also developed an interactive app that enables shoppers to select products for home delivery, read reviews and receive discount vouchers. In 2011, Debenhams was reportedly interested in testing in-­‐store mobile payments. The retailer is likely to adopt them as consumer uptake increases and dominant players establish themselves. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares, kitchenware; beauty; watches and jewelry; electronics and electrical goods; toys and gifts. Major Competitors Marks & Spencer; Next Plc; House of Fraser; John Lewis department stores; Primark; BHS; Matalan; Gap; IKEA; Dunelm; Boots. Global Department Store Retailing
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John Lewis Source: John Lewis •
•
Established: 1864. •
John Lewis is part of the John Lewis Partnership, which is owned by a trust on behalf of its employees; it is not a listed company. •
Sales are split between three segments, each accounting for roughly one-­‐third of total sales: Home (furniture and furnishings), Fashion (including beauty) and Electricals and Home Technology. •
The full-­‐range department stores typically stock more than 350,000 lines while JohnLewis.com offers 280,000 lines. •
As of February 2015, John Lewis operated 31 full-­‐range department stores, 10 limited-­‐line, home-­‐focused John Lewis At Home stores, a small “click-­‐and-­‐commute” store at London’s St Pancras railway station and a small store at London Heathrow airport. •
Planned store openings: A full-­‐range Birmingham store is due to open in September 2015. Eight John Lewis stores are in the pipeline, the company says. Additionally, shops-­‐in-­‐shops are set to open in summer 2015 in 11 branches of SM department stores and Our Home stores in the Philippines; shops-­‐in-­‐shops in three Robinsons department stores in Singapore are also in the works. •
Employees: 29,800 “partners” as of January 2014. John Lewis operates mainly large, upper-­‐midmarket department stores in major towns and cities in the UK and internationally. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS January 31, 2015 Company reports that click-­‐and-­‐collect has overtaken home delivery as the dominant online fulfilment option, accounting for 54% of Internet orders. October 14, 2014 John Lewis opens a 3,000 sq. ft. “click-­‐and-­‐commute” store at St Pancras railway station in London. The small store is designed to serve as a collection point for busy commuters and to offer an edited selection of products for immediate purchase. August 20, 2014 The company curbs the “free cake” element of its loyalty scheme, with free tea and cake “no longer guaranteed.” October 30, 2013 The My John Lewis loyalty scheme rolls out, offering free hot drinks and cake once a month to members, as well as occasional competitions and freebies. April 22, 2013 The company relaunches its customer website; annualized online sales reach £1 billion. February 22, 2013 John Lewis extends its click-­‐and-­‐collect options by offering its collection through the 5,000 stores that are members of the CollectPlus network. October 12, 2012 A half-­‐size (65,000 sq. ft.) department store opens in Exeter. The smaller format is designed to dovetail with multichannel shopping, with in-­‐store brose-­‐and-­‐order hubs and collection points connecting shoppers to the full range. KEY MANAGEMENT Title Chairman, John Lewis Partnership Incumbent Sir Charlie Mayfield is Chairman of the John Lewis Partnership, which owns John Lewis department stores and Waitrose supermarkets. Mayfield joined the Partnership in 2000 as Head of Business Development and was appointed Chairman in 2008. Managing Director Andy Street has been Managing Director of John Lewis department stores since 2007; he was previously Supply Chain Director at the firm. Street has worked at John Lewis for his entire career. Finance Director Rachel Osborne joined the company as Finance Director in July 2011 from facilities-­‐management company Sodexo UK and Ireland, where she was Chief Financial Officer. Global Department Store Retailing
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FINANCIAL OVERVIEW The figures for operating profit and net profit are the same at John Lewis. Key Metrics Year to end-­‐January Revenue 2013 £ Million 3,049 2014 £ Million 3,274 2015* £ Million 3,566 Operating Profit 217 226 251 Net Profit 217 226 251 * 53 weeks. Source: Company reports Comparable sales Year to end-­‐January Comparable Sales Growth* 2013 % 10.5 2014 % 6.4 2015 % 6.5 * Based on gross sales. In January 2011, the UK raised its standard rate of VAT from 17.5% to 20.0%. Source: Company reports TECHNOLOGY AND INNOVATIONS Click & Collect John Lewis offers next-­‐day click-­‐and-­‐collect service, including collection from the 300+ supermarkets of its sister chain Waitrose. In the UK, John Lewis is seen as one of the preeminent omnichannel retailers. In the year ending February 2015, click-­‐and-­‐collect overtook home delivery as the most popular fulfilment option from JohnLewis.com; 98.7% of click-­‐and-­‐collect orders were in-­‐store the following day. The importance of click-­‐and-­‐collect to the retailer is underlined by the opening of a small “click-­‐and-­‐commute” store at St Pancras railway station in London in 2014 (see image below). In addition to in-­‐store collection, customers can use the CollectPlus feature to order online and select a pickup point convenient to them, even if it’s not a John Lewis–owned store. Pickup points include garages, local newsagents and train stations. Beacons In 2014, John Lewis invested in Localz, a startup microlocation specialist, through the company’s JLab initiative. This partnership has led to the development of beacons that John Lewis will test in the near future. It intends to track customers as they enter the store and alert the click-­‐and-­‐collect department to cut down waiting times for the service. The beacons will also help shoppers move around the store in accordance with their online wish lists and most-­‐viewed items. John Lewis stores are understood to have iBeacon technology from Apple. Global Department Store Retailing
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Radio Frequency Identification Selected John Lewis stores tested RFID in 2013. More recently, the company has integrated RFID technology and 3-­‐D printing to create an in-­‐store site where people can design their own sofas. Browse & Order Hubs John Lewis offers in-­‐store screens that can be used to search for products and help customers find their way around the store. M-­‐Commerce In 2014, John Lewis was ranked as the number one UK retailer for mobile commerce. Its app allows customers to buy products, price match and find stores. Mobile Payments The company accepts in-­‐store payment via the PayPal app. John Lewis is one of the few retailers expected to launch mobile payment in 2015 in conjunction with Zapp. The idea is to simplify mobile transactions with an app that links directly to a consumer’s bank account. John Lewis’s new “click-­‐and-­‐commute” shop offers a collection point in a high-­‐foot-­‐traffic railway station—St Pancras, in London—coupled with an edited selection of merchandise for immediate purchase. Source: John Lewis Global Department Store Retailing
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PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares, kitchenware and garden products; electronics and electrical goods; beauty; watches and jewelry; sports and leisure goods; toys and gifts. Major Competitors Marks & Spencer; House of Fraser; Debenhams; Next Plc; Ted Baker; Jaeger; Mothercare; Dreams; DFS; IKEA; Habitat; Laura Ashley; Homebase; Currys-­‐PC World; Argos; Apple Store; Boots; Space NK. Global Department Store Retailing
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House of Fraser Source: Wikimedia Commons/Arpingstone •
Established: 1849. •
Privately owned House of Fraser operates upper-­‐midmarket department stores in the UK and is moving into international retailing. •
House of Fraser operated 59 UK department stores, one standalone collection-­‐only location in the UK and one international franchise store in Abu Dhabi as of April 2015. •
Planned store openings: Information is limited because the company is privately held. Three large stores are planned for China, where one store is due to open “shortly,” the company said in April 2015. Yuan Yafei, chairman of parent company Sanpower, said in May 2014 that House of Fraser planned to open four franchise stores in Russia and two in Abu Dhabi over the next two to three years, but the weakening of the Russian economy and the country’s political climate may have changed the plans for Russia. There appear to be no plans for further UK stores. •
Employees: 6,800 at House of Fraser and over 13,000 concession staff as of April 2015. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS April 28, 2015 House of Fraser appoints Colin Elliot as CFO, effective May 1. April 21, 2015 The company announces that it will open its first shops in China in 2015 and start trading online in the country. A second Abu Dhabi store will open “shortly.” House of Fraser reports strong full-­‐year results, with comps up 5.8% and EBITDA up 7.0%. Online sales grew 32% to represent 15% of sales. February 18, 2015 The company appoints Nigel Oddy CEO. May 4, 2014 Yuan Yafei, chairman of parent company Sanpower, says House of Fraser will open four franchise stores in Russia and two in Abu Dhabi over the next two to three years. April 13, 2014 Reports say that “as many as 50” stores could open in China, following the acquisition by Sanpower. April 4, 2014 House of Fraser announces the sale of 89% of the company to China’s Sanpower Group, owner of China’s oldest department store, Nanjing Xinjieko. Sale is completed on September 2 2014. The company was previously privately owned; chairman Don McCarthy held 20% and failed Icelandic banks, largely Landsbanki, owned 49%. February 4, 2014 The company relaunches its customer website based on a mobile-­‐first design that optimizes the site layout based on screen size. January 30, 2014 “Queue-­‐busting” technology for click-­‐and-­‐collect rolls out. The “virtual queuing system” from Qudini allows shoppers to check in using a touchscreen when they arrive to collect an order; customers then receive a text message when their order is ready. October 31, 2013 First overseas location, a 100,000 sq. ft. store in Abu Dhabi, opens. October 14, 2013 A dedicated click-­‐and-­‐collect floor opens in the Edinburgh store. November 23, 2011 A second dotcom store opens in Liverpool. This store closes in 2013. October 21, 2011 House of Fraser opens its first small “dotcom collection-­‐only” store (it facilitates online orders and carries no merchandise) in Aberdeen. Global Department Store Retailing
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KEY MANAGEMENT Title Chairman Chief Executive Officer Chief Financial Officer Incumbent Frank Slevin was appointed Executive Chairman in February 2015, replacing Don McCarthy, who retired following the 2014 acquisition by Sanpower. Nigel Oddy became CEO in February 2015, following the departure of John King after eight years at the helm. Oddy was previously Chief Operating Officer at House of Fraser. Colin Elliot has been CFO since May 1, 2015. He replaced Mark Gifford, who had been CFO since November 2007. Gifford will remain with the business until September 2015 to ensure a smooth transition. FINANCIAL OVERVIEW Key Metrics Year to end-­‐January Gross Transaction Value Revenue Operating Profit*** Net Profit 2013* £ Million 1,152 696 16 -­‐18 2014 £ Million 1,192 732 22 -­‐2 2015** £ Million 1,300 N/A N/A N/A * Restated. ** 53 weeks. Rounded data from company press release. *** Before exceptionals. Source: Company reports Sales Mix by Product Type Year to end-­‐January Private Label Brands Own-­‐Bought Brands Concessions 2014 % 15 33 53 Source: Company reports Comparable sales Year to end-­‐January Comparable Sales Growth 2013 % 3.3 2014 % 3.6 2015 % 5.8 Source: Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect House of Fraser offers a free click-­‐and-­‐collect service, with orders received by 10 p.m. available the following day. Using CollectPlus, which charges a fee, shoppers can pick up goods at convenient destinations such as train stations, local shops and post offices. Beacons At the end of 2014, House of Fraser tested beacon technology in selected store windows. The objective was to communicate with shoppers via smartphone and give them information on the products displayed in the windows, including prices, styling ideas and a link to purchase. House of Fraser stores are understood to have iBeacon technology from Apple. Radio Frequency Identification House of Fraser has used RFID tagging technology since 2004. It is now looking to implement it in the click-­‐and-­‐collect process to cut waiting times. Browse & Order Hubs The company has interactive platforms in-­‐store that shoppers can use to browse products and source information. In 2014, House of Fraser tested a new concept and offered an online shopping service and buy-­‐and-­‐collect point in a Caffè Nero coffee shop, where customers were given the use of a House of Fraser tablet. M-­‐Commerce House of Fraser launched a new, mobile-­‐first m-­‐commerce site in 2014 that is easier than the previous offering for shoppers to navigate and use. Mobile Payments The company will launch Zapp in 2015 to offer mobile payment options. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares, kitchenware; beauty; watches and jewelry; electronics and electrical goods; toys and gifts. Major Competitors Debenhams; John Lewis department stores; Selfridges; Marks & Spencer; Next Plc; Zara; Ted Baker; Dreams; DFS; IKEA; Habitat; Laura Ashley; Homebase; Currys-­‐PC World; Argos; Boots; Space NK. Global Department Store Retailing
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Company Profiles: France Global Department Store Retailing
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Source: Wikimedia Commons/Benh LIEU SONG •
Established: 1894. •
Privately owned Galeries Lafayette operates upscale department stores in France and, increasingly, internationally. •
Galeries Lafayette operates 59 department stores in France and one each in Berlin, Beijing, Casablanca, Dubai and Jakarta as of April 2015. •
Galeries Lafayette Group also owns the BHV Marais department store chain, which has four stores, all in France. •
Planned store openings: A Milan flagship was announced in June 2014, and a new Paris store on the Champs-­‐Elysées was announced in November 2014. The company is reportedly looking at new opportunities in China. •
Employees: over 15,000. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS November 23, 2014 The company announces that a new store on the Champs-­‐Elysées is scheduled to open in 2018. September 13, 2014 Galeries Lafayette opens its first outlet store, at the One Nation Paris shopping mall. July 18, 2014 An in-­‐store trip-­‐planner app, designed to help customers plan their shopping trips, launches. January 15, 2014 CEO Nicolas Houzé fires most of the top management committee. March 20, 2013 Nicolas Houzé becomes CEO, replacing Paul Delaoutre, who joined the company in 2003. September 22, 2014 The company announces plans for a major overhaul of its store in Marseille. October 17, 2013 A new Beijing store opens, 15 years after the company closed its previous Chinese store. The new location is a 50/50 joint venture with Hong Kong brand management firm I.T. The parties are reportedly looking for further opportunities to open stores in China. June 26, 2013 Galeries Lafayette reaches an agreement to sell its half share of grocery/mixed-­‐goods chain Monoprix to Groupe Casino for €1.175 billion. April 12, 2013 The company announces plans to offer click-­‐and-­‐collect in 10 of its stores. October 27, 2010 The Berlin store tests MasterCard PayPass contactless payment. KEY MANAGEMENT Title Chairwoman of the Supervisory Board Incumbent Ginette Moulin is Chairwoman and the majority shareholder of parent firm Galeries Lafayette Group. The 88-­‐year-­‐old Moulin is the granddaughter of one of the co-­‐founders of Galeries Lafayette. Chief Executive Officer Philippe Houzé has been CEO and Chairman of the Management Board since 2005. Houzé is married to the heiress of the Galeries Lafayette Group, Christiane Moulin. President of Department Store Division Nicolas Houzé has been CEO since March 2013. His father is Philippe Houzé, and his grandmother is Ginette Moulin. Prior to taking this role, Houzé was Deputy Managing Director of the Department Store Division. Chief Financial Officer Ugo Supino is CFO. He was CEO at human resources firm Aldeta until June 2010. Global Department Store Retailing
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FINANCIAL OVERVIEW Key Metrics Because Galeries Lafayette is a private firm, disclosure is limited—comps, for instance, are not available. The latest available information is for 2013. Company subsidiaries include the travel division, Galeries Lafayette Voyages. Year to end-­‐December 2011 € Million 2012 € Million 2013 € Million 1,546 1,536 1,493 1,064 1,243 1,310 Grands Magasins Galeries Lafayette 56 58 59 Galeries Lafayette Deutschland 39 40 40 4 4 4 2,710 2,880 2,905 429 361 310 Magasins Galeries Lafayette Galeries Lafayette Haussmann Galeries Lafayette Voyages Total BHV Totals may not sum due to rounding. Source: S&P Capital IQ/Company reports/FBIC Global Retail & Technology analysis TECHNOLOGY AND INNOVATIONS Click & Collect Galeries Lafayette offers click-­‐and-­‐collect service as well as delivery options for tourists. Beacons Beacon technology is used to add functionality to the company’s app, which was launched in 2014. Radio Frequency Identification The department store tested RFID payment technology almost 10 years ago for six months. Browse & Order Hubs In-­‐store screens are used to communicate marketing information and display images. M-­‐Commerce Galeries Lafayette app launched an in-­‐store geo-­‐location app in 2014, combining wifi and Bluetooth technology to identify shoppers’ location when they are in the flagship Haussmann store. Shoppers can plan their route through the store based on brands they want to see and find their exact location on 3-­‐D maps. The app is offered in 14 languages. Mobile Payments Not available. Galeries Lafayette in Berlin launched contactless card payment in conjunction with MasterCard PayPass in 2010. Global Department Store Retailing
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The informational site for the Paris Haussmann store is offered in multiple languages, but the main transactional site is not. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares, kitchenware; watches and jewelry; beauty; gourmet food. Major Competitors Printemps; Le Bon Marché; Kookai; BRÉAL; Zara; La City; Jacadi; Armand Thiery; Marionnaud; Sephora; Nocibé/Douglas; Yves Rocher; IKEA. Global Department Store Retailing
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Source: Printemps •
Established: 1865. •
Qatari-­‐owned Printemps operates upscale department stores, largely in France. It has moved more upmarket in recent years, partly as a result of pursuing tourist shoppers, and this has included the opening of a dedicated luxury store in Paris. •
Printemps operates 21 department stores in France and a small number of international stores, including locations in Tokyo, Jeddah, Shanghai and Andorra. •
Printemps also operates the multichannel youth-­‐fashion fascia Citadium, which has four stores and a transactional website. It owns the fashion pure play PlaceDesTendances.com. •
Planned store openings: No stated intentions. Information is limited because Printemps is privately owned. •
Employees: 3,500. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS 2015 Printemps marks its 150th anniversary. November 8, 2014 The company announces that it hopes e-­‐commerce will generate at least 10% of revenues within three to four years. However, as of April 2015, Printemps.com is still largely non-­‐transactional, with just a limited selection of 150th-­‐anniversary special items available for purchase online. October 16, 2014 Printemps acquires PlaceDesTendances.com, a fashion pure play, to bolster its omnichannel presence. January 15, 2014 A new 20,000 sq. ft. luxury-­‐focused store opens in the Carrousel du Louvre, a mall adjacent to Paris’s Louvre Museum. April 8, 2013 Qatari investors agree to buy Printemps by acquiring parent company Borletti Group, through Luxembourg holding company Divine Investments. Ultimate ownership is not revealed, although it is later reported to be the Qatar Investment Authority, a sovereign wealth fund. Unions ask a French court to stop the sale, which is temporarily halted. The sale is reportedly completed on August 1, 2013. KEY MANAGEMENT Title Chairman/Chief Executive Officer/President Incumbent Paolo de Cesare has served as CEO, Chairman and President since 2007. De Cesare was previously the President of Global Skin Care at Procter & Gamble Co., where he worked for 24 years. Chief Financial Officer Not disclosed. FINANCIAL OVERVIEW Key Metrics Comps are not available for Printemps, which is privately held. Year to end-­‐March Revenue 2012 € Million 1,131 2013 € Million 1,198 2014 € Million 1,249 Operating Profit 40 33 N/A Net Profit 25 50 N/A Source: S&P Capital IQ/Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Printemps offers free click-­‐and-­‐collect service, but online shopping is restricted to PlaceDesTendances.com and a limited “150 Years” shop within Printemps.com. Beacons The company launched a mobile app in 2014 that uses beacon technology to help customers navigate the store and to alert shoppers and passers-­‐by to daily activities. Radio Frequency Identification Not currently used. Like other retailers, Printemps could adopt RFID technology in future years if the benefits become apparent. Browse & Order Hubs As Printemps has shifted more upmarket, and as it chases tourist shoppers in its Paris store, browse-­‐and-­‐order hubs appear less relevant. They look to be more applicable to stores outside Paris, which target local shoppers. M-­‐Commerce The main Printemps.com site is non-­‐transactional, and the company offers no mobile commerce option. In conjunction with luxury brand KENZO, Printemps launched an app in 2014 that allowed users to preview exclusive new lines in KENZO’s pop-­‐up shop. Since then, the retailer has also launched a store-­‐specific app that enables shoppers to navigate the store. Mobile Payments Not currently used. That may change as consumer uptake increases and dominant players emerge, but Printemps has been slow to move into related areas like e-­‐commerce. The latest iteration of the Printemps mobile app focuses on store navigation rather than mobile commerce. Global Department Store Retailing
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PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, housewares and kitchenware; watches and jewelry; beauty; gourmet food. Major Competitors Galeries Lafayette; Le Bon Marché; BHV Marais; Kookai; BRÉAL; Zara; La City; Jacadi; Armand Thiery; Marionnaud; Sephora; Nocibé/Douglas; Yves Rocher; IKEA. Global Department Store Retailing
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Company Profiles: Germany Global Department Store Retailing
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Source: Metro Group •
Established: 1879. •
Galeria Kaufhof operates midmarket department stores in Germany and Belgium. It offers a broad product mix, but in recent years cut down its offering in electronics to focus more on apparel. •
As of September 2014, Galeria Kaufhof operated 105 department stores in Germany and 15 Galeria Inno stores in Belgium. The company also operates 17 Sportarena and Wanderzeit sports stores in Germany. •
Planned store openings: None announced or expected. Given low top-­‐line growth and parent company Metro Group’s interest in disposing of Galeria Kaufhof, we expect no new openings in Germany. Metro Group has given no indication that it will open stores in international markets, and we think the Galeria Kaufhof format is not distinctive or premium enough to target markets like China. •
Employees: 21,115 full-­‐time equivalents as of September 2014. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS April 28, 2015 Galeria Kaufhof is up for sale and a bidding war progressing, according to WWD.com, with Canada’s Hudson’s Bay said to be an interested party. April 15, 2015 Galeria Kaufhof and other big retailers such as Real, Obi, Rewe and Penny found GS1 Germany, a collaboration between retailers and mobile network operators to launch near-­‐field-­‐communication-­‐based (NFC-­‐based) mobile payment in Berlin. December 16, 2014 Metro Group says it has dropped plans to sell Galeria Kaufhof, following talks with new Karstadt owner Rene Benko. November 12, 2014 Inno.be, a transactional website for the Belgian market, launches. October 3, 2014 Olivier Van den Bossche is appointed CEO of Galeria Inno in Belgium, replacing Lovro Mandac, who led Inno for nearly 20 years. August 13, 2014 Galeria.cn, an informational website for Chinese consumers, launches. April 4, 2014 Galeria Kaufhof establishes a separate management department for multichannel retail, to integrate its online and store-­‐based operations. January 23, 2014 The company announces that it will equip in-­‐store staff with 1,100 HP tablet computers by the middle of the year. December 16, 2013 Galeria Kaufhof is one of the first companies to accept Vodafone’s SmartPass, an NFC-­‐based mobile payment system. November 18, 2013 All stores are equipped with contactless card payment terminals. September 30, 2013 Metro Group remains interested in selling the Galeria Kaufhof chain, CEO Olaf Koch tells the press. March 18, 2013 After management restructuring, Metro Group CFO Mark Frese becomes head of Galeria Kaufhof. Olaf Koch, previously head of Galeria Kaufhof and Metro Group CFO, takes responsibility for the business segment with the highest sales and earnings, Metro Cash & Carry. January 18, 2012 Metro Group halts the planned sale of the Galeria Kaufhof chain, saying possible buyers were struggling to raise funds. November 2, 2011 Metro Group says Galeria Kaufhof is for sale, and Signa Holding and private investor Nicolas Berggruen are possible buyers. October 7, 2011 Galeria Kaufhof relaunches its website with expanded range. 2011 The company reduces its electronics ranges to concentrate on clothing, footwear and accessories. Global Department Store Retailing
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KEY MANAGEMENT Title Incumbent Chief Executive Officer, Metro Group Olaf Koch has been CEO (technically Chairman of the Management Board) of parent company Metro Group since January 2012. He previously took responsibility for Galeria Kaufhof as Chairman of its Supervisory Board until a restructuring in 2013. Chairman of the Supervisory Board, Mark Frese became Chairman of the Supervisory Board Galeria Kaufhof; Chief Financial on June 28, 2013, following a restructuring. A member of Officer, Metro Group the Supervisory Board of Galeria Kaufhof since January 2012, Frese is also CFO of Metro Group. FINANCIAL OVERVIEW Key Metrics Parent company Metro Group does not break out net profit for Galeria Kaufhof. Year to end-­‐December/end-­‐September* Revenue 2012 € Million 3,092 2013* € Million 3,082 2014 € Million 3,099 136 214 193 Operating Profit ** * Year-­‐end changed from December to September in 2013. 2013 data is pro-­‐forma 12-­‐months data. ** Before exceptionals. Source: Company reports Comparable Sales Year to end-­‐December/end-­‐September* Comparable Sales Growth* 2012 % 2013* % 2014 % -­‐0.6 0.9 0.5 * Year-­‐end changed from December to September in 2013. 2013 data is nine-­‐month data. Source: Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect The company offers the option to collect or return online purchases in-­‐
store, but the website does not prominently display or explain that information. Beacons Not currently used. Could potentially be a future investment as Galeria Kaufhof seeks to ramp up its multichannel proposition, but given that the company only recently introduced tablets for in-­‐store ordering, we do not see cutting-­‐edge tech as a priority. Radio Frequency Identification The company first tested RFID on clothing tags in 2007 in an effort to improve customer service and increase availability through better visibility. The trial allowed Kaufhof to determine which garments were tried on together and to see how positioning and presentation impacted sales. Understood to currently be using RFID tagging. Browse & Order Hubs In 2014, the company distributed 1,100 tablet computers to store staff to help shoppers browse and buy from the Galeria Kaufhof website. M-­‐Commerce Galeria Kaufhof has a mobile-­‐optimized site but no transactional app. Mobile Payments In 2013, the company began accepting payment via Vodafone’s NFC-­‐
enabled mobile wallet and prepaid SmartPass. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; watches and jewelry; home furnishings, housewares, kitchenware; beauty; electronics and electrical goods; sports and leisure goods; toys and gifts; food and wine. Major Competitors Karstadt; Breuninger; C&A; Esprit; TK Maxx; s.Oliver; Peek & Cloppenburg (Düsseldorf); Peek & Cloppenburg (Hamburg); Ernstings Family; Tom Tailor; Primark; H&M; Douglas Perfumery; IKEA; Media-­‐Saturn; Tchibo; Intersport; Sport 2000; Amazon.de; Zalando.de. Global Department Store Retailing
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Karstadt Source: Wikimedia Commons/Bernd Hutschenreuther •
Established: 1881. •
Privately owned Karstadt operates midmarket department stores in Germany. Karstadt offers a broad product mix, but like rival Galeria Kaufhof, it has pared back its electronics offer in recent years. •
Karstadt has struggled with profitability and revenue growth for a number of years, and has changed hands for a nominal €1 twice in the past five years. •
Karstadt operated 83 department stores in Germany at the time of its sale to Signa in August 2014. •
Planned store openings: Store closures are more likely in the immediate future. Six have been confirmed, and more may follow as the company struggles to restore profitability. Some reports have put total potential store closures at between 20 and 30. •
Employees: reportedly 17,000 as of August 2014. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS May 12, 2015 February 23. 2015 February 2, 2015 October 23, 2014 October 23, 2014 August 28, 2014 August 15, 2014 July 7, 2014 December 12, 2013 September 16, 2013 June 9, 2013 July 17, 2012 June 5, 2012 November 24, 2010 September 3, 2010 Following confirmation that the company plans to close six stores, five additional store closures are planned, according to WWD.com. Karstadt announces a breakthrough in negotiations with trade unions on job cuts, including the creation of a transitional employment company to train employees made redundant and to structure redundancies in the “most socially responsible manner possible.” Karstadt says it plans to restructure its workforce, allowing it to pay shop staff lower wages. Karstadt is a founding member of Shopkick, a beacon-­‐enabled incentive program, when it launches in Germany. Stephan Fanderl is appointed CEO; Fanderl had previously been Chairman of the supervisory Board. Karstadt announces turnaround plans based on three pillars: increase earnings, reduce staff and operating costs and improve the profitability of the store portfolio. Six store closures in 2015 are outlined. Chief Operating Officer Rüdiger Hartmann leaves the company. Nicolas Berggruen sells Karstadt to Austrian group Signa for €1, the same price he paid in 2010. Eva-­‐Lotta Sjöstedt resigns as CEO after just five months, citing a lack of investment and support for her strategy. The company announces the appointment of Eva-­‐Lotta Sjöstedt as CEO, effective February 23. Sjöstedt was previously deputy global vice president of IKEA Group. Austrian property group Signa acquires 75% of Karstadt’s premium department stores and sports stores. The sale includes KaDeWe (Berlin), Alsterhaus (Hamburg), Oberpollinger (Munich) and 28 Karstadt Sports stores. Nicolas Berggruen retains a 25% stake. Both parties agree to invest €300 million in the Karstadt group as a whole, although Berggruen receives no payment from the “sale.” Karstadt announces that Chief Executive Andrew Jennings’s contract will not be renewed when it expires at the end of 2013. The company says it will cut 2,000 jobs by the end of 2014. Karstadt launches a non-­‐transactional app for iPhone and iPad. By April 2015, its mobile app is transactional. British retailer Andrew Jennings is named CEO, effective January 1, 2011. A court-­‐approved takeover led by private investor Nicolas Berggruen rescues the chain from insolvency. Parent company Arcandor had filed for bankruptcy protection in 2009. Global Department Store Retailing
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KEY MANAGEMENT Title Chairman of the Supervisory Board Incumbent Wolfram Keil was appointed Chairman of the Advisory Board in October 2014, after Stephan Fanderl became Chief Executive Officer. Keil has been a board member since September 2014. Chief Executive Officer Stephan Fanderl became CEO in October 2014. Kai-­‐Uwe Weitz, the company’s Personnel Director, and Miguel Müllenbach, CFO, had temporarily filled the post following the departure of Eva-­‐Lotta Sjöstedt in July 2014. Fanderl had been Chairman of the Advisory Board of Karstadt since October 2013. Chief Financial Officer Miguel Müllenbach has been CFO since December 2012. FINANCIAL OVERVIEW Key Metrics The latest company accounts run to September 2013. Because Karstadt is privately owned, comps are not available. Year to end-­‐September Revenue Operating Profit Net Profit 2012 € Million 2,936 2013 € Million 2,673 2014 (Est.) € Million 2,569 -­‐38 -­‐122 N/A -­‐158 -­‐131 N/A Source: S&P Capital IQ/Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect The company offers free click-­‐and-­‐collect service. Beacons Beacons are used as part of the Shopkick service, which involves a mobile app that offers redeemable points for taking specified actions in physical stores, such as entering a store, scanning a product or making a purchase. Karstadt was among the first German retailers to sign up for Shopkick; Germany was Shopkick’s first market outside the US. Radio Frequency Identification Karstadt first tested RFID on clothing tags in 2007 in order to improve the efficiency of its operations. Understood to currently be using RFID tagging. Browse & Order Hubs Not currently used. Likely to be introduced in the future as Karstadt follows domestic competitors like Galeria Kaufhof and international peers like Marks &Spencer. M-­‐Commerce The company has a transactional app. Mobile Payments Like Galeria Kaufhof, Karstadt began accepting payment via Vodafone’s NFC-­‐
enabled mobile wallet and prepaid SmartPass in 2014. The mobile app is one competitive advantage Karstadt has over main rival Galeria Kaufhof. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; watches and jewelry; home furnishings, housewares, kitchenware; beauty; household electrical goods; sports and leisure goods; wine. Major Competitors Galeria Kaufhof; Breuninger; C&A; Esprit; TK Maxx; s.Oliver; Ernstings Family; Peek & Cloppenburg (Düsseldorf); Peek & Cloppenburg (Hamburg); Tom Tailor; Primark; H&M; Douglas Perfumery; IKEA; Media-­‐Saturn; Tchibo; Intersport; Sport 2000; Amazon.de; Zalando.de Global Department Store Retailing
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Company Profiles: China Chongqing Department Store Co. Ltd Global Department Store Retailing
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Source: shanghai.ugo.cn •
Established: 2003. •
Shanghai Bailian Group is a large state-­‐owned enterprise headquartered in Shanghai. •
The company operates high-­‐end department stores. •
Shanghai Bailian Group operates more than 5,000 stores, including department stores, convenience stores and supermarkets, in more than 20 provinces across China. It operated 45 department stores as of 2013. •
Planned store openings: An Outlets will open in Nanjing in 2015. The department store says it expects to consolidate its position and expand to the whole of China. •
Employees: around 200,000. MAJOR EVENTS OF THE PAST FIVE YEARS April 21, 2015 Shanghai Bailian Group’s department stores launched VIP sales on April 17, 2015; it recorded 190 million yuan in sales in 16 hours. April 20, 2015 The company announces its intention to non-­‐publicly issue around 260 million shares to raise money to buy Nanjing Bailian Outlets Plaza and Bailian Chuansha Shopping Mall and supplement working capital. January 1, 2015 Shanghai Bailian Group says it will transfer its 90% stake in Home Mart to its parent company Bailian Group in cash for 450 million yuan to improve asset structure and strengthen profitability. March 1, 2012 Simon Property Group and Bailian Group agree to jointly develop a Premium Outlet Center in China. Global Department Store Retailing
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November 4, 2010 Shanghai Friendship Group Inc. announces that it will buy the department store chain Shanghai Bailian Group Co. in a stock swap, a result of a government initiative pushing state-­‐owned companies to merge. October 16, 2006 Shanghai Bailian Group Co. combines four Shanghai companies to become the country's biggest retailer. KEY MANAGEMENT Title Chairman Incumbent Zhen Cheng Huang is Chairman of the Supervisory Board of Shanghai Bailian Group Co. Ltd.; Chairman of Shanghai Friendship South Shopping Mall Co. Ltd.; and Independent Non-­‐Executive Director at Mission Capital Holdings Ltd. He was previously President of Shanghai Bailian Group Co. Ltd. and Chairman of Shanghai Hongqiao Friendship Shopping Center Co. Ltd. President and Director Guo Ding Li is President and Director. He was previously a Director and Vice President. Chief Financial Officer Xiao Chun Dong is Chief Financial Officer and Secretary. He is on the Board of Directors of Haitong Securities Co., Ltd. He was previously Chief Financial Officer and Secretary of Shanghai Bailian Group Co. Ltd. and Secretary of Bailian Group Co. Ltd. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐December Group Total Sales 2012 RMB Million 2013 RMB Million 2014 RMB Million 49,263 51,926 51,164 Operating Profit 1,974 1,725 1,534 Net Profit 1,170 1,036 1,046 2012 RMB Million 15,408 2013 RMB Million 17,031 2014 RMB Million 17,480 2,884 3,103 3,163 Source: Company reports/4-­‐traders Financials of Department Store Operations Year to end-­‐December Department Store Sales Gross Profit, Department Store Operations Source: Company reports/4-­‐traders Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Shanghai Bailian Group developed click-­‐and-­‐collect capabilities early in 2010 to take advantage of its large network of retail outlets. Beacons The company has not yet developed the beacon technology. FBIC forecasts that Tencent will lead beacon deployment, with its WeChat application as the medium. Radio Frequency Bailian uses RFID for operations management. Identification Browse & Order Not currently used. Hubs M-­‐Commerce Blemall is the platform for e-­‐commerce and m-­‐commerce. Mobile Payments Shanghai Bailian Group does not currently support mobile payments. An updated version of the mobile website will include a payment function. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; groceries, baked goods and gourmet food; meat and seafood; fresh fruits and vegetables; household articles; beauty. Major Competitors Beijing Hualian Department Store Co., Ltd; Beijing Hualian Hypermarket Co., Ltd.; Beijing Wangfujing Department Store (Group) Co., Ltd.; Fujian Dongbai (Group) Co., Ltd.; Shanghai Join Buy Co., Ltd.; Shanghai New World Co., Ltd.; Shanghai Yimin Commercial Co., Ltd. Co. Global Department Store Retailing
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Source: panoramio.com •
Established: 1992. •
Dashang Co., Ltd., operates department stores, supermarkets and electronics stores. •
Its department store brands are MYKAL, New Mart, KINGSON and Modern Integrated Department Stores. •
The department store brands mainly serve the middle market. •
Dashang Co., Ltd., has 280 chain stores across China, of which 200 are department stores. •
Planned store openings: In 2015, Dashang will open one department store, in Shenyang. •
Employees: around 230,000. MAJOR EVENTS OF THE PAST FIVE YEARS May 7, 2015 February 11, 2015 January 8, 2015 Dashang uses its 51tiangou platform to accelerate its online-­‐to-­‐
offline (O2O) strategy. Dashang opens a large (over 100,000 sq. m.) New Mart department store in Zhengzhou. Dashang department store sales reach 1.7 billion yuan, breaking the record for Chinese department store industry. Global Department Store Retailing
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December 19, 2014 December 16, 2014 August 2, 2013 Dashang Group announces that it will collaborate with Xinhua News Agency, CUP, Chow Tai Fook, Coca-­‐Cola and ATMU Group to create an e-­‐commerce “ecosystem”. Intime Department Store (Group) Co., Ltd., says it plans to sell its equity and shareholder loans in Shenyang Intime, a subsidiary of the group, for 564 million yuan to Dashang. Dashang subsidiary MYKAL signs with Jiamusi Chinese center to open a shopping mall there. KEY MANAGEMENT Title Chairman Incumbent Gang Niu is Chairman of Dashang Co., Ltd., Dalian Dashang Group Co., Ltd., and Dalian Dashang International Co. Ltd. President, Director Wang Zhimin has been President and Director of Dashang Co., Ltd., since April 24, 2013. She had previously been vice president. Earlier, she was Chairman of the Board and General Manager of a Fushun-­‐based department store and Chairman of the Board of six other companies. Vice Chairman of the Board Lu Lu has been Vice Chairman of the Board since April 24, 2013. She had been President and General Manager of Dashang’s New Mart brand in Shenyang Region. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐December Total Group Sales Operating profit Net profit 2012 RMB Million 31,859 2013 RMB Million 33,747 2014 RMB Million 32,206 1,326 1,671 1,753 977 1,179 1,228 2012 RMB Million 19,379 2013 RMB Million 20,484 2014 RMB Million 19,339 3,106 3,386 3,216 Source: Company reports/4-­‐traders Financials of Department Store Operations Year to end-­‐December Department Store Sales Gross Profit, Department Store Operations Source: Company reports/4-­‐traders Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Dashang offers click-­‐and-­‐collect through its e-­‐commerce platform 51tiangou. Customers can collect goods from more than 200 Dashang-­‐owned department stores and supermarkets. Beacons Not currently in use. FBIC projects that Tencent will lead beacon deployment, with its WeChat application as the medium. Radio Frequency Not currently in use. As with other retailers, Dashang could adopt it in the Identification future if the benefits become apparent. Browse & Order Not currently in use. This technology tends to be unpopular in China. Hubs M-­‐Commerce Dashang launched the 51tiangou platform in 2014, with the app version and the mobile website version. Mobile Payments Available using TenPay, UnionPay and Dashang VIP card. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; cosmetics; watches; appliances; home improvement products; housewares; food. Major Competitors Bailian Group Co., Ltd.; Beijing New Cooperation Supermarket Chain Company; Beijing Wangfujing Department Store (Group) Co., Ltd.; Carrefour, China; Changchun Eurasia Group Co. Ltd.; China Resources Vanguard Co. Ltd.; Hefei Department Store Group Co. Ltd.; RT-­‐MART Limited Shanghai; Shanghai Bailian Group Co., Ltd.; Wal-­‐Mart (China) Investment Co., Ltd.; Wumart Stores, Inc.; Zhongbai Holdings Group Co., Ltd.; New World Department Store China Limited. Global Department Store Retailing
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Chongqing Department Store Co. Source: nipic.com •
Established: 1950. •
Chongqing Department Store Co., Ltd., operates department stores and supermarkets. It retails and wholesales commercial goods. •
As of 2013, the company operated 292 department stores under the names Chongqing Department Store and New Century Department Store. •
The department stores serve mainly the middle market. •
Planned store openings: The company is expanding to Sichuan, Guizhou and Hubei provinces. It plans to keep opening more stores where their scale is still small in that province. •
Employees: over 90,000. Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS March 16, 2015 Chongqing Department Store Co., Ltd., says it will provide a loan guarantee of 300 million yuan for a wholly owned Chongqing-­‐based information technology subsidiary. December 18, 2014 Chongqing Department Store completes acquisition of 100% stake in a Chongqing-­‐based information technology company and a Chongqing-­‐
based e-­‐sales company. November 18, 2014 Horizon Lake View Investment Limited says it has decreased its stake in Chongqing Department Store from 10.64% to 5.64%. October 28, 2014 The company says it will set up and hold a 40% stake in a joint venture with a Chongqing Agricultural Commodity Exchange company and a Chongqing-­‐based investment company. October 27, 2014 Chongqing Department Store says it will change its accounting policy because of new accounting standards announced by the Chinese Ministry of Finance. September 28, 2014 Chongqing Department Store opens a new Xinshijie Department Store in Nanchuan. August 8, 2014 Chongqing Department Store announces that it will open its New Century Sunshine shopping mall in September. August 1, 2014 Chongqing Department Store publicizes its plans to set up a company in Hong Kong for cross-­‐border e-­‐commerce development. KEY MANAGEMENT Title Chairman Incumbent He Qian is appointed as chairman since 2014. He has been the general manager of the Chongqing General Trading Group, the holding company of Chongqing Department Store, since 2011. A former university professor, he is also is the Party Committee Secretary of Chinese government. Director Gao Ping has been Director of Chongqing Department Store Co., Ltd., since January 12, 2006. He is also Deputy General Manager of Chongqing General Trading (Group) Co., Ltd., where he previously served as Assistant General Manager, and Head of General Office. He has also been Head of General Manager's Office at a chemical company. Chief Financial Officer Zhou Yongcai has been Chief Financial Officer since September 10, 2011. He was previously Chief Financial Officer of another department store company. Global Department Store Retailing
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FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐December Group Total Sales 2012 RMB Million 28,117 2013 RMB Million 30,247 2014 RMB Million 30,140 Operating Profit 815 915 584 Net Profit 697 783 492 Source: Company reports Financials of Department Store Operations Year to end-­‐December Department Store Sales 2012 RMB Million 13,327 2013 RMB Million 14,642 2014 RMB Million 13,854 2,027 2,357 2,191 Gross Profit, Department Store Operations Source: Company reports TECHNOLOGY AND INNOVATIONS Click & Collect Not currently used. Beacons Not currently in use. FBIC predicts that Tencent will lead beacon implementation with its WeChat application as the medium. Radio Frequency Not currently used. Like other retailers, Chongqing Department Store could Identification adopt RFID in the future once the benefits become apparent. Browse & Order Not currently in use. This model tends to be unpopular in China. Hubs M-­‐Commerce Chongqing Department Store has WeChat microshops and makes some discount coupons available. The e-­‐commerce platform “cbmall,” launched by Chongqing Department store, does not have a compatible mobile version. Mobile Payments Not currently in use. Global Department Store Retailing
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PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; watches; appliances; home improvement merchandise and housewares; groceries, baked goods and gourmet food; fresh fruit and vegetables; cosmetics. Major Competitors Bailian Group Co., Ltd.; Beijing New Cooperation Supermarket Chain Company; Beijing Wangfujing Department Store (Group) Co., Ltd.; Carrefour, China; Changchun Eurasia Group Co. Ltd.; China Resources Vanguard Co. Ltd.; Hefei Department Store Group Co. Ltd.; RT-­‐MART Limited Shanghai; Shanghai Bailian Group Co., Ltd.; Wal-­‐Mart (China) Investment Co., Ltd.; Wumart Stores, Inc.; Zhongbai Holdings Group Co., Ltd.; New World Department Store China Limited. Global Department Store Retailing
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Company Profiles: Japan Global Department Store Retailing
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Source: Wikipedia.org •
Established: Mitsukoshi, 1673; Isetan, 1886. •
Isetan Mitsukoshi operates 27 premium regional department stores in business areas in Japan, mainly in the Tokyo metropolitan area. •
The company plans to further expand its e-­‐commerce presence. •
As of March 31, 2014, Isetan Mitsukoshi operated 38 overseas stores in Southeast Asia, which contributed to 6.6% of total sales revenue for FY2013. •
Planned store openings: The company is diversifying to small and medium-­‐sized stores, entering residential areas by opening 63 stores, and opening five outlets. Nine stores are planned inside railway station buildings and shopping centers. •
Employees: 10,155 as of March 31, 2014 (department stores only). Global Department Store Retailing
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MAJOR EVENTS OF THE PAST FIVE YEARS March 23, 2015 Isetan Mitsukoshi introduces “majotae” hemp fabric items jointly developed with Avex Group as part of the “JAPAN SENSES” campaign for spring 2015. March 19, 2015 Short film about Isetan Mitsukoshi “JAPAN SENSES” campaign officially launches. January 15, 2015 Isetan Mitsukoshi Group PR short film debuts. July 2014 The Mitsukoshi Nihombashi main store features an exhibition telling the story of the Prince of Monaco’s wedding. December 2013 The “Shopping in Japan Campaign,” a joint effort with the Japan Tourism Agency’s Visiting Japan promotion, starts. March 2012 A series of exhibitions supports the revival of northeastern Japan after the 2011 earthquake. May 2011 Isetan Mitsukoshi announces a pay cut for all executive officers due to losses following the March 2011 earthquake. KEY MANAGEMENT Title Chairman Chief Executive Officer General Manager (Finance) Incumbent Kunio Ishizuka has been Chairman of Isetan Mitsukoshi Holdings since April 2011. He joined Mitsukoshi in 1972 and served as CEO of Isetan Mitsukoshi from February 2006 to June 2009. Hiroshi Ohnishi has been CEO since June 2009. He joined Isetan in 1979 and became CEO of Isetan Mitsukoshi Holdings in January 2012. Shigeki Yamazaki. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Financial data for the department stores division is not consistently available. But in the year ending March 2014, department store revenues were ¥1,201 billion, according to S&P Capital IQ. Year to end-­‐March Revenue 2013 ¥ Billion 1,236.3 2014 ¥ Billion 1,321.5 2015 ¥ Billion 1,272.1 Operating Profit 26.6 34.6 33.1 Net Profit 25.3 21.2 29.9 Source: S&P Capital IQ/Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Customers confirm availability at a specific store before purchase, and the click-­‐and-­‐collect system assigns a pick-­‐up date. Beacons The Isetan Shinjuku store launched an experimental Beacon project for iPhone users on April 29, 2015; Android launch is scheduled for autumn 2015. Radio Frequency Isetan Mitsukoshi has used RFID on price tags for women’s shoes since 2006. Identification Browse & Order Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality Hubs customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Transactional website but no transactional app. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, home decorations, housewares and kitchenware; beauty; food and wine. Major Competitors J-­‐Front Retailing (Daimaru and Matsuzakaya); 7 & i Holdings (SOGO and Seibu); Takashimaya. Global Department Store Retailing
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J. Front Retailing (Daimaru and Matsuzakaya) Source: Wikipedia.org •
Established: 1611 (Matsuzakaya); 1717 (Daimaru). •
The two department stores merged in 2007 and formed J. Front Retailing Group. •
The group currently operates 20 department stores in Japan. •
Business philosophy: Service before profit; emphasizes customer satisfaction. •
Employees: 2,907, as of February 28, 2014 (Department Stores division). MAJOR EVENTS OF THE PAST FIVE YEARS YEARS May 15, 2015 Grand Opening of Shanghai Daimaru Department Store. This is the first department store opened in China, under a joint venture started in January 2013, with Shanghai New World Company Limited, a subsidiary of leading Hong Kong real estate conglomerate, New World Development Company Limited. Global Department Store Retailing
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October, 2014 Partnership with online shopping site Rakuten. Shopping in any of the group’s department stores can accumulate “R Points”, which can then be used for payment on Rakuten. December, 2013 First “Painting Auction” to be host by the group, in Ueno store, selling paintings from renowned local and overseas artists including Bernard Buffet and Marc Chagall, for charity purposes. March to April, 2011 Donation to, and fund raising for, the March 11 earthquake-­‐affected region. KEY MANAGEMENT Title Group Chairman Group President Department Store President Senior General Manager of Finance Division Existing Shunichi Samura. Named Group Chairman on April 1, 2013. Named Group President in March, 2010. Joined Matsuzakaya in 1969. Ryoichi Yamamoto. Named Department Store President in 2010, and Group President in April, 2013. Joined Daimaru in 1973. Tatsuya Yoshimoto. Named Department Store President on April 1, 2013. Joined Daimaru in April, 1979. Hiroyuki Tsutsumi. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐February Revenue 2013 ¥ Billion 1,092.8 2014 ¥ Billion 1,146.3 2015 ¥ Billion 1,149.5 Operating Profit 30.9 41.8 42.1 Net Profit 12.2 31.6 19.9 Source: S&P Capital IQ/Company reports Financials of Department Store Operations Year to end-­‐February Revenue Operating Profit 2013 ¥ Billion 750.3 2014 ¥ Billion 768.9 2015 ¥ Billion 759.9 18.5 23.0 23.1 Source: S&P Capital IQ/Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Not available. Home delivery to any address in Japan costs less than US$3, and US5 for refrigerated delivery. Click-­‐and-­‐collect is not seen as an attractive option for the customers the company targets. Beacons Not available. In general, Daimaru and Matsuzakaya target well-­‐off adults in their 40s, who do not see beacons as a value-­‐added service. Radio Frequency Identification Not in use. Browse & Order Hubs Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Transactional, mobile-­‐optimized website but no transactional app. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; beauty; food, wine and non-­‐food groceries; gifts; homewares and kitchenware; art. Major Competitors Isetan Mitsukoshi Holdings (Isetan and Mitsukoshi); Takashimaya; 7 & i Holdings (SOGO and Seibu) Global Department Store Retailing
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Source: Wikipedia.org •
Established: 1831. •
Takashimaya operates 17 premium regional department stores in business areas in Japan. The company originated in Kyoto and expanded to Osaka and Tokyo. •
Takashimaya operates three overseas stores; its US store closed in 2010. •
The company’s strategic focus is on omnichannel retailing. Another focus is on targeting inbound tourists resulting from the weakness of the yen. •
Employees: 9,729 (department stores only). MAJOR EVENTS OF THE PAST FIVE YEARS April 2015 Takashimaya develops its own beauty brand. March 2015 The company celebrates the 45th anniversary of the Takashimaya Museum. March 2015 Dinosaur exhibition opens at Takashimaya Times Square. January 2015 Takashimaya “Spring’s Silk Cashmere Collection” launches. The first-­‐ever Takashimaya-­‐brand spring collection. Global Department Store Retailing
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October 2014 A special exhibition marking the 80th birthdays of the Emperor and Empress opens at Takashimaya Department Store in Nihonbashi, Tokyo. January 2014 Takashimaya announces the promotion of Koji Suzuki from CEO to Chairman; Shigeru Kimoto will become CEO. November 2013 The company announces the return of part of the executive officers’ remuneration following a food-­‐safety incident. March 16, 2011 Takashimaya donates 100 million yen to earthquake relief. KEY MANAGEMENT Title Chairman Incumbent Koji Suzuki became Chairman in February 2014. He joined the company in 1968 and was promoted to Director in 1997, Deputy CEO in 2001 and CEO in 2003. Chief Executive Officer Shigeru Kimoto was promoted to CEO in February 2014. He joined the company in April 1979 and was promoted to Director in May 2011. General Manager (Finance) Yamashita Yasushi has been General Manager (Finance). He joined the company in 1986 and became executive officer in 2010. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐February Revenue 2013 ¥ Billion 870.3 2014 ¥ Billion 904.2 2015 ¥ Billion 912.5 Operating Profit 25.5 29.1 32.0 Net Profit 16.5 18.7 22.6 Source: S&P Capital IQ/Company reports Financials of Department Store Operations Year to end-­‐February Revenue Operating Profit 2013 ¥ Billion 776.0 2014 ¥ Billion 804.4 2015 ¥ Billion 809.2 11.9 14.0 15.5 Source: S&P Capital IQ/Company reports Global Department Store Retailing
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TECHNOLOGY AND INNOVATIONS Click & Collect Not available. Some items are eligible for free delivery; shipping for others costs just US$2 to US$6. Beacons Not available. In general, Takashimaya targets well-­‐off adults in their 40s, who do not see beacons as a value-­‐added service. Radio Frequency Identification RFID is used for inventory control. Browse & Order Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality Hubs customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Available. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, home decorations, housewares and kitchenware; beauty; food, wine and non-­‐food groceries. Major Competitors Isetan Mitsukoshi; J-­‐Front Retailing (Daimaru and Matsuzakaya); 7 & i Holdings (SOGO and Seibu). Global Department Store Retailing
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•
Established: 1830. •
The group operates convenience store chain 7-­‐Eleven globally. Total sales, including franchisees, are approximately 10 trillion yen a year (~US$800 billion). •
SOGO and Seibu operate 24 stores in Japan, focused on private brand, which is named “Limited Edition”. The stores target customers in their 50s and older. •
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The company emphasizes customer service, including concierge services. •
Employees: 9,211 as of February 28, 2014 (department stores only). The company’s strategic focus is on omnichannel retailing. The department store group uses the company’s 16,000 convenience stores in Japan as pick-­‐up locations for click-­‐and-­‐collect. MAJOR EVENTS OF THE PAST FIVE YEARS April 2015 “Limited Edition: beauty24” exhibition launches, the first time it starts a private-­‐label beauty line. March 2015 An exhibition at the Seibu Shibuya branch shows F1 cars from McLaren-­‐
Honda. October 2014 The “Future Gifts from Department Store”, targeting the development between now and the Tokyo Olympics in 2020, launches. Products from different categories are specifically designed for this theme. September 2014 SOGO and Seibu announces a new program targeting inbound tourists. March 2013 The “Tokyo Girls Collection” fashion project, of which Seven & I Holdings is a sponsor, launches. Some brands from the collection are available for sale at designated SOGO and Seibu stores. Global Department Store Retailing
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January 2013 Annual sales revenue of in-­‐house brands approaches 40 billion yen. May 2012 Singer Tomomi Itano, at the time a member of the group AKB48, launches her “Rain Style Collection,” targeting female customers between 20 to 30 years old. April to May 2011 Donation campaigns for earthquake relief take place in every store. March 13, 2011 The company introduces an electricity-­‐saving plan following the earthquake on March 11, 2011. KEY MANAGEMENT Title Group Chairman & CEO Incumbent Toshifumi Suzuki has been CEO since November 5, 2005; he succeeded Jim Keyes. He had joined a company subsidiary in 1963. President & COO Noritoshi Murata was promoted to President and COO of the holding company in September 2009. After joining a company subsidiary in 1971, he was promoted to director in 1990. Group CFO Kurio Takahashi was promoted to CFO in 2011. He joined the group in 2003 and was promoted to the executive office for finance in 2005. Department Store Chairman Yukio Horiuchi. Department Store President Ryu Matsumoto. He started at Seibu in 1975 and was promoted to Director in 2010. FINANCIAL OVERVIEW Key Metrics Group Financials (Including Non–Department Store Operations) Year to end-­‐February Revenue 2013 ¥ Billion 4,991.6 2014 ¥ Billion 5,631.8 2015 ¥ Billion 4,996.6 Operating Profit 295.7 339.7 343.3 Net Profit 138.1 175.7 172.9 Source: S&P Capital IQ/Company reports Global Department Store Retailing
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Financials of Department Store Operations Year to end-­‐February Revenue 2013 ¥ Billion 884.0 2014 ¥ Billion 871.1 2015 ¥ Billion 875.0 8.0 6.6 7.1 Operating Profit Source: S&P Capital IQ/Company reports TECHNOLOGY AND INNOVATIONS Click & Collect Available; customers can request pick-­‐up at 7-­‐Eleven convenience stores. Beacons Not available. In general, SOGO and Seibu target well-­‐off adults in their 40s, who do not see beacons as a value-­‐added service. Radio Frequency Not in use. Identification Browse & Order Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality Hubs customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Available. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; home furnishings, home decorations, housewares and kitchenware; beauty; food, wine and non-­‐food groceries; flowers; Buddhist decorations and worship tools; disaster-­‐survival packages. Major Competitors Isetan Mitsukoshi; H Two O retailing (Hankyu and Hanshin); Tokyu Co. (Tokyu Department Stores). Global Department Store Retailing
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H Two O retailing (Hankyu and Hanshin) Source: Wikipedia.org •
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Established: 1929. The Hanshin and Hankyu chains were established around train stations, so the history of the group is relatively short compared to that of many other Japanese department stores. The group currently operates 15 department stores in Japan, all around major train stations. Employees: Not Available. MAJOR EVENTS OF THE PAST FIVE YEARS September 2014 The group announces a new joint venture with a Ningbo realtor to open a Ningbo Hanshin Department Store, expected in autumn 2018. This will be its first store in China. April 2014 Termination of a planned joint venture, which was set to open a Ningbo Hanshin Department Store in spring 2018. October 2011 The company launches food delivery service to the Tokyo metropolitan area. Global Department Store Retailing
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KEY MANAGEMENT Title Incumbent Group Chairman & CEO Vacant. Junichi Sugioka resigned on March 31, 2015. Group President Atsushi Suzuki was appointed President on April 1, 2014. Department Store CEO Toyohisa Araki has been Department Store CEO since March 2012. FINANCIAL OVERVIEW Key Metrics Year to end-­‐March Revenue 2013 ¥ Billion 383.3 2014 ¥ Billion 427.3 2015 ¥ Billion 420.6 7.8 13.2 15.9 Operating Profit Source: S&P Capital IQ/Company reports TECHNOLOGY AND INNOVATIONS Click & Collect Not available. Home delivery to any address in Japan costs less than US$3. Click-­‐and-­‐collect is not seen as an attractive option for the customers the company targets. Beacons Not available. In general, Hanshin and Hankyu target well-­‐off adults in their 40s, who do not see beacons as a value-­‐added service. Radio Frequency Identification The company has used RFID in price tags for women’s shoes since 2006. Browse & Order Hubs Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Available. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; beauty; food, wine and non-­‐food groceries; food-­‐to-­‐go; homewares and kitchenware. Major Competitors Kintetsu Group (Kintetsu Department Stores); Tokyu Co. (Tokyu Department Stores). Global Department Store Retailing
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Source: Wikipedia.org •
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Established: 1931. Marui operates 24 stores, mainly in the Tokyo metropolitan area. Strategic focus: Emphasizes the relationships with customers, and plans to have customers involved in developing private brand products. Planned store openings: One store opening planned for autumn 2016. Employees: 5,966 (department stores only). MAJOR EVENTS OF THE PAST FIVE YEARS March 2015 Marui launches a campaign aimed at reducing carbon dioxide emissions along the entire supply chain. December 2014 The company receives the Eco-­‐Products Award at the 11th Eco-­‐
Products exhibition. June 2013–June 2014 Marui donates vintage apparel to support a campaign for earthquake relief. Global Department Store Retailing
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KEY MANAGEMENT Title Chairman Incumbent Sato Motohiko became Chairman in August 2008. He had joined the group in February 2005. President Aoi Hiroshi was promoted to President in April 2005. FINANCIAL OVERVIEW Key Metrics Year to end-­‐March Revenue 2013 ¥ Billion 407.4 2014 ¥ Billion 416.5 2015 ¥ Billion 404.9 Operating Profit 24.3 27.1 28.0 Net Profit 13.3 15.4 16.0 Source: S&P Capital IQ/Company reports TECHNOLOGY AND INNOVATIONS Click & Collect Available, with in-­‐store pick-­‐up. Beacons Not available. In general, the company targets well-­‐off adults in their 40s, who do not see beacons as a value-­‐added service. Radio Frequency Identification RFID is used for supply-­‐chain management. Browse & Order Hubs Not available. Japan emphasizes face-­‐to-­‐face interaction and high-­‐quality customer service. Premier department stores targeting well-­‐off adults in their 40s have no plans to develop this technology. M-­‐Commerce Available. Mobile Payments Not available. Mobile payment in Japan is used for small payments only. PRODUCT OFFER AND COMPETITION Type of Goods Apparel, footwear and accessories; beauty; food, wine and non-­‐food groceries. Major Competitors PARCO. Global Department Store Retailing
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