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Luxury, Internet Seen as Department Stores’ Saviors

Istanbul forum hears about importance of keeping pace with consumer trends.

ISTANBUL — Department stores need to keep pace with online developments as well as fast-changing consumer trends in order to survive and thrive.

 

That was the overriding message at the third World Department Store Forum (WDSF), held here on May 30 and 31.

 

“The speed of change relies on the speed of the Internet. We have to keep up with that pace. Customers are in charge of us now,” said Andrew Jennings, who is to step down as chief executive of Karstadt at the end of the year.

 

Research has shown that in Germany, 76 percent of customers get spending recommendations from friends, while 62 percent rely on Facebook. And in the Middle East, 84 percent of people depend on social media for tips on where to shop. So word of mouth still rules, but it’s digital now.

 

The bi-annual forum focused on shaking off the slowdown and increasing productivity. It was organised by the International Group of Department stores (IGDS) and the Turkish retail group Boyner Holding, whose chairman, Cem Boyner, spoke about how consumers are becoming more demanding and sophisticated in an environment flush with retail options.

 

Profiling their interests, understanding their needs and personalizing the whole retail business is the only way to increase sales and profits, Boyner said.

 

In an interview, Location Group founder Marc-Christian Riebe said department stores will only survive if they own the properties themselves, or if they offer luxury products like Galeries Lafayette or Harrods and operate as a “space broker,” leasing space to brands.  Otherwise, “they won’t be able to compete with Forever 21, H&M, Primark, Uniqlo or Zara,” he added. Location Group provides retail stores information about the best frequented shopping streets worldwide, and also offers advice expansion.

 

The U.S. and Asia are a different matter, where department stores are often anchor tenants in shopping centers, Riebe noted.

 

Terry J. Lundgren, chairman, chief executive officer and president of Macy’s, emphasized the growing importance of private label merchandise, saying it has shifted from the low end of the quality spectrum to the top.

 

In the Middle East, department stores have increasing success and credibility, attracting top spenders from GCC countries as well as China, India and Russia. Patrick Chalhoub, co-ceo of Chalhoub Group, said that after Hong Kong, the region boasts the largest luxury market. Dubai contains 82 percent of the world’s luxury brands, just 2 percent lower than Hong Kong, while even London can only offer 80 percent.

 

For Boyner, though, with a foot in both camps as an operator of luxury department store Beymen and the midmarket chain Boyner, the focus is on personalization and customer profiles.

 

“Internet retailers are a step ahead of us now on personalization, even though previously they learned everything from us,” he said.

 

Boyner said analysis of its annual customer base shows that 30 percent are new clients,. “If we decrease churn by half, net sales will increase by 15 percent,” he said, stressing that an omni-channel approach helps retailers track lost customers. 

 

Traditional traffic drivers such as widely advertised sales and discounts, are less effective. Instead, Boyner suggested targeting each customer individually, laying out each profile in detail and working out ahead of time, showing each of them individual care.

 

The way forward is to keep a step ahead of customer needs via profiling both offline and online. “What doesn’t work on the Internet won’t work in bricks and mortar,” Boyner said.