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Service Key for Department Stores

Whether they're operating in the economic doldrums of the U.S. or the rapidly growing economies of Russia, China, Thailand and Malaysia, retailers gathered...

LONDON — Whether they’re operating in the economic doldrums of the U.S. or the rapidly growing economies of Russia, China, Thailand and Malaysia, retailers gathered at the Global Department Store Conference here Thursday and Friday agreed quality of service and engaging with customers are two powerful weapons with which to combat the threat of both growing competition and cautious consumers.

Paul Kelly, chief executive of London’s Selfridges, one of the conference’s organizers, said in his opening remarks that “2008 and 2009 are going to be tough years, we’ve known that for some time. When the wind changes, you’ve got to change tack.”

Kelly added that since the Weston family acquired the store in 2003, they have transformed Selfridges’ accessories areas, opened up the store’s windows to “show people what our soul is all about” and devoted 3,500 square feet to its Ultralounge, an area that doesn’t carry products for sale. Instead, the store holds exhibitions and events in the basement space. “We want to capture customer affection and loyalty,” said Kelly. “If you can do a good job in the tough times, you’ll do a great job in the good times.”

Terry Lundgren, chairman, president and ceo of Macy’s, echoed this policy of improving the store’s offering in difficult times. “We have to think through who we want to be when the customer comes back and begins shopping again,” said Lundgren. “It’s time to embrace newness, innovativeness and ideas, we have to support the brand and what it stands for.” Lundgren also accepted the summit’s award for department store of the year, which was awarded to Bloomingdale’s, at a dinner last Thursday night,

Similarly, Stephen I. Sadove, chairman and ceo of Saks Fifth Avenue, said that in the weak economic climate, the company is focusing on categories such as footwear, handbags and jewelry, along with “reinventing” the struggling bridge category. “There’s a consumer slowdown and [the consumer] is responsive only to promotion, this is the environment we’re having to live through,” said Sadove, who cited the launch of the store’s shoe floor 10022-SHOE in September as an example of “targeted capital improvement” to increase the productivity of Saks’ current stores. Sadove said that after the department’s success in New York, the company would expand to “five or six more stores.”

Despite a difficult environment in the U.S., Sadove said international expansion is still on Saks’ agenda. “We’ll do it with the right location, the right partner and the right set of brands,” said Sadove, who added that the recent earthquake in Sichuan, China, hadn’t put the company off from opening a store in that country. “We’re still pursuing our international growth strategy,” said Sadove. “We’re looking in China at opportunities to open stores there, but there’s no specific time frame.”

Those retailers operating in booming, emerging environments said refining their brand is just as important, to inspire loyalty among those countries’ growing middle class.

Yuwadee Chirathivat, ceo of Thailand’s Central Department Stores, said that its Chidlom store in Bangkok would stage the first Rembrandt exhibition in Thailand, and that it hosts an annual watch fair, which last year drew sales of $20 million over 45 days. “We want to create loyalty with constant store updates [and capture] Thailand’s rising purchasing power,” said Chirathivat.

“The customer evolution in South Africa is astounding,” said Andrew Jennings, managing director of retail at Woolworths in South Africa. “For many [of the emerging middle class], their first car is a luxury car.”

Jennings added that in a climate of “instant gratification” and “brand attachment,” Woolworths had differentiated its offer, and plans to launch a fashion and accessories concept in conjunction with international designers, along with upgrading the company’s food hall. “The balance of power has shifted to the customer,” he said.