PARIS — Galeries Lafayette continues to defy the traditional department store model by ramping up growth outside of its home market — with the Middle East its latest target.
The push from the French retailer comes as department store chains around the world struggle to reinvent themselves in the face of online competition, with a few players betting on new frontiers for what has been a persistently local business.
“It’s normal that department stores don’t develop internationally because there’s no economy of scale abroad — we don’t necessarily share all of the brands, the clients aren’t the same and, in comparison with other types of businesses, there isn’t necessarily an advantage or considerable synergies to rolling out our model abroad,” acknowledged Olivier Bron, Galeries Lafayette, BHV Marais and international director.
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Still, after years of international development, the chain’s executives think they have found the right model for expansion abroad, Bron explained. The move is part of a strategy to reduce the company’s reliance on France, where it counts 57 stores, as well as tourism at home, by setting up in markets where the brand is best known — China and the Middle East.
On Monday, the retailer unveiled plans to open flagships in Istanbul and Kuwait City in 2019. With the addition of two new locations, Galeries Lafayette, which first set up in Dubai in 2009, will count eight stores in the Middle East, prized for its young, wealthy and fashion-conscious populace.
“We will only develop abroad in regions where the brand awareness of Galeries Lafayette is the strongest,” Bron explained.
American counterparts Bloomingdale’s and Macy’s Inc., which both belong to the same group, are also venturing into the Middle East for similar reasons, said Tiffany Hogan, an analyst with Kantar Retail Market Insights division.
“These are brands that see themselves as iconic American brands with a cache that can travel,” said Hogan.
Also compelling these retailers is the hunt for new revenue streams and shoppers with growing spending power — and who may also travel to the U.S. to shop.
The American chains have partnered with Al Tayer Group to open stores in Abu Dhabi next year.
Saks Fifth Avenue, on the other hand, closed its Dubai location last year as the economy slowed in the United Arab Emirates. In 2012, the retailer closed a licensed store in Riyadh, Saudi Arabia, after more than a decade in operation.
The 120-year-old French retailer, meanwhile, has set a goal of having 20 stores outside of France within five years, marking an acceleration of change pushed by the company’s chief executive officer Nicolas Houzé.
“The international expansion of our store chain is a key growth driver for Galeries Lafayette now more than ever,” said Houzé.
“First we needed to test the model and know that it functions. It takes time between opening a store and realizing its full potential — in general between two and five years,” noted Bron. The expansion comes as part of a more than three-year transformation of the group under Houzé’s lead, which includes the international focus and a push into the digital sphere.
In its home market, Galeries Lafayette opened a new store in the outskirts of Paris with a streamlined style featuring fewer items in the store meant to complement an expanded choice online for products like luggage. It also plans to open a flagship on the Champs-Elysées in Paris next year.
The retailer also recently bolstered its online business with the acquisition of French catalogue retailer La Redoute. The catalogue company had undergone a major overhaul that entailed reorienting its business online.
For the international expansion, partners are key, Bron explained.
“We need local expertise,” he said, citing the need to tap into knowledge of the market. The stores abroad generally carry 30 percent French brands, 30 percent international brands and 30 percent local brands, according to Bron.
Galeries Lafayette’s planned Kuwait City location will be in the Assima Mall and operate under a franchise agreement with Ali Bin Ali, a family-owned group that the French retailer paired up with for its Doha store.
The Istanbul store will be in the Vadistanbul shopping center and operated under franchise with the DEMSA group, the Turkish retailer that operates Galeries Lafayette’s other Turkish store.
While the company has a 25 percent minority stake in the Dubai store, the other partnerships are franchises owned fully by the other party, said Bron.
The French retailer takes part in all steps of building and running the stores, he said, including choosing the architect and deciding on the broad design aspects. Architecture tends to be different in the region than in France, with heavier use of gold and marble, he noted. In countries like Qatar, for example, shoes, leather goods and jewelry take a more prominent place in stores than ready-to-wear apparel, he added.
“We are very involved and approve each phase of the building of the store in partnership with our franchisees,” Bron added.
“Our biggest asset is the Galeries Lafayette brand,” he noted.
The chain recently made a push to increase its notoriety with Americans, hosting cocktail events on both coasts with the cabaret show Lido de Paris for an audience of influencers.
But this does not mean the company is angling for a U.S. presence, according to Bron. “English-speaking markets are very mature when it comes to department stores — the legitimacy of the Galeries Lafayette brand in comparison with the strength of local department store brands would not be sufficient,” he said.
The company also has stores in Jakarta and Beijing.