Bold ideas needed at House of Fraser
House of Fraser has gone into administration and been rescued at a knock-down price by the Sports Direct founder Mike Ashley. Debenhams has been struggling, with three profit warnings in the last year. Marks & Spencer has been through endless revamps without ever really recovering, and even the mighty John Lewis has started to run out of steam. If there is a more hopeless business to be in than department stores, it is hard to think of it. Even within a struggling industry, the likes of House of Fraser look like relics of the Edwardian era, about as relevant to the 21st century as typewriters and video players.
But hold on. Sure, retailing has plenty of challenges. Yet the likes of Amazon and Apple have been moving aggressively into physical shops, and they are two of the most successful companies in the world. In fact, old-fashioned stores need to be completely reinvented, offering experiences as much as products, developing services, and innovating with their websites.
It remains to be seen whether Ashley can do that. But there is no question retailing can be revived with bold and innovative new ideas.
The collapse of House of Fraser will have come as no surprise to anyone. In the last decade, it has struggled with store closures and profit warnings. A series of different owners have tried to turn it around without success. Like every retailer, it has seen sales shift to the web, been hit by punishing rents and business rates, and staff costs have been pushed up by the national living wage. Shops in every sector have struggled against all that. But the department store, with its slightly quirky mix of clothes, homeware and electronics, and its Fifties ambience, has struggled most of all.
Lots of people might think Ashley is crazy to pay even £90m for the chain. And yet he is a clever entrepreneur who has built up Sports Direct from nothing. While he has never been popular in the City, he clearly knows something about retailing.
He already has a substantial stake in House of Fraser, and in Debenhams as well, so he clearly sees value in traditional chains.
It is easy to forget it now, but the department stores were radical in their time. With their range of different products, their glitzy multi-storey layout, their restaurants and cafes, they offered a completely different experience. They were, in truth, the Google or Netflix of the day. Could they recapture some of that razzmatazz? Potentially, but only by radically reinventing themselves. Here are three good places to start.
First, they need to remember that the original department stores had a lot of show business to them. They were experiences, as well as places to buy things, and in a world dominated by internet shopping, people still want those. Customers want a day out as much as anything else, and you don’t get that from swiping through the apps on your phone. A few have made a start – Debenhams, for example, has announced plans to start putting gyms in its stores. But there is a lot more they could do. Homeware departments could be putting on cookery courses, there could be makeover sessions in cosmetics, children’s parties in the toy department and speed dating evenings in fashion. If a shop is a fun place to go, people will pay to be there.
Next, they should be concentrating on services alongside products. From TV installations, to diet and fitness advice, to interior design, lots of customers want tips on how to look after both themselves and their homes.
Finally, they need to rethink their websites completely. Just whacking up a few internet pages, and offering click and collect, is not good enough. How about allowing people to buy in store, then delivering to their home while they have lunch in the café? Or using social media to create communities of people with shared interests?
It is fashionable to write off retailing. But keep this in mind. Both Amazon and Apple have spent tens of millions in the last couple of years opening shops. If they figure retailing has a future, they are probably right.
It just needs to adapt to changing shopping patterns. Whether Ashley is the right person to attempt that remains to be seen. But the opportunity is certainly there – if someone is willing to grasp it.
‘The original department stores had a lot of show business to them’