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Department Stores - UK - July 2017

“Department stores are having to justify their raison d’être and are seeking to adapt to the changing dynamics of the marketplace. The main players in the market have recognised a need to focus on experiential retail in response to growing demand for leisure and experiences over purchasing of products. They are redesigning their stores with improved beauty services, food and drink venues and a focus on own brands to help differentiate them from other types of retailers. Over the longer term this should help revive the department store sector and make it more relevant for today’s consumer.”
– Tamara Sender Ceron, Senior Fashion Analyst

This Report answers the following key questions:

  • How is the role of department stores changing?
  • Who are the winners and losers in the department store sector?
  • What are the main growth opportunities for department stores?

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Table of contents

  1. Overview

    • What you need to know
      • Areas covered in this Report
      • Executive Summary

          • The market
            • Growth remains flat in 2017
              • Figure 1: Best and worst case forecast for department store sales, 2012-22
            • Weak sterling attracts foreign visitors
              • Companies and brands
                • Innovations
                  • High-end department stores outperform
                    • Figure 2: Annual segment growth: mid-market versus high-end, 2012-16
                  • M&S loses share as John Lewis grows its share
                    • Figure 3: Top department stores’ market shares, 2015 and 2016
                  • John Lewis leads online
                    • Brand research
                      • Figure 4: Attitudes towards and usage of selected brands, December 2016-June 2017
                    • Fenwick’s new concepts to encourage customers to visit
                      • The consumer
                        • Debenhams falls out of favour with young women
                          • Figure 5: Department stores purchased from in the last six months, in-store and online, May 2017
                        • Store experience key reason for shopping
                          • Figure 6: Reasons for shopping at department stores over other types of retailers, May 2017
                        • Millennials want more food and drink venues
                          • Figure 7: Interest in additional services offered by department stores, May 2017
                        • Women want more updated fashion
                          • Figure 8: Interest in innovations when shopping at department stores, May 2017
                        • Mid-market department stores stand out for customer service
                          • Figure 9: Correspondence analysis, May 2017
                        • What we think
                        • Issues and Insights

                          • How is the role of department stores changing?
                            • The facts
                              • The implications
                                • Who are the winners and losers in the department store sector?
                                  • The facts
                                    • The implications
                                      • What are the main growth opportunities for department stores?
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • Growth remains flat in 2017
                                              • Outlook for department store sector
                                                • Millennials shun ownership in favour of experiences
                                                  • Experiences continue to take precedence over retail spend
                                                    • Weak sterling attracts foreign visitors
                                                      • Home and garden grew 5% in 2016
                                                      • Market Size and Forecast

                                                        • Definitions
                                                          • Growth remains flat in 2017
                                                            • Figure 10: Department stores: sector sales, 2012-17 (est)
                                                          • Outlook
                                                            • Figure 11: Best and worst case forecast for department store sales, 2012-22
                                                          • Forecast – The data and methodology
                                                            • Figure 12: Department store sales in current and constant prices, 2012-22
                                                        • Consumer Spending

                                                              • Figure 13: Consumer spending on key department store categories, 2012-16
                                                          • Market Drivers

                                                            • Changes in population
                                                              • Figure 14: Trends in the age structure of the UK population, 2011-21
                                                            • Fall in sterling expected to dent consumer confidence
                                                              • Figure 15: Trends in consumer sentiment for the coming year, June 2012-June 2017
                                                            • Experiences continue to take precedence over retail spend
                                                              • Weak sterling attracts foreign visitors
                                                                • Figure 16: Spending by overseas residents on visits to the UK, by area of residence, 2014-16
                                                            • Companies and Brands – What You Need to Know

                                                              • 24/7 personalised e-commerce experience
                                                                • EWM rolls out new department store concept
                                                                  • Ad spend down 5.6% in 2016 to £120 million
                                                                    • High-end department stores outperform
                                                                      • M&S loses share as John Lewis grows its share
                                                                        • Debenhams falls behind
                                                                          • John Lewis leads online
                                                                            • Online sales grow to £3.3 billion
                                                                            • Launch Activity and Innovation

                                                                              • Concierge services
                                                                                • Rental service for fashion and accessory items
                                                                                  • 24/7 personalised e-commerce experience
                                                                                    • Virtual reality shopping experience
                                                                                        • Figure 17: Rodarte’s romantic styling for Romeo and Juliet, 2016
                                                                                      • Brand extension
                                                                                        • Celebrating emerging talent with new concept
                                                                                        • Leading Specialist Retailers

                                                                                          • High-end department stores outperform
                                                                                            • Figure 18: Annual segment growth: mid-market versus high-end, 2012-16
                                                                                          • Fortnum & Mason sees strongest sales growth
                                                                                            • Figure 19: Major retailers’ annual sales growth versus average segment growth, 2016
                                                                                          • Leading retailers by sales
                                                                                              • Figure 20: Leading department stores: net revenues, 2012-16
                                                                                            • Store numbers
                                                                                              • Figure 21: Leading department stores: outlet numbers, 2012-16
                                                                                            • Sales per store
                                                                                              • Figure 22: Leading department stores: annual sales per outlet, 2012-16
                                                                                            • Total sales area
                                                                                              • Figure 23: Leading department stores: total sales area, 2012-16
                                                                                            • Sales densities
                                                                                              • Figure 24: Leading department stores: annual sales per sq m, 2012-16
                                                                                            • Operating profits and margins
                                                                                              • Figure 25: Leading department stores: operating profits, 2012-16
                                                                                              • Figure 26: Leading department stores: operating margins, 2012-16
                                                                                          • Market Shares

                                                                                            • John Lewis grows share
                                                                                              • Figure 27: Top department stores’ market shares, 2015 and 2016
                                                                                            • Debenhams loses share
                                                                                              • M&S to fall behind John Lewis
                                                                                                • Figure 28: Leading department stores’ market shares, 2012-16
                                                                                            • Online

                                                                                                • Figure 29: Leading department stores, estimated online sales, 2013-16
                                                                                              • John Lewis leads online
                                                                                                • Figure 30: Online share of leading department store sales as a % of total sales, 2013-16
                                                                                              • Online sales grow to £3.3 billion
                                                                                                • Figure 31: Department store online sales, 2013-16
                                                                                              • Click-and-collect
                                                                                              • Space Allocation Summary

                                                                                                  • Space allocation summary
                                                                                                    • Figure 32: Department stores: summary of estimated in-store space allocation, June 2017
                                                                                                  • Detailed space allocation estimates
                                                                                                    • House of Fraser redefining itself as a ‘premium’ department store
                                                                                                      • Debenhams focusing on making the shopping experience sociable and fun
                                                                                                        • Selfridges’ £300 million Oxford Street revamp
                                                                                                          • Fenwick’s new concepts and store attractions to encourage customers to visit
                                                                                                            • John Lewis blurring shopping and leisure to create destination shopping
                                                                                                              • M&S repurposing store space to meet changing customer needs
                                                                                                                • Figure 33: Department stores: detailed space allocation estimates, June 2017
                                                                                                            • Retail Product Mix

                                                                                                                • Sales
                                                                                                                  • Figure 34: Leading department stores, estimated sales mix, 2016
                                                                                                                • Sales density
                                                                                                                  • Figure 35: Leading department stores, estimated sales density by broad product category, 2016 (est)
                                                                                                              • Advertising and Marketing Activity

                                                                                                                • Ad spend down 5.6% in 2016 to £120 million
                                                                                                                  • Figure 36: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, 2013-16
                                                                                                                • Leading department stores advertising spend
                                                                                                                    • Figure 37: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, 2013-16
                                                                                                                  • TV and press the most favoured media type
                                                                                                                    • Figure 38: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, by media type, 2016
                                                                                                                  • Nielsen Ad Intel coverage
                                                                                                                  • Brand Research

                                                                                                                      • What you need to know
                                                                                                                        • Brand map
                                                                                                                          • Figure 39: Attitudes towards and usage of selected brands, December 2016-June 2017
                                                                                                                        • Key brand metrics
                                                                                                                          • Figure 40: Key metrics for selected brands, December 2016-June 2017
                                                                                                                        • Brand attitudes: Debenhams and House of Fraser score highly on online perceptions
                                                                                                                          • Figure 41: Attitudes, by brand, December 2016-June 2017
                                                                                                                        • Brand personality: John Lewis enjoys most positive brand personality perceptions
                                                                                                                          • Figure 42: Brand personality – Macro image, December 2016-June 2017
                                                                                                                        • John Lewis clearly differentiated from rivals
                                                                                                                          • Figure 43: Brand personality – Micro image, December 2016-June 2017
                                                                                                                        • Brand analysis
                                                                                                                          • John Lewis sets the benchmark others aspire to
                                                                                                                            • Figure 44: User profile of John Lewis, December 2017
                                                                                                                          • Debenhams scores well online but brand needs refresh
                                                                                                                            • Figure 45: User profile of Debenhams, June 2017
                                                                                                                          • Selfridges has low usage but strong brand personality
                                                                                                                            • Figure 46: User profile of Selfridges, June 2017
                                                                                                                          • Harrods needs to improve online presence
                                                                                                                            • Figure 47: User profile of Harrods, June 2017
                                                                                                                          • House of Fraser strong online but brand needs a refresh
                                                                                                                            • Figure 48: User profile of House of Fraser, June 2017
                                                                                                                        • The Consumer – What You Need to Know

                                                                                                                          • Debenhams falls out of favour with young women
                                                                                                                            • Store experience key reason for shopping
                                                                                                                              • Only Gen X shop there for fashion
                                                                                                                                • Millennials want more food and drink venues
                                                                                                                                  • Women want more updated fashion
                                                                                                                                    • High demand for own brands from Millennial women
                                                                                                                                      • Mid-market department stores stand out for customer service
                                                                                                                                        • Department stores competing with online-only retailers for value and convenience
                                                                                                                                        • Where They Shop

                                                                                                                                          • Debenhams falls out of favour with young women
                                                                                                                                              • Figure 49: Department stores purchased from in the last six months, in-store and online, May 2017
                                                                                                                                            • John Lewis leads online
                                                                                                                                              • Figure 50: Department stores purchased from in the last six months, whether in-store or online, May 2017
                                                                                                                                            • M&S sees big drop in women aged 45-64
                                                                                                                                                • Figure 51: Department stores purchased from in the last six months, whether in-store or online, February 2016 and May 2017
                                                                                                                                                • Figure 52: Department stores where consumers have browsed in the last six months, either in-store or online, May 2017
                                                                                                                                              • Repertoire
                                                                                                                                                • Figure 53: Repertoire of department stores purchased from in the last six months, in-store and online, May 2017
                                                                                                                                            • Reasons for Shopping at Department Stores

                                                                                                                                              • Store experience key reason for shopping
                                                                                                                                                  • Figure 54: Reasons for shopping at department stores over other types of retailers, May 2017
                                                                                                                                                • Only Gen X shop there for fashion
                                                                                                                                                  • Wide selection of products is the main differentiator
                                                                                                                                                  • Interest in Additional Services

                                                                                                                                                    • Millennials want more food and drink venues
                                                                                                                                                      • Figure 55: Interest in additional services offered by department stores, May 2017
                                                                                                                                                    • Men want furniture and technology fitting service
                                                                                                                                                      • Female under-45s keen on beauty services
                                                                                                                                                      • Interest in Innovations

                                                                                                                                                        • Women want more updated fashion
                                                                                                                                                          • Figure 56: Interest in innovations when shopping at department stores, May 2017
                                                                                                                                                        • High demand for own brands from Millennial women
                                                                                                                                                          • Male under-45s interested in buying direct from social media
                                                                                                                                                          • Attributes of Different Types of Retailers

                                                                                                                                                            • Mid-market department stores stand out for customer service
                                                                                                                                                                • Figure 57: Correspondence analysis, May 2017
                                                                                                                                                              • Mid-market department stores linked to boring designs
                                                                                                                                                                • Department stores competing with online-only retailers for value and convenience
                                                                                                                                                                  • Figure 58: Attributes associated with different types of retailers, May 2017
                                                                                                                                                                • Methodology
                                                                                                                                                                • Debenhams

                                                                                                                                                                    • What we think
                                                                                                                                                                      • A need to grow the online side of the business
                                                                                                                                                                        • Creating more of an experiential destination
                                                                                                                                                                          • Capitalising on ‘social shopping’
                                                                                                                                                                            • Positioning mobile as the engine of growth
                                                                                                                                                                              • Becoming more efficient
                                                                                                                                                                                • Back to basics
                                                                                                                                                                                  • Reducing reliance on clothing
                                                                                                                                                                                    • Brexit impact still to be felt
                                                                                                                                                                                      • Where now?
                                                                                                                                                                                        • Company background
                                                                                                                                                                                          • Company performance
                                                                                                                                                                                            • Figure 59: Debenhams: group financial performance, 2011/12-2015/16
                                                                                                                                                                                            • Figure 60: Debenhams: outlet data, 2011/12-2015/16
                                                                                                                                                                                          • Retail offering
                                                                                                                                                                                          • Fenwick Ltd

                                                                                                                                                                                              • What we think
                                                                                                                                                                                                • New boss signals a new era in the family-owned retailer’s 135-year history
                                                                                                                                                                                                  • Struggling against online competition
                                                                                                                                                                                                    • New concepts and attractions to encourage store visits
                                                                                                                                                                                                      • Data-capturing campaign to deliver a more personalised experience
                                                                                                                                                                                                        • Company background
                                                                                                                                                                                                          • Company performance
                                                                                                                                                                                                            • Figure 61: Fenwick Ltd: group financial performance, 2011/12-2015/16
                                                                                                                                                                                                            • Figure 62: Fenwick Ltd: outlet data, 2011/12-2015/16
                                                                                                                                                                                                          • Retail offering
                                                                                                                                                                                                          • Harrods Ltd

                                                                                                                                                                                                              • What we think
                                                                                                                                                                                                                • Influential MD reverses decision to step down
                                                                                                                                                                                                                  • Tapping into desire for advice
                                                                                                                                                                                                                    • Scope for improving online offer
                                                                                                                                                                                                                      • A Brexit boost?
                                                                                                                                                                                                                        • Rates hike to hit?
                                                                                                                                                                                                                          • Company background
                                                                                                                                                                                                                            • Company performance
                                                                                                                                                                                                                              • Figure 63: Harrods Ltd: group financial performance, 2011/12-2015/16
                                                                                                                                                                                                                              • Figure 64: Harrods Ltd: Outlet data, 2011/12-2015/16
                                                                                                                                                                                                                            • Retail offering
                                                                                                                                                                                                                            • Harvey Nichols UK

                                                                                                                                                                                                                                • What we think
                                                                                                                                                                                                                                  • Gross profit margins and operating profits fall
                                                                                                                                                                                                                                    • Looking ahead
                                                                                                                                                                                                                                      • Company background
                                                                                                                                                                                                                                        • Company performance
                                                                                                                                                                                                                                          • Figure 65: Harvey Nichols UK: group financial performance, 2011/12-2015/16
                                                                                                                                                                                                                                          • Figure 66: Harvey Nichols UK: outlet data, 2011/12-2015/16
                                                                                                                                                                                                                                        • Retail offering
                                                                                                                                                                                                                                        • House of Fraser Plc

                                                                                                                                                                                                                                            • What we think
                                                                                                                                                                                                                                              • Online growth is encouraging
                                                                                                                                                                                                                                                • Store performance more of a concern
                                                                                                                                                                                                                                                  • Plans to make stores more experiential
                                                                                                                                                                                                                                                    • Beauty identified as growth prospect
                                                                                                                                                                                                                                                      • Brand overhaul
                                                                                                                                                                                                                                                        • Company background
                                                                                                                                                                                                                                                          • Company performance
                                                                                                                                                                                                                                                            • Figure 67: House of Fraser Plc: group financial performance, 2012/13-2016/17
                                                                                                                                                                                                                                                            • Figure 68: House of Fraser Plc: GTV and sales by region, 2015/16-2016/17
                                                                                                                                                                                                                                                            • Figure 69: House of Fraser Plc: outlet data, 2012/13-2016/17
                                                                                                                                                                                                                                                          • Retail offering
                                                                                                                                                                                                                                                          • John Lewis

                                                                                                                                                                                                                                                              • What we think
                                                                                                                                                                                                                                                                • A considered strategy which sees investment focus shift back towards existing estate
                                                                                                                                                                                                                                                                  • Still opening new stores…for now
                                                                                                                                                                                                                                                                    • Growing own brand and exclusives
                                                                                                                                                                                                                                                                      • Modest international expansion with a focus on e-commerce
                                                                                                                                                                                                                                                                        • Company background
                                                                                                                                                                                                                                                                          • Company performance
                                                                                                                                                                                                                                                                              • Figure 70: John Lewis (department store): group financial performance, 2012/13-2016/17
                                                                                                                                                                                                                                                                            • Investing in its stores
                                                                                                                                                                                                                                                                                • Figure 71: John Lewis (department store): outlet data, 2012/13-2016/17
                                                                                                                                                                                                                                                                              • Retail offering
                                                                                                                                                                                                                                                                              • Marks & Spencer

                                                                                                                                                                                                                                                                                  • What we think
                                                                                                                                                                                                                                                                                    • Tangible signs of improvements in clothing after price and product repositioning
                                                                                                                                                                                                                                                                                      • Stepping up the pace of its fashion collections with ‘See Now Buy Now’ capsule
                                                                                                                                                                                                                                                                                        • In-store customer service
                                                                                                                                                                                                                                                                                          • Capitalising on the healthy eating trend
                                                                                                                                                                                                                                                                                            • Tailored shopping experience encouraging customers to shop more frequently
                                                                                                                                                                                                                                                                                              • Company background
                                                                                                                                                                                                                                                                                                • Company performance
                                                                                                                                                                                                                                                                                                    • Figure 72: Marks & Spencer: group financial performance, 2012/13-2016/17
                                                                                                                                                                                                                                                                                                    • Figure 73: Marks & Spencer: outlet data, 2012/13-2016/17
                                                                                                                                                                                                                                                                                                    • Figure 74: Marks & Spencer: Store portfolio, March 2017
                                                                                                                                                                                                                                                                                                  • Retail offering
                                                                                                                                                                                                                                                                                                  • Selfridges Retail Ltd

                                                                                                                                                                                                                                                                                                      • What we think
                                                                                                                                                                                                                                                                                                        • Experiential retailing
                                                                                                                                                                                                                                                                                                          • Christmas comes early
                                                                                                                                                                                                                                                                                                            • Looking ahead
                                                                                                                                                                                                                                                                                                              • Company background
                                                                                                                                                                                                                                                                                                                • Company performance
                                                                                                                                                                                                                                                                                                                  • Figure 75: Selfridges Retail Ltd: group financial performance, 2011/12-2015/16
                                                                                                                                                                                                                                                                                                                  • Figure 76: Selfridges Retail Ltd: outlet data, 2011/12-2015/16
                                                                                                                                                                                                                                                                                                                • Retail offering
                                                                                                                                                                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                                                                                                                                    • Abbreviations
                                                                                                                                                                                                                                                                                                                      • Consumer research methodology
                                                                                                                                                                                                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                                                                                                                                                                                                        • Forecast methodology

                                                                                                                                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                                                                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                                                                                                                                        Department Stores - UK - July 2017

                                                                                                                                                                                                                                                                                                                        US $2,672.70 (Excl.Tax)