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Department Stores - UK - July 2019

Covered in this report

For the purposes of this report, Mintel has used the following definitions:

It is difficult to define a department store and, as a result, there are no hard and fast rules to Mintel’s definition. However, we would expect stores to typically trade from a minimum of 1,000 sq m and stock at least half a dozen different broad product categories, with one category unlikely to account for more than two thirds of turnover, and usually significantly less than this. Stores must carry a range of brands and be clearly departmentalised – so we include M&S, but not Next. Most department stores trade in stores with multiple floors, though this is not necessarily a defining factor.

“As the UK’s leading department stores continue to struggle, there is a question as to whether the concept of a department store is still relevant. A broad range of goods was once what made these retailers stand out but online retailers can now offer an unparalleled amount of choice. This means that department stores need to find new ways to stand out, but the luxury players in this sector have proven that success is still possible if you have the right brand mix and can offer a superior shopping experience to what is available elsewhere.”

– Samantha Dover, Senior Retail Analyst

This report examines the following issues:

  • What can the mass-market players do to revive their fortunes?
  • If experience is a differentiator, what can department stores do next?
  • How can department stores reassert their position as experts?

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Table of contents

  1. Overview

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

          • The market
            • Sector expected to see some recovery in 2019
              • Figure 1: UK department store sector size and forecast, 2014-24
            • Consumer spending on core categories continues to rise
              • Figure 2: Year-on-year percentage change in consumer spending on the core department store categories, 2014-19
            • Companies and brands
              • Online department store market growing at a faster rate
                • Figure 3: Online as a percentage of the total department store sector, 2014-18
              • Mixed performance amongst the leading players
                • John Lewis becomes the UK department store market leader
                  • Figure 4: Leading department stores, estimated market shares, 2018
                • Brand research further confirms House of Fraser’s struggles
                  • Figure 5: Attitudes towards and usage of selected brands, April 2019
                • The consumer
                  • Leading players losing customers to other retailers
                    • Figure 6: Department stores used in the last 12 months, February 2018 and May 2019
                  • Most consumers buy fashion from the department stores
                    • Figure 7: What consumers bought from department stores in the last 12 months, May 2019
                  • Purchasing from department stores is infrequent
                    • Figure 8: Frequency of department store usage in the last 12 months, May 2019
                  • Satisfaction with the shopping experience is high
                    • Figure 9: Key drivers of overall satisfaction with department stores, May 2019
                  • Differentiation needed to offset discounting
                    • Figure 10: Attitudes towards department stores, May 2019
                  • What we think
                  • Issues and Insights

                    • What can the mass-market players do to revive their fortunes?
                      • The facts
                        • The implications
                          • If experience is a differentiator, what can department stores do next?
                            • The facts
                              • The implications
                                • How can department stores reassert their position as experts?
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • The sector declined in 2018
                                        • Future growth expected to be slow
                                          • Core department store categories perform well
                                            • Beauty market set to become more challenging
                                              • Brexit uncertainty is ongoing
                                                • High street footfall continues to fall
                                                • Market Size and Forecast

                                                  • A slow department store recovery forecast
                                                      • Figure 11: UK department store sector size and forecast, 2014-24
                                                      • Figure 12: UK department store sector size and forecast, at constant and current prices, 2014-24
                                                    • Forecast methodology
                                                    • Consumer Spending

                                                      • Growth in core categories
                                                          • Figure 13: Consumer spending on the core department store categories, 2015-19
                                                      • Market Drivers

                                                        • Uplift in consumer confidence
                                                          • Figure 14: Mintel’s Financial Confidence Tracker, January 2017-May 2019
                                                        • Real incomes continue to grow
                                                          • Figure 15: Real wage growth – Average weekly earnings vs inflation, June 2016-May 2019
                                                        • Private renting on the up
                                                          • Figure 16: UK households, by tenure status, 2013-17
                                                        • Rising internet access boosts online market
                                                          • Figure 17: Household internet access, 2009-18
                                                        • Footfall continues to decline
                                                          • Figure 18: Change in UK retail footfall, by location, June 2016-May 2019
                                                        • Inbound tourism dipped in 2018
                                                          • Figure 19: Total overseas visits to the UK, 2010-19
                                                        • The value of Sterling stabilises
                                                          • Figure 20: Select international currency exchange rates, annual averages, 2005-19
                                                          • Figure 21: Select international currency exchange rates, annual averages, 2015-19
                                                        • The threat of Amazon
                                                          • Figure 22: Amazon reported and gross transactional value revenues, 2015-18
                                                      • Companies and Brands – What You Need to Know

                                                        • Polarised performance amongst the leading players
                                                          • John Lewis becomes the market leader
                                                            • Online sales continue to grow at a faster rate than stores
                                                              • Store innovation continues
                                                                • Perceptions of House of Fraser deteriorate
                                                                  • Changes in the UK department store sector are ongoing
                                                                  • Leading Players

                                                                    • Note on department store sales
                                                                      • Majors players struggling
                                                                        • Figure 23: Leading department stores, net sales, 2014-18
                                                                      • Ongoing store closures
                                                                          • Figure 24: Leading department stores, outlet numbers, 2014-18
                                                                        • A number battling with declining sales per outlet
                                                                          • Figure 25: Leading department stores, estimated sales per outlet, 2014-18
                                                                        • Operating profits are also falling, and margins being eroded
                                                                            • Figure 26: Leading department stores, operating profits, 2014-18
                                                                            • Figure 27: Leading department stores, operating margins, 2014-18
                                                                        • Market Shares

                                                                          • Leading players lose market share
                                                                            • Figure 28: Leading department stores, estimated market shares, 2018
                                                                            • Figure 29: Leading department stores, market shares, 2014-18
                                                                        • Online

                                                                          • Most leading players report strong online growth
                                                                              • Figure 30: Select leading department stores, estimated online revenues, 2014-18
                                                                            • Online continues to capture a greater share
                                                                                • Figure 31: Estimated online share of select leading department stores’ total revenues, 2014-18
                                                                              • Growth in the online market subdued by House of Fraser
                                                                                • Figure 32: Estimated online department store market size, 2014-18
                                                                              • Innovation in the online department store market
                                                                                • Harrods and Farfetch enter new partnership
                                                                                  • Fenwick makes the move online, whilst Liberty strengthens its offer
                                                                                    • John Lewis improves online order fulfilment
                                                                                      • Harvey Nichols merges the online and offline experience
                                                                                        • John Lewis targets online beauty and homeware buyers
                                                                                          • Note on methodology
                                                                                          • Launch Activity and Innovation

                                                                                            • Ongoing investment into store experience
                                                                                              • Figure 33: Selfridges’ menswear department, 2018
                                                                                            • In-store leisure gets an update
                                                                                              • Beauty continues to be a priority
                                                                                                • Figure 34: Harvey Nichols’ Hershesons beauty lounge, 2019
                                                                                              • Focusing on health and wellness
                                                                                                • An arty twist on experiential retailing
                                                                                                    • Figure 35: Fortnum’s X Franks exhibition, 2018
                                                                                                    • Figure 36: Selfridges’ State of The Arts campaign, 2019
                                                                                                  • New ways to engage customers
                                                                                                    • Additional services strengthen customer experience
                                                                                                        • Figure 37: The Restory Homepage, July 2019
                                                                                                        • Figure 38: The Restory and Selfridges partnership, 2019
                                                                                                    • Advertising and Marketing Activity

                                                                                                      • Year-on-year advertising expenditure up 23.2%
                                                                                                        • Figure 39: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, 2014-18
                                                                                                      • Marks & Spencer is the sector’s biggest advertising spender
                                                                                                        • Figure 40: Recorded above-the-line, online display and direct mail total advertising expenditure, by selected leading UK department stores, 2014-18
                                                                                                      • A major uplift in digital spending
                                                                                                        • Figure 41: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, by media type, 2018
                                                                                                        • Figure 42: Recorded above-the-line, online display and direct mail total advertising expenditure by selected leading UK department stores, by media type, 2014-18
                                                                                                      • Key campaigns
                                                                                                        • Christmas campaigns come thick and fast
                                                                                                          • Debenhams’ rebranding campaign
                                                                                                            • John Lewis & Partners’ product-led campaign
                                                                                                              • Nielsen Ad Intel coverage
                                                                                                              • Space Allocation Summary

                                                                                                                • Methodology
                                                                                                                  • Space allocation summary
                                                                                                                    • Figure 43: Department stores: summary of estimated in-store space allocation, July 2019
                                                                                                                  • Detailed space allocation estimates
                                                                                                                    • Marks & Spencer cutting floor space devoted to clothing and homeware
                                                                                                                      • John Lewis multi-million pound refurbishment scheme
                                                                                                                        • Selfridges opens the world’s largest accessories hall
                                                                                                                          • Figure 44: Selfridges champagne bar in its new accessories department, 2018
                                                                                                                        • House of Fraser revamp under new owner Sports Direct
                                                                                                                          • Fenwick extends jewellery offering
                                                                                                                            • Debenhams Beauty Hall of the Future and concession deals with home décor brands
                                                                                                                              • Figure 45: Department stores: detailed space allocation estimates, July 2019
                                                                                                                          • Retail Product Mix

                                                                                                                            • Methodology
                                                                                                                              • Estimated Sales Mix
                                                                                                                                • Figure 46: Leading department stores, estimated sales mix, 2018
                                                                                                                              • Estimated Sales Density
                                                                                                                                • Figure 47: Leading department stores, estimated sales density by broad product category, 2018
                                                                                                                            • Brand Research

                                                                                                                                • Brand map
                                                                                                                                  • Figure 48: Attitudes towards and usage of selected brands, April 2019
                                                                                                                                • Key brand metrics
                                                                                                                                  • Figure 49: Key metrics for selected brands, April 2019
                                                                                                                                • Brand attitudes: Debenhams offers good online service and value for money
                                                                                                                                  • Figure 50: Attitudes, by brand, April 2019
                                                                                                                                • Brand personality: M&S seen as ethical
                                                                                                                                  • Figure 51: Brand personality – macro image, April 2019
                                                                                                                                • House of Fraser thought to only care about profits
                                                                                                                                  • Figure 52: Brand personality – micro image, April 2019
                                                                                                                                • Brand analysis
                                                                                                                                  • John Lewis has a broad brand appeal and is highly recommended
                                                                                                                                    • Figure 53: User profile of John Lewis, April 2019
                                                                                                                                  • Marks & Spencer most trusted and offers the best customer service
                                                                                                                                    • Figure 54: User profile of Marks & Spencer, April 2019
                                                                                                                                  • Debenhams thought to be accessible and offers value for money
                                                                                                                                    • Figure 55: User profile of Debenhams, April 2019
                                                                                                                                  • Selfridges perceived as exclusive and expensive
                                                                                                                                    • Figure 56: User profile of Selfridges, April 2019
                                                                                                                                  • House of Fraser seen as boring and overrated
                                                                                                                                    • Figure 57: User profile of House of Fraser, April 2019
                                                                                                                                • Competitive Strategies

                                                                                                                                  • Acquisitions
                                                                                                                                    • Store closures
                                                                                                                                      • Rebranding
                                                                                                                                        • Store investment
                                                                                                                                          • Figure 58: Selfridges eyewear department, 2018
                                                                                                                                        • Sustainability
                                                                                                                                            • Figure 59: Harrods Fashion Re-Told Pop-Up, 2019
                                                                                                                                        • The Consumer – What You Need to Know

                                                                                                                                          • Leading players have lost customers
                                                                                                                                            • Fashion remains a priority
                                                                                                                                              • Online is encouraging shoppers away from department stores
                                                                                                                                                • John Lewis’ customer experience stands out
                                                                                                                                                  • A need for more staff expertise
                                                                                                                                                    • Differentiation needs to be a priority
                                                                                                                                                    • Where They Shop

                                                                                                                                                      • Two thirds shop with department store retailers
                                                                                                                                                        • Figure 60: Department stores used in the last 12 months, May 2019
                                                                                                                                                      • M&S leads both in-store and online
                                                                                                                                                        • Figure 61: Department stores used in-store and online in the last 12 months, May 2019
                                                                                                                                                      • Young men are driving the shift online
                                                                                                                                                        • Figure 62: How consumers shopped with department stores in the last 12 months, by age and gender, May 2019
                                                                                                                                                      • Most shop with just one or two retailers
                                                                                                                                                        • Figure 63: Repertoire of department stores used in the last 12 months, May 2019
                                                                                                                                                      • M&S is also the most frequently used retailer
                                                                                                                                                        • Figure 64: Department stores used most frequently in the last 12 months, May 2019
                                                                                                                                                    • Customer Profiles

                                                                                                                                                      • Luxury department stores attract more male consumers
                                                                                                                                                        • Figure 65: Department store customer profiles, by gender, May 2019
                                                                                                                                                      • Leading players more popular with older shoppers
                                                                                                                                                        • Figure 66: Department store customer profiles, by age, May 2019
                                                                                                                                                      • Most department stores have a bias towards urban shoppers
                                                                                                                                                        • Figure 67: Department store customer profiles, by location, May 2019
                                                                                                                                                      • Market positioning doesn’t always determine customer affluence
                                                                                                                                                        • Figure 68: Department store customer profiles, by socio-economic group, May 2019
                                                                                                                                                    • What They Buy

                                                                                                                                                      • Clothing remains the most purchased category
                                                                                                                                                        • Figure 69: What consumers bought from department stores in the last 12 months, May 2019
                                                                                                                                                      • What people buy is influenced by gender
                                                                                                                                                        • Figure 70: What consumers bought from department stores in the last 12 months, by gender, May 2019
                                                                                                                                                      • Department store fashion popular with older consumers
                                                                                                                                                        • Figure 71: What consumers bought from department stores in the last 12 months, by age, May 2019
                                                                                                                                                      • One in three only buy one type of product
                                                                                                                                                        • Figure 72: Repertoire of what consumers bought from department stores in the last 12 months, May 2019
                                                                                                                                                    • Frequency of Use

                                                                                                                                                      • Department store usage is infrequent
                                                                                                                                                          • Figure 73: Frequency of department store usage in the last 12 months, May 2019
                                                                                                                                                        • Men shop more often
                                                                                                                                                          • Figure 74: Frequency of department store usage in the last 12 months, by gender, May 2019
                                                                                                                                                        • Frequency highest amongst 25-34s
                                                                                                                                                          • Figure 75: Frequency of department store usage in the last 12 months, by age, May 2019
                                                                                                                                                        • Clothing buyers shop less frequently
                                                                                                                                                            • Figure 76: Frequency of department store usage in the last 12 months, by what consumers bought, May 2019
                                                                                                                                                        • Changes in Usage

                                                                                                                                                          • Department store usage is largely unchanged
                                                                                                                                                            • Figure 77: Changes in department store usage in the last 12 months, May 2019
                                                                                                                                                          • Why consumers are shopping with department stores more
                                                                                                                                                            • Figure 78: Why consumers used department stores more in the last 12 months, May 2019
                                                                                                                                                          • Why consumers are shopping with department stores less
                                                                                                                                                            • Figure 79: Why consumers used department stores less in the last 12 months, May 2019
                                                                                                                                                        • Satisfaction with Department Stores

                                                                                                                                                          • Consumers are relatively content
                                                                                                                                                            • Figure 80: Satisfaction with the department store retailer used most frequently in the last 12 months, May 2019
                                                                                                                                                          • John Lewis outperforms both M&S and Debenhams
                                                                                                                                                            • Figure 81: Satisfaction with the department store retailer used most frequently in the last 12 months, by leading players, May 2019
                                                                                                                                                          • Clothing buyers are least satisfied
                                                                                                                                                            • Figure 82: Satisfaction with the department store retailer used most frequently in the last 12 months, by core product categories, May 2019
                                                                                                                                                        • Key Driver Analysis

                                                                                                                                                          • Staff training should be a priority
                                                                                                                                                              • Figure 83: Key drivers of overall satisfaction with department stores, May 2019
                                                                                                                                                              • Figure 84: Overall satisfaction with department stores – key driver output, May 2019
                                                                                                                                                            • Methodology
                                                                                                                                                            • Attitudes towards Department Stores

                                                                                                                                                              • The discounting challenge is ongoing
                                                                                                                                                                • Figure 85: Attitudes towards department stores, May 2019
                                                                                                                                                              • Demand for own-label strongest amongst young consumers
                                                                                                                                                                  • Figure 86: Attitudes towards department stores, by age, May 2019
                                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                  • Abbreviations
                                                                                                                                                                    • Consumer research methodology
                                                                                                                                                                    • Appendix – Key Driver Analysis

                                                                                                                                                                        • Interpretation of results
                                                                                                                                                                          • Figure 87: Overall satisfaction with department stores – key driver output, May 2019
                                                                                                                                                                          • Figure 88: Satisfaction with department stores, May 2019
                                                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                                                        • Best- and worst-case forecast
                                                                                                                                                                          • Figure 89: UK department store sector size and forecast, best- and worst-case forecast, 2019-24
                                                                                                                                                                        • Forecast methodology

                                                                                                                                                                        Department Stores - UK - July 2019

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