A couple weeks ago, in Part I of my reflections on department stores in the UK and USA, I looked at the starkly different political, cultural and technological context so many of these iconic stores around the world were born into. It left me feeling worried about their ability to retain their relevance, because – while we may see today’s circumstances as challenging – it’s the question they have faced each and every year that they’ve been trading.
But there is another question at the heart of the challenge, and that is who they are remaining relevant to. Specifically, are they able to appeal to younger generations of consumers?
“But there is another question at the heart of the challenge, and that is who they are remaining relevant to. Specifically, are they able to appeal to younger generations of consumers?”
Research published last month by Bain & Co suggests that US department stores at least are struggling. Their survey data, based around net promoter scores, show that the strongest support for department stores in the critical category of women’s clothing comes from those aged over 45. Amongst 18-24 year-olds, they receive a negative NPS of -7; in other words, there are more detractors than there are promoters.
Is this indicative of a permanent, existential shift – or is there something that department stores could be doing?
In order to understand this better, I spoke to a 26-year-old young woman from Shenzhen, China, the country’s fastest-growing city, located just 20 minutes by bullet train from Hong Kong. Ada told me that ‘young people in China love hanging out in department stores’. Interestingly, her definition of a department store is really a shopping mall. Ada explained how department stores in China have evolved into multifunctional shopping centres over the past few decades. She told me that unlike in Europe, where people visit department stores to save time and conveniently complete all their, for example, Christmas shopping in one place, or go specifically to buy something, or to try a new makeup brand, in China, people often go to shopping malls for recreation, down time or to meet friends – and come away having not bought anything but had a lovely day out. As a result, in busy commercial areas, it’s common to find two shopping centres within a single square kilometre.
Shenzhen, China’s fastest growing city
These centres offer a vast array of experiences – restaurants, karaoke, cinemas, VR experience centres, and pop-up exhibitions. She says: ‘for my generation in China, it’s the go-to place to hang out, partly because there aren’t many other modern leisure options in the city’.
Ewan Venters, CEO ArtFarm and previously CEO of Fortnum & Mason for 11 years, wrote to me after reading Part I and he said: ‘I think the biggest threat to department stores is twofold. Firstly, the skills gaps in the quality of merchants to curate what’s desired and the second is the obvious clue that a department store must be a curation of departments, per the name, Department Store. Floors of individual branded outlets with fixed walls and doors will destroy the definition of what a department store is – a shop for the many, not just the few’.
Speaking to William Kim, CEO Shinsegae in Korea, he explained to me clearly that there is a very big difference between department stores and shopping malls. He said that shopping malls are led by landlords and property owners – big boxes divided by walls and doors – it is the convenience of different stores under one roof, usually food in the basement and good parking facilities. Landlords need to rent the space and so you often end up with odd adjacencies. Department stores, he says, are usually vertical and in the best department stores, every inch is carefully curated. Nothing is accidental and there is a sensitivity around what goes where. You go to department stores to find the unexpected.
“Speaking to William Kim, CEO Shinsegae in Korea, he explained to me clearly that there is a very big difference between department stores and shopping malls.”
Shinsegae Centum City in Seoul is the largest department store in the world. Spanning 3.16 million square feet across 14 floors, it has a golf course, a large roof garden, an ice-skating rink and an exhibition space. On the ninth floor, there is an outdoor theme park that features dinosaurs and pirate ships. On the top floor, you find cooking lessons, yoga sessions, a world-class spa, and mother and baby classes.
William explains that there is a high density of affluent communities living in 30-storey apartment blocks, amongst which there will be a Shinsegae department store. With an extremely loyal customer base and a world-class loyalty programme, customers come to meet friends, and usually meet to eat together. The entire basement is set out for food and then throughout that store there are many restaurants. For Shinsegae, food anchors a store – he says that Korean culture is similar to that of the Italians and is often centered around eating. What that means therefore, is often families and friends come to Shinsegae for a day of sightseeing and eating together.
Image source: Shinsegae International
And then there is the pace of brand curation.
Luxury brand floors, Kim tells me, are often recognisable and the same world over, but when he talks about the pace and frequency of changeover, the introduction of new concepts and brands and how that approach drives customers of all ages to journey through stores on a journey of discovery, the scale, the speed to change and access to capital is a real game changer.
“Korean culture, and especially Korean youth culture, has gone global in recent years — from K-pop to beauty to cinema, TV, books and to technology.”
Korean culture, and especially Korean youth culture, has gone global in recent years — from K-pop to beauty to cinema, TV, books and to technology. At least for now, some of their best department stores, and some others in the wider region, are creating relevance with new generations of consumers. Here’s hoping that this is something else that can be exported globally.
