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Global Department Store Retailing - Verdict Channel Report

Global Department Store Retailing - Verdict Channel Report


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Executive Summary

We saw a decline in global department store expenditure growth in 2013 caused by a slower European recovery and weak Japanese currency rates. However, we forecast that the market will recover in 2014, growing by 3.5% and exceeding USD480bn as department stores invest in improving their instore services and multichannel offer to drive shopper expenditure.

Key Findings

Make informed investment decisions using department store expenditure forecasts to 2019 for seven defined regions.

Benchmark your company's performance by accessing profiles of 12 department store operators including their global market shares.

Glean how competitors have expanded internationally, via stores, online, or new retail formats and learn which is most suitable for your business.

Understand why tourists are being targeted by department store operators and how they are increasing tourists' spend instore.

Learn about Japan's shrinking department store market and how domestic players are investing in new retail formats to halt sales' declines.

Synopsis

Growth between 2014 and 2019 will be driven by strong sales in the Asia Pacific region and much improved growth in America. We expect economies in Europe that have been particularly impacted by the recession to reach a point of recovery, while the squeezing of household incomes will ease, resulting in higher discretionary spending.

North America's share of the global department store market has declined by 4.9 percentage points in the five years to 2014, and we forecast that this will continue to decline gradually as less developed retail markets such as Latin America and Asia Pacific provide department stores with greater opportunities to expand.

According to Verdict's Global Wealth Model, there will be a rise in the number of affluent consumers and burgeoning middle classes across the world. This will aid retail expenditure growth over the next five years, particularly for luxury and premium department stores players, which target those consumers who have seen their incomes rise.

Reasons To Buy

Which markets hold the most potential for department store retailers and should I invest in them? What countries are players expanding into?

How did department store operators such as Macy's, Sears, Kohl's, Nordstrom, JCPenney and Isetan Mitsukoshi perform last year?

What can I learn from luxury players on instore experience and what changes shall I make to customer service to stand out from competitors?

1 Overview

2 Executive Summary

2.1 The global department store market will grow by 3.5% in 2014...

2.2 ...and 22.2% growth to USD590bn is forecast for the next five years

2.3 Expansion opportunities remain in China, while Japan's recovery will be gradual

2.4 North America will continue to lose share as competition mounts

2.5 Rising consumer affluence and growing tourism will benefit the premium department store market

3 Recommendations

3.1 Seizing growth opportunities becomes vital as consumers opt to spend at specialists

3.1.1 Markets to target

3.1.2 Adapt expansion strategy to suit the local market

3.1.3 Competition in select markets is rife, with specialists continuing to encroach on the channel

3.1.4 Department stores must gain a larger slice of tourism spend

3.1.5 Increase the potential of the online channel

3.1.6 Focus on customer engagement to garner loyalty

3.1.7 Enhance product ranges to maximise spending

4 Market Size

4.1 Market definition

4.2 Global department store market to grow by 3.5% in 2014

4.2.1 Global department store market to exceed USD480bn in 2014

4.2.2 Weaker demand in Europe and North America impacts global market in 2013

4.2.3 Softer demand in Japan amid shift in consumer behaviour

4.2.4 China is strongest market, retaining international appeal

4.2.5 Mature markets North America and Europe suffer and lose share...

4.2.6 ...while China and Latin America continue to achieve strong growth

4.3 Europe sales expenditure returns to 2009 levels

4.3.1 Subdued economy slows down European department store market recovery

4.3.2 Weaker demand and lack of differentiation impact El Corte Ingls and M&S

4.3.3 Luxury department stores benefit from tourist spend

4.3.4 Retailers invest in product ranges to drive appeal

4.3.5 Favourable exchange rates will boost overseas visitors

4.3.6 Galeries Lafayette looks overseas for growth

4.4 North America's share of the market continues to fall

4.4.1 JC Penney and Sears struggle to compete in a weak market

4.4.2 North America continues to lose share as its market matures

4.4.3 JC Penney's repositioning strategy confuses shoppers

4.4.4 Sears loses relevance among shoppers

4.4.5 Canada benefits from premium players expanding

4.4.6 Nordstrom's instore environment and customer service drive sales

4.4.7 Relaxation of visa restrictions will boost tourism and lead to higher expenditure growth

4.4.8 Department stores capitalise on sales potential within the beauty sector

4.5 Asia Pacific region to account for almost half of global expenditure in 2014

4.5.1 Regional growth to rebound in 2014, outperforming the global market

4.5.2 Japanese market to contract by 7.3% in five years to 2014

4.5.3 Asia Pacific ex Japan and China forecast to exceed USD40bn in 2014

4.6 Latin American market to grow by 75% between 2009 and 2014

4.6.1 Department store market records second fastest growth, behind China

4.6.2 Global slowdown impacts Latin American economy...

4.6.3 ...but recovery expected in 2014, especially in Brazil

4.6.4 Credit availability supports expenditure growth

4.6.5 Expansion remains a focus for domestic incumbents

4.6.6 Sporting events bring focus to Brazil, but will have minimal impact on spending

4.7 Department store market in the Middle East and Africa remains buoyant

4.7.1 Growth exceeds total market in 2013

4.7.2 Remains a resilient market but holds a minimal share of global expenditure

4.7.3 African market forecast to grow by 35.2% between 2009 and 2014

4.7.4 Rising affluence aids spending

4.7.5 Political unrest reduces appeal of Middle East...

4.7.6 ...though recent figures show stronger tourism levels

4.7.7 Intense competition in the premium to luxury segment in the Middle East...

4.7.8 ...but the market holds potential for midmarket players

5 Market Forecast

5.1 22.2% growth forecast for five years to 2019

5.1.1 Global department store market to reach USD590bn in 2019

5.1.2 On-going rise in affluent consumers to aid premium department store market...

5.1.3 ...encouraging shoppers to travel and spend overseas

5.1.4 Expansion opportunities lie in Eastern Europe

5.2 North America will continue to lose share as China grows its lead position

5.3 Growth opportunities remain across Europe

5.3.1 European recovery will be gradual

5.3.2 Mature markets impacted by economic downturn will gradually rebound

5.3.3 Transformation for House of Fraser underway in the next two years

5.4 North America's growth much improved on preceding five year period

5.4.1 A turnaround is expected for JC Penney, though there will be no quick wins

5.4.2 Future looks bleak for Sears Canada as competition intensifies in the region...

5.5 Asia Pacific growth to slow in the five years to 2019

5.5.1 China's department store market to grow by 38% between 2014 and 2019

5.5.2 Subdued growth forecast for Japanese market

5.5.3 Asia Pacific excluding Japan and China forecast to exceed USD60bn in 2019

5.6 Latin American market to account for 5.2% of global expenditure in 2019

5.6.1 Growth of 41% in Latin America presents opportunity for players

5.6.2 Midmarket and premium department store chains must take advantage of growing affluence

5.6.3 Potential for market entry in less competitive markets

5.6.4 Growth opportunities for e-commerce in the region

5.7 Growth in the Middle East and Africa to remain in single digits in coming six years

5.7.1 Region still forecast to hold minimal share of global market

5.7.2 Shopping mall roll out provides growth opportunities, but rapid turnover ensures caution is required

5.7.3 Growing appeal of mono-brand retailing puts pressure on department stores

5.7.4 Online retailing not forecast to take off

5.7.5 Stronger growth forecast for Africa

6 Trends

6.1 Customer engagement opportunities to drive loyalty

6.1.1 Building loyalty among shoppers is paramount for department stores to maintain relevance

6.1.2 Brand personality provides a point of differentiation

6.1.3 A superior instore experience is required to compete with specialists and engage shoppers

6.2 Department stores must relentlessly improve their multichannel offer

6.2.1 New transactional websites remain a cheaper and less risky method of expansion

6.2.2 Players now need to do more than just provide a user-friendly site...

6.2.3 Annual delivery passes, lockers and click & collect will enhance online shopping convenience

6.2.4 Luxury players must compete with pureplay rivals on editorial content

6.2.5 Department store players must drive better online conversion rates

6.3 Private label should be central to the department store proposition

6.3.1 Private label ranges drive footfall and loyalty

6.3.2 Rationalisation of brand portfolios required to avoid confusion...

6.3.3 ...but segmentation is key

6.3.4 More activity at the premium end expected...

6.3.5 Designers provide more long-term prospects than celebrities

6.4 Attracting tourists is imperative due to their high spending power

6.4.1 Increased tourism will boost department store expenditure in mature markets

6.4.2 World Tourism Organisation expects influx of international arrivals by 2020

6.4.3 Relaxation of visa restrictions will lead to higher expenditure growth

6.4.4 Department stores have introduced visitor discounts to encourage tourists' spending

6.4.5 And are ensuring their instore services and product offering cater to foreign visitors

7 Market Shares

7.1 Macy's to maintain lead in 2014

7.1.1 Marks & Spencer's international business helps to protect market share

7.1.2 Smaller players steal share from larger players

7.1.3 Challenges remain for losing US players

7.2 Operating statistics

8 Methodology

8.1 Building up the market size

8.2 Forecasts

8.3 Exchange rates

8.3.1 Global Wealth Model methodology

8.3.2 Forecasting methodology

8.4 Datamonitor's wealth data

8.4.1 Definitions

9 Appendix

9.1 About Verdict Retail

9.2 Disclaimer

Figure 1: Global department store expenditure (USDbn), 2009-14e

Figure 2: Share of department store expenditure by region (%), 2009 and 2014e

Figure 3: European department store expenditure (USDbn), 2009-14e

Figure 4: North American department store expenditure (USDbn), 2009-14e

Figure 5: JC Penney online, 2013

Figure 6: Asia Pacific department store expenditure (USDbn), 2009-14e

Figure 7: Asia Pacific regional splits (%), 2009 and 2014e

Figure 8: Chinese department store market will grow by 76.6% between 2009 and 2014

Figure 9: Japanese department store expenditure (USDbn), 2009-14e

Figure 10: Asia ex Japan and China department store expenditure (USDbn), 2009-14e

Figure 11: Galeries Lafayette store in Jakarta, Indonesia

Figure 12: Latin American department store expenditure (USDbn), 2009-14e

Figure 13: El Palacio de Hierro's 'Dias Amarillos' promotional events

Figure 14: The Middle East and Africa department store expenditure (USDbn), 2009-14e

Figure 15: International department store operators in the Middle East

Figure 16: Global department store expenditure (USDbn), 2014e-19e

Figure 17: Share of department store expenditure by region (%), 2014e and 2019e

Figure 18: European department store expenditure (USDbn), 2014e-19e

Figure 19: North American department store expenditure (USDbn), 2014e-19e

Figure 20: Asia Pacific department store expenditure (USDbn), 2014e-19e

Figure 21: Chinese department store expenditure (USDbn), 2014e-19e

Figure 22: Japanese department store expenditure (USDbn), 2014e-19e

Figure 23: Asia Pacific (ex. Japan and China) department store expenditure (USDbn), 2014e-19e

Figure 24: Latin American department store expenditure (USDbn), 2014e-19e

Figure 25: The Middle East and Africa department store expenditure (USDbn), 2014e-19e

Figure 26: Wig fair at Takashimaya's Shinjuku branch, 2013

Figure 27: JC Penney's revised pricing strategy, 2012

Figure 28: JC Penney's Facebook message, May 2013

Figure 29: Lane Crawford's Beauty+ card, January 2014

Figure 30: Central Department Store app, January 2014

Figure 31: Myer's Twitter feed, January 2014

Figure 32: John Lewis Christmas advertising campaign, 2011

Figure 33: Holt Renfrew's blog, holts muse, January 2014

Figure 34: Harvey Nichols UK advertising campaign, 2012

Figure 35: Macy's Herald Square shoe salon, New York, 2012

Figure 36: Selfridges' email and transactional website, January 2014

Figure 37: Selfridges' Festival of Imagination, 2014

Figure 38: Online recommendations by region, 2014

Figure 39: M&S German and Sears Puerto Rico transactional websites, 2014

Figure 40: Barneys' featured favourites, 2014

Figure 41: Intime's Alipay Wallet, 2013

Figure 42: House of Fraser's click & collect department, Aberdeen

Figure 43: Net-a-Porter live, 2013

Figure 44: Google search results for 'blue men's shirt' and 'women's cocktail dress', 2014

Figure 45: Benefits of private label in department stores, 2014

Figure 46: Chester & Peck, El Palacio de Hierro, Mexico

Figure 47: Debenhams' House of Holland range by designer Henry Holland, September 2013

Figure 48: Harrods Gatwick, 2013

Figure 49: Macy's visitor discount and Takashimaya's tourist privileges passport, 2013

Figure 50: Harrods QR code for WeChat, 2013

Figure 51: Market shares of leading global department store operators (%), 2014e on 2009

Figure 52: Winners and losers in the global department store market, 2014

Figure 53: Revenue of leading department store operators (USDbn), 2014e on 2013e

Figure 54: Operating margins of leading department store operators (%), 2013

Table 1: Global department store expenditure (USDbn), 2009-14e

Table 2: Global department store expenditure by region (USDbn), 2009-14e

Table 3: Year-on-year growth of global department store expenditure by region in dollar terms (%), 2009-14e

Table 4: Share of global department store expenditure by region (%), 2009-14e

Table 5: European department store expenditure (USDbn/EURbn), 2009-14e

Table 6: North American department store expenditure (USDbn), 2009-14e

Table 7: Asia Pacific department store expenditure (USDbn), 2009-14e

Table 8: Chinese department store expenditure (USDbn), 2009-14e

Table 9: European department store expenditure (USDbn/EURbn), 2009-14e

Table 10: Asia ex Japan and China department store expenditure (USDbn), 2009-14e

Table 11: Latin American department store expenditure (USDbn), 2009-14e

Table 12: The Middle East and Africa department store expenditure (USDbn), 2009-14e

Table 13: Global department store expenditure (USDbn), 2014e-19e

Table 14: Global department store expenditure by region (USDbn), 2014e-19e

Table 15: Year-on-year growth of global department store expenditure by region (%), 2014e-19e

Table 16: Share of global department store expenditure by region (%), 2014e-19e

Table 17: European department store expenditure (USDbn/EURbn), 2014e-19e

Table 18: North American department store expenditure (USDbn), 2014e-19e

Table 19: Asia Pacific department store expenditure (USDbn), 2014e-19e

Table 20: Asia Pacific department store expenditure (USDbn), 2014e-19e

Table 21: Japanese department store expenditure (USDbn/bn), 2014e-19e

Table 22: Asia Pacific (ex. Japan and China) department store expenditure (USDbn), 2014e-19e

Table 23: Latin American department store expenditure (USDbn), 2014e-19e

Table 24: Latin American department store expenditure (USDbn), 2014e-19e

Table 25: Leading department store operators' global market shares (%), 2009-14e

Table 26: Leading global department store operators by revenue (USDm), 2009-14e

Table 27: Leading global department store operators by revenue growth (%), 2009-14e

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