Designing a future for the modern department store

House of Ashley? Debenhams Picture House? M&S Residential? White-label boxes? What is to become of the space left behind from department store closures and the shops under new ownership?

Communities where Debenhams, House of Fraser and Marks & Spencer (M&S) are closing stores should expect gaps to be filled by a leisure, hospitality, residential and retail space, according to the Colliers retail agency.

The property firm’s co-head of retail, Dan Simms, says most property owners of affected stores will have been working on provisions for some time, having expected the current trend for closing down physical space in mid-sized towns and cities.

“Quite a few of them have residential and hotel potential, and are attractive buildings in central locations,” he explains. “Some of the bigger city ones will have office demand and flexi office solutions, but also some will have leisure demand from cinemas and gyms. I think you’ll see interesting creative solutions and it’s not going to be retail across all of them.”

This refocusing comes as House of Fraser, which collapsed in August before immediately being acquired for £90m by Sports Direct in a pre-pack administration deal, prepares to close several stores.

Under the previous Sanpower Group ownership, 31 of its 59 stores were mooted for closure, but some of these – including the flagship London Oxford Street shop – have been saved from shuttering by new owner Mike Ashley, who has acquired the shops and brand but not the debt owed to creditors.

Elsewhere, Debenhams is making plans to cull 10 stores and downsize others, and M&S is speeding up its 100-plus shop closure programme. John Lewis, too, is working on new store models, although does not currently have plans to close any of its 50 shops.

Colliers suggests replicating the leasing approach of UK factory outlets on the wider high street, as a way of improving landlord-tenant relationships that have been tarnished by some of the recent closures and controversial use of company voluntary arrangements across UK retail.

It proposes standard five-year leases granted outside of the 1954 Landlord & Tenant Act and rents based purely on retailer turnover in that particular shop. Colliers is also championing a ‘white box’ approach to shop layout, where basic fitted units are made available to retailers to minimise fit-outs.

Simms says: “Experiential shopping is not going to be focused at every store in a 400-store portfolio, for example – it might be 50 stores where you have that level of shop-fit but in the medium-sized store in a medium-sized town you are probably not going to create a full-on flagship.

“I think retailers should have shop-fit quality A, B and C, for example, and grade them accordingly. There are lots of retailers out there that say we have Grade A and Grade A goes everywhere, but I don’t think the market is strong enough in certain areas to sustain that anymore.”

House of Fraser’s original list of stores to close included shops in towns and cities, from Bournemouth to Birkenhead, Cwmbran to Chichester, and Doncaster to Darlington. While there is a chance some of these will remain open, as Sports Direct’s Ashley assesses the portfolio he has inherited, it is mid-sized retail centres like these where Simms believes outlet-style leasing and design is suitable.

Local concerns and House of Fraser

Anchor store closures have a different economic impact dependent on location, and there are always some areas that suffer more than others. Although their civil leaders are positive about the future, Bournemouth and Darlington are towns with multiple closures.

M&S closed in Bournemouth in April, while Darlington is set to lose that retailer too, potentially creating a double blow for each of these areas if House of Fraser departs. B&M has only just confirmed it will be occupying the abandoned Bhs unit in Darlington, which has been empty since 2016.

Staff at the House of Fraser stores previously scheduled to close are nervously waiting to hear if they are to gain a reprieve in the way the retailer’s Oxford Street location, and latterly, its Telford and Plymouth stores have. Announcements on all are imminent – but at the time of writing just three have been saved.

Graham Soult, a retail consultant who has visited 26 of the 31 House of Fraser stores originally earmarked for shuttering, argues that Ashley has a vested interest in keeping many of his newly-acquired stores open, including ones in towns where his other businesses such as Flannels reside.

“Even though the House of Fraser store in Darlington, for example, clearly isn’t doing as well as it should, it still draws people to to the town – it’s a reason to go to Darlington as opposed to Newcastle or Gateshead’s Metrocentre, and that will benefit nearby Flannels in terms of footfall,” he explains.

But one thing Ashley must address, according to Soult, is the look and feel of the stores he has inherited. The analyst suggests there must be a focus on restaurant facilities, beauty lounges and personal shopping to give them a point of difference.

“Sometimes it’s just down to basic housekeeping. I’ve previously blogged about the sorry state of the toilet in the House of Fraser in Darlington because it struck me as bizarre they were so grotty, while they were trying to sell very expensive handbags on the shop floor.”

Soult continues: “Getting everyday details right – making stores clean, tidy and smart – is fundamental for a store trying to sell classy products. It’s where Flannels is very good – it spends a fortune fitting out stores before opening, including the shop which was an old Bhs in Middlesbrough.

“You’d never know it was a former Bhs – it was completely transformed. If, as Ashley says, he’s aiming to create the ‘Harrods of the high street’, he’ll have to invest in the store fitouts. A lot of those House of Fraser buildings have some real charm, so if you strip back some of the modern excretions and let the buildings breathe they can work really well.”

Sandersons in Sheffield
Sandersons in Sheffield

Department stores with a difference

Department store chains radically reducing their estates are mid-market players that have all seen market share decline, according to research organisation GlobalData.

Statistics show between 2007 and 2017, former market leader M&S’s share dropped from 32.6% to 23%, falling 2% behind the new number one department store, John Lewis. Debenhams’ share slipped from 16.6% to 14.2% and House of Fraser’s from 8.2% to 7.4%.

John Lewis has increased its control of the sector from 19.4% to 25% over that time, but even issued a profit warning itself in June, highlighting far-reaching sector challenges.

Visual Thinking managing director Karl McKeever says the Debenhams and House of Fraser issues are not emblematic of the sector. He argues: “What we’re seeing is symptomatic of the troubles at mid-market – if you’re mid-market, be it grocery store, department store or multiple store, that is where the issues are.

“The problem is too many stores, they’re quite ubiquitous, the brand mixes they sell are easily available online and in other places. In the good days they were prepared to acquire lots of space and to open space that was competent not excellent, but I’m afraid that chicken has come home to roost.”

He calls for the creation of “hero spaces” in department stores where retailers and brands can tell their stories in more compelling ways. GlobalData figures support that view, with experience-led luxury retailers such as Harrods and Selfridges among those growing market share alongside the likes of Liberty and Fortnum & Mason.

Deborah Holmes
Deborah Holmes

Independents such as Sheffield-based Sandersons, which is part of the Yorkshire city’s Fox Valley development, are proving what can be done with attention to design detail, too. Be it the plant decorations outside its store, appealing windows, or personal shopping facilities inside, it tailors its offering to a local audience.

Describing her store, Sandersons’ managing director Deborah Holmes says: “The layout is customer friendly, attractive and interesting with the shopper in mind, aisles are wide and we’ve create plenty of break-out areas with attractive and comfortable seating where friends and partners can relax, as well as an in-store cafe to promote dwell time and enhance the shopping experience.  

“Our changing rooms and toilets are furnished to a really high standard as well; these little touches are so important and creating a lovely environment is what sets the physical retail experience apart from the online experience. This tells our customer that they’re really valued and that’s important to us, we want every aspect of the experience at Sandersons to be a pleasant one.”

New life for old department stores?

As Mike Ashley continues his assessment of the House of Fraser portfolio, with announcements about the business, its strained supplier relationships, and real estate plans, an almost daily occurrence, there is a clear need to address design and proposition. If he finds a solution that helps drive shopper numbers up, the story around mid-market department stores could yet improve.

Soult says: “You can imagine if Ashley can work out what the offer needs to be and can hone it and get it working in the existing stores, there is no reason why additional House of Fraser stores can’t open in the future. It doesn’t have to be a business that gently declines. If the offer works and is profitable, there is no reason why they couldn’t expand rather than shrink.”