Taking the personal out of shopping

The lights are on. The crowds are on the move. Wallets are being prised open. It is make or break time for large retailers.

Taking the personal out of shopping

There is upbeat talk of a long-awaited upturn, but we have been there before.

Last year, lobby group Retail Ireland got a bit ahead of itself; talking up a consumer recovery that never really happened.

An early budget seemed like the long-awaited panacea until the Revenue Commissioners decided to post out those ill-considered property tax letters.

The reopening of Clerys, following major reconstruction, has boosted hopes that in the county’s capital, at least, the flagship department stores are on the way back.

This, however, is a polarised market in which the Irish-based budget fashion chain, Penneys Primark, goes from strength to strength while upmarket Brown Thomas more than holds its own.

Primark is about to start work on a new 125,000 sq ft Dublin HQ.

Profits have risen by 44% this year. Sales last year exceeded £4bn, and there are plans to create 5,000 jobs across Europe.

Meanwhile, the mid-market stores continue to be squeezed out.

M&S is stagnating, propped up by its food store. Expensive marketing campaigns cannot hide the fact that its fashion racks appear dated while its customers are ageing.

The Irish operation is faced with industrial action over the unilateral decision of UK management to close down the defined benefits pension scheme at the Irish operation.

Along Grafton Street, A-Wear has gone into receivership again, putting hundreds of jobs at risk.

The chain is a victim of high rents and a succession of owners without retail in their blood, so-called ‘turnaround specialists.’

While department stores have followed their customers to the large suburban malls, some have struggled to achieve a real identity. The large House of Fraser store in the Dundrum Town Centre is a case in point.

The big old stores have shipped a lot of blows in recent years from a combination of recession and the spread of online technology.

Yet the people who predict the demise of the department store continue to be proved wrong.

Somehow, the old beast has managed to adapt, but some experts believe that major reinventions will be required if the department store is to recover the levels of profitability so many enjoyed before the financial meltdown.

Eddie Shanahan served as a director of Arnotts. He currently chairs the Council of Fashion Designers and works as a retail consultant.

He believes that many of the stores have lost their way, having handed far too much space over to concessions.

Over the fat years of the boom, buying skills were lost along with the ability to interface constructively with the customer.

He is also critical of poor store design and layout. In the revamped Clerys, customers complained about difficulties in actually locating departments.

In Shanahan’s view, priority should be given to staff training and to the revival of old skills.

He regrets the fact that so many employees have been taken off the floor, leaving customers short of someone to turn to.

His concerns are echoed by Michael Meegan, industrial organiser with the Mandate trade union.

He expresses concern about the arrival of venture capitalists as department store owners whose instinct is to strip costs to the bone.

The union has expressed fears for the future of 1,500 employees at Arnotts where the former plc’s debts are up for sale.

Arnotts once churned out profits of over €20m a year but fell prey to overambitious property plans and a re-privatisation led by Richard Nesbitt.

Meegan leans towards a management-led buyout of the debts, though he accepts that the takeover of Clerys by private owners in the form of the Boston-based, Gordons, has worked out well to date. The key is that Gordons has a long tradition of investing in retailing.

Meegan is impressed by their commitment to the flagship store on O’Connell St and he suspects that Clerys would not have survived the disastrous July flood if Gordons had not arrived to take over the place.

The union official is cautiously optimistic about prospects for his members. Mandate recently negotiated 3% pay increases for its members at Penneys, along with contracts offering employees guaranteed minimum working hours.

Eddie Shanahan believes that staff must develop much greater product knowledge while more of a sense of fun and innovation should be reintroduced to the department store visit experience. He points to cookery exhibitions, fashion shows and the old Lego exhibition at Arnotts as examples.

Consumers are increasingly splitting their buying, picking up the basics in Primark or Zara, while investing in quality, up-market pieces such as jackets that will last five or six years.

Many middle-income buyers now shop for luxury brands. Louis Vuitton has responded by introducing ‘invitation only floors’ for its high roller customers, not keen on rubbing shoulders with more ordinary people.

Shanahan deplores the spread of discounting in department stores. In his view, the constant discounting of stock is a sign that buyers are simply not up to the job.

“When I was going to school, there were two sales a year in the stores.”

He would like to see a return to the time when buyers rose up from the shop floor, having learned their trade, dealing face to face with customers.

In considering the future of the department store, it is tempting to conclude that stores will disappear from many cities as online buying spreads.

Amazon.com enjoyed sales of $61bn, last year, yet, as consumer writer, Clare O’Connor of Forbes Magazine points out, this is just 13% of what Wal-Mart achieved.

The US research group, WD Partners, surveyed 1,700 customers of all ages.

It concluded that the bricks and mortar model remains viable, but that the younger respondents got, the less physical contact (with goods) mattered. One key finding is that stores must differentiate themselves.

“The more you are like a warehouse, the more Amazon is going to crush you.” according to Lee Peterson of WD Partners.

He believes that bricks and mortar stores will increasingly integrate online characteristics, with staff being equipped with laptops able to access information on stock and to order it for delivery.

Another survey by LIM College with the US National Retail Federation found that 68% of 18 to 25-year-olds prefer to shop in stores for clothing and shoes.

A key conclusion is that retail observers may be significantly overestimating the continued growth potential of online shopping.

Big catch-all centre stores could yet thrive, particularly on the back of investment in good restaurant and other leisure facilities.

Much could depend on extraneous factors. Improved traffic management — that is, fewer swingeing fines for motorists and better public transport can play a big part in reviving city centre stores. But the future of ageing suburban malls could be much more doubtful.

Interestingly, some online stores are now opening outlets on top high streets, an example being the cyclewear company, Rapha.

A few may opt to establish a presence in department stores. Rapha CEO, Simon Mottram says: “It is hard for brands to engage with their customers in a purely digital way. That may be fine if your business is about conducting simple transactions, but if you truly want to connect with a customer and create an ongoing relationship with them, then a physical experience is inevitable.”

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