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SINGAPORE: I woke up on the morning of October 30 to ominous text message “pings” announcing the closure of the iconic 162-year-old Robinsons department store.
When I read the news that Robinsons is closing its stores in The Heeren and Raffles City, like many Singaporeans, I had mixed feelings of nostalgia and inevitability about the future of department stores in Singapore and around the world.
The writing was already on the wall since the 1990s and 2000s when we saw the first wave of Japanese and European department stores like Sogo, Daimaru, Galleries Lafayette, Printemps and Lane Crawford leaving Singapore.
This was followed by the closing of John Little’s last store in Plaza Singapura in 2016, as well as the closure of the Isetan store in Jurong’s Westgate Mall and the Robinsons store in Jem earlier this year.
The retail body count continues to rise globally, especially for the once-dominant department store format.
According to GlobalData Retail, more than 190,000 stores representing nearly 50 percent of retail square footage in the US have closed due to the COVID-19 pandemic and economic crisis.
Many of these retail stores, which primarily sell non-essential items, may never reopen. Some of the established department store chains, such as Neiman Marcus and JC Penney, have filed for bankruptcy.
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Nordstrom’s and Macy’s are restructuring and raising capital to stay afloat and relevant.
In Singapore, the environment seems equally challenging for established players like Metro, Tangs, OG, BHG, Takashimaya, and Isetan.
Photo of OG Orchard Point. (Photo: Tang See Kit)
Some of the retail players, such as Marks and Spencer, can continue to operate profitably by improving operational efficiency, merchandising, and inventory management, while others, such as Metro, have diversified into real estate investments.
Even then, recent news reports show that Metro Holdings’ revenue slumped 71.5 percent and the increase in profit share was driven by contributions from a residential project.
PERMANENT CHANGES IN LIFESTYLES AND AN ECONOMY OF ISOLATION
While many observers agree that this trend has been exacerbated by the coronavirus pandemic, there are a multitude of business and competitive factors including permanent changes in shopper behavior and lifestyles that don’t bode well for the big stores.
Danny Lim, Robinsons senior general manager, told the media that changes in retail trends were due to increased e-commerce, cost pressures and lower demand for department stores.
He added that the department store model is outdated and the pandemic has only deepened the challenges department stores face.
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Some experts have also observed that Robinsons may have alienated many of his regulars after their rebranding and repositioning to become more luxurious and exclusive when the Al Futtaim group took over their operations.
Also, some of the new brands that were introduced to Singapore stores did not appeal to the locals.
Customers queue to enter Robinsons department store in Hereen off Orchard Road on October 30, 2020 (Photo: AFP / Roslan Rahman)
This reminded me of the branding and marketing mistakes Galleries Lafayette and Lane Crawford made when they opened department stores in Singapore by introducing expensive, luxury European brands that didn’t appeal to their clientele.
However, the biggest drawback has been the popularity of online shopping. Shoppers can purchase their favorite high-end and mass-market brands from e-commerce markets such as Lazada, Shopee, and Amazon, as well as directly from brands’ websites.
The great variety and variety of products and competitive prices available online at any time, has made online shopping the preferred option for buyers, especially the younger ones, with knowledge of digital technology.
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Designer brands such as Gucci, Prada, Louis Vuitton and Chanel that used to sell their products at retail in luxury department stores have gone directly to opening flagship luxury boutiques that offer personal shopping assistance and personalization, and through their direct-to-consumer channels (DTC) as well as its immersive and interactive websites and mobile applications.
For example, Louis Vuitton now offers live streaming purchases in certain markets.
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This trend has been evident since the 2000s, as luxury brands have been expanding their retail presence and competing with department stores in premium shopping locations.
Therefore, the share of department stores in luxury retail has been gradually declining, compounded by the presence of many online retailers and discount stores.
While department stores have responded by adding new premium brands and increasing the selection of private labels, the impact on sales has been limited.
This has made department stores less desirable as a destination for designer brands.
Singapore Lazada’s website is seen in this photo photo from June 20, 2017. REUTERS / Thomas White / Illustration
Additionally, the trend toward what some experts call the isolation economy is gathering momentum as more and more people become accustomed to the convenience of consuming products and services in the comfort and safety of their homes.
The pandemic has also forced many to work from home and avoid crowded shopping malls and department stores due to the risks of infection.
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The isolation economy has driven demand not only for online shopping, but also for e-learning, telemedicine, games, streaming entertainment such as Netflix and Spotify, and the growing popularity of “shopping entertainment” such as live streaming of Taobao, which combines e-commerce with entertainment. .
Analysts believe this trend is likely to continue after the pandemic ends, as consumers who have experienced the value, variety, convenience and security of consuming services and shopping from home may be less reluctant to return to the physical or recreational shopping.
LOCATION, LOCATION AND LOCATION
The famous maxim of a retailer’s success – location, location and location – may be less relevant, even for department stores that have historically preferred to locate in privileged districts as anchor tenants in busy shopping malls.
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The growing retail presence of luxury boutiques, massive brand name chain stores now also appearing in suburban shopping malls, and the popularity of online shopping have further diluted the strategic importance of having your store located in locations. privileged to capture visitors.
With the increasing popularity and convenience of e-commerce and voice commerce, shopping assisted by digital assistants like Amazon’s Alexa and Apple’s Siri, in the future, paying high rents for stores at premium shopping locations like Orchard Road may not make sense. commercial even if these places still attract high pedestrian traffic.
Shoppers pass the luxury brand stores on Orchard Road. (Photo: AFP)
High operating costs and the difficulty of attracting and retaining good retail talent make it very difficult for department stores to be financially viable while at the same time providing high standards of quality of service and shopping experiences.
Robinsons and Isetan, which have embraced the competitive saturation location-based strategy by opening more than one store in high-traffic locations like Orchard Road, may no longer be viable due to high rents, the accessibility of suburban shopping centers, and the fact that department stores are no longer considered destination stores.
CAN THE OMNICHANNEL RETAILER SAVE THE STORE BY DEPARTMENT?
In Robinsons’ experience, the attempt to go omnichannel, which is a combination of physical stores, e-commerce and mobile platforms, to attract younger shoppers, including the annual Black Friday sale, to provide variety, value and convenience is eroded. by competition from online retailers and brand director-to-consumer (DTC) channels.
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I also believe that Robinsons was relatively late in the omnichannel retail game, so his brand equity among online shoppers, mostly younger and digitally savvy shoppers, was not as strong as ASOS and Lazada, which have been on the market longer.
This means that department stores will continue to face challenges even if they embrace digital transformation and omnichannel retail at this stage.
Pedestrians are seen along Orchard Road in Singapore on October 30, 2020 (Photo: AFP / Roslan Rahman)
Ultimately, success and sustainability will depend on whether shoppers still value the personalized and tactile shopping experiences with the environment that luxury department stores provide.
However, evidence of shopping trends and behavior in Singapore and around the world seems to indicate otherwise. If so, this could spell the end of a one-stop shop like department stores.
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And if that happens, we may need to reinvent ways to continue to have the ability to go shopping during the holiday seasons.
One option is to replace these big-name stores with festival markets and pop-up stores in shopping belts or community areas.
As a buyer, I certainly hope that department stores will continue to be a part of Singapore’s retail scene and provide immersive and social experiences that online shopping cannot replace.
Dr. Prem Shamdasani, Associate Professor of Marketing and Academic Director, The NUS Executive MBA, National University of Singapore.The opinions expressed are those of the author and do not represent the views or opinions of NUS.
