House of Fraser chairman Frank Slevin yesterday recognised the changing shape of the high street as the company announced plans to shut 31 stores, taking its total store estate from 59 to 28.
“The retail industry is undergoing fundamental change and House of Fraser urgently needs to adapt to this fast-changing landscape in order to give it a future and allow it to thrive,” he said. “Our legacy store estate has created an unsustainable cost base which, without restructuring, presents an existential threat to the business.” His colleague Alex Williamson, chief executive of House of Fraser, said this announcement, “one of the most important in this company’s 169 year history,” was very much about whether the company continued to exist.“We, as a management team, have a responsibility to take necessary steps to ensure House of Fraser’s survival, which is why we are making these proposals.”
This is by no means a one off shock, but the latest evidence of deep change in the way that retail is organised. Currently the industry appears to be at a tipping point as the balance of power in retail moves from the store to online, driven by changing customer behaviour. Here are three big changes we are seeing in the way that retail is organised – and what they mean for House of Fraser.
Falling footfall is leading to reduced store numbers
As footfall has decreased – down by 4.8% on the previous year over March and April according to Springboard figures – so too have store numbers. House of Fraser is relatively late in the news cycle with its announcement of shutting 31 stores. Marks & Spencer said last month that it would close more than 100 stores by 2022, reducing the space it gives to home and clothing by 25% as it looks to make a third of its turnover from those categories online by that date. New Look is reducing its store numbers by 60, while Mothercare is also cutting store numbers as it reduces its stores by 50, from 137 to a ‘right size’ of 78. All are increasing their focus on digital: M&S says that its aim is to have fewer but more inspirational stores that will play their part in a “seamless online experience”. House of Fraser too says in its transformation plan, according to its briefing to investors this week, that it will become an “ecommerce-led retailer offering a seamless multichannel proposition and integration between in-store and online customer experience.” Its stores will be “in affluent locations offering the finest brands in ever-evolving and improve retail experience centres.”
Department store sales moving online faster
In March, while online sales grew by 13.3%, according to the Office for National Statistics, department store online sales moved still faster. That month they grew by a third (33%) and accounted for 17.1% of all sales made in the sector. In its presentation to investors, House of Fraser cites BRC-KPMG Retail Sales Monitor figures showing 29.6% of clothing sales now taking place online, along with 22% of total retail sales. House of Fraser says that there have been 2.5 years of negative growth for physical store sales, and that the categories it sells are moving online most rapidly.
House of Fraser’s competition is focusing on customer service – in the case of John Lewis – and shopping as a social activity – in the case of Debenhams – in order to counteract the move online. In its briefing for investors, House of Fraser said that it aimed to “become the antidote to the issues of the high street”, targeting market gaps in luxury and premium and building “a brand proposition based on our extraordinary DNA”. It’s telling that in its transformation update to investors it said it would this year be starting the journey towards a single customer view, something that many retailers have been working on for several years already.
Brands selling direct
More brands are selling direct: today we also report on how clothing brand Joules and gaming brand Games Workshop are seeng their sales lift as they focus on giving their very different groups of customers the experience that they want, both online and offline. House of Fraser says that its focus will be on the brand proposition, with a high concentration of premium brands in order to become “the house of brands”. But today’s multichannel marketplace means that today retailers such as department stores are competing against the brands that they sell, whether that’s through their own direct sales online or in stores.