The answer to the plight facing our department stores – falling profits and market share – lies in understanding a fundamental shift in the nature of our economy.

The world’s economies are no longer supply driven, with retailers supplying an array of products that tempt us to buy. Our economies today are demand-driven – retailers understand our current needs and wants and, even better, dream up products that we will want to buy in the future.Brands in every industry, from media to retail, are collapsing under the pressures of the commoditisation of most goods and services caused by the ubiquity of the internet. Consumers are all-powerful; they are informed on brand, quality, price and performance. If the transaction is just about supply and price, consumers win. The brands that are growing are those that understand us better than we understand ourselves. Think Apple. Think Google.

The role of curation
Today’s shoppers are overwhelmed with choice, and this fact provides department stores with an opportunity: to become curators on behalf of their customers.

Admittedly, their sphere of influence is smaller than it once was – perhaps permanently. Department stores once sold everything from white goods to hardware. But those were the days when the top floor of David Jones was the venue for a gala dinner for Queen Elizabeth’s visit to New South Wales in the 1950s, and when our mothers wore hats and gloves to go shopping.

The rise of the “category killers” – Bunnings and Mitre 10 in hardware, Ikea and Freedom in furniture, Harvey Norman and Bing Lee in whitegoods and TVs – is one reason for the department stores’ decline.

Winners
Let’s take a look at the most successful shopping centres in Australia: Chadstone in Melbourne’s south-east. “Chaddie” has the highest turnover per square metre of any shopping centre in the country.

Why? It is positioned as the home of luxury fashion brands, from Burberry to Louis Vuitton. David Jones Chadstone alone is home to over 800 brands. Imagine if department stores took their curation role one step further, and developed their own house brand?

What if they selected items from every corner of the globe – underlined by a definable value such as “quality”, “reliability” or perhaps “sustainability” – and curated their own range, be it under the names of David Jones or Myer or Selfridges? They might be able to reintroduce a wider array of lines, including white goods and hardware, using this approach of curating products.

Why curation works

One reason that curation is a good strategy is that it forces brands to define their customers and become very close to them. If we are to pick a present for a friend, we must understand what they like, dislike and what they hope for and aspire to. As many commentators have noted, department stores seem to have lost sight of exactly who their customers are. Yet this connection with customers has never been more possible than it is today.

Yes, social media is one reason for this, making it easier to get customer feedback and recommendations. But even those in older demographics, who are not using social media, are using the web and smartphones, making it easy to engage with them.

Department stores need only to look at their online rivals to find out how to do curation well. From ASOS to Pinterest, there are plenty of pioneers of the tactics that work for a demand-driven economy.

Some department stores are already innovating. Target’s introduction of a limited range from designer Stella McCartney in 2007 is an early example of curation, as is its use of British stylist, Gok Wan, as a “style and quality ambassador” of its fashion range for women.

The other ingredient: experience

The iconic London department store, Selfridges, was again awarded the status of the best department store in the world, by the Intercontinental Group of Department Stores (IGDS) for an unprecedented third consecutive time, and will retain the honour until 2016.

Selfridges reminds all retailers that we are all looking for excitement and entertainment when we shop, and that outstanding customer service is a crucial part of the mix.

The winners in department store retailing are those that understand their customers with all the intimacy that the internet and social media allow, are dedicated to predicting their wants and needs, help to reduce information overload for customers by curating products from around the globe and make shopping into a personal, exciting and unforgettable experience. Easy!

About the Author: Tony Quinn, a principal in Hames Sharley’s Sydney office, has over 20 years experience in master planning and design for retail and mixed-use sectors. Prior to joining Hames Sharley this year from his position as a director at Woodhead, Tony directed award-winning projects such as the Orion Springfield Queensland (mixed use) and Sovereign Hills Town Centre (mixed use) and collaborated on No. 1 Martin Place (Sydney GPO), Grace Bros Broadway, and Sydney Central Plaza redevelopments.

Tony regularly contributes a column on design in the retail industry’s publication Shopping Centre News.

 

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