With an estimated global market size of €839B by 2018 per MarketResearch.com, the industry is expected to grow at a compound annual growth rate of 5.4% between 2015 and 2020, according to the research firm GlobalData. While historically department store sales have typically been strongest in Europe, Japan, and the US - these regions are expected to see contracting sales with growth coming from developing economies. According to research by Dun & Bradstreet, Indonesia is expected to experience the fastest growth in the industry, followed by India and the Philippines.
Some of the evolving challenges facing department stores today include:
- Outmaneuvering discount or "off price" retailers who have increasingly cut into the mainstay customers of department stores with all year bargains and price cuts.
- Increasing share of e-commerce purchases, which according to Bain Consulting reached about 8% of the total market in 2016, and
- Reinterpreting the maxim 'Location, Location, Location' to better balance fixed costs of huge flagship stores at prime real estate locations with changing consumer buying habits.
- Differentiated products or brand offerings that create unique shopping experiences and wins back pricing power from the consumers.
- Faster throughput of merchandising from supply chain to store registers to reduce store clogging, overstocks or forced clearance pricing.
- Enhancing digital demand and assortment planning capabilities for both in-store as well as e-commerce platforms
Benchmarking database and methodology:
Our department stores industry benchmarking report is based on 34 department store companies with publicly available financial information and includes department store giants like Lotte Shopping Co., Macy's Inc., Sears, and Marks and Spencer Group Plc. Privately held department store companies such as Galeries Lafayette Group or Selfridges & Co are excluded from this study due to lack of adequate publicly available financial data. Off-Price retailers such as Ross Stores Inc. or The TJX Companies Inc. are also excluded from this study.Summary demographic profile of the benchmarking database is below:
|Companies HQ in Europe||8|
|Companies HQ in NA||9|
|Companies HQ in Asia||17|
|2016 Revenue (USD M) - Average||$5,359|
|2016 Revenue (USD M) - Middle 80%||$14,862 - $137|
|5 Year CAGR||Gross Margin||EBITDA Margin||Inventory Days||Online Sales|
*Reported Online Sales is based on public disclosures made by approximately 15% of the companies in the benchmarking pool only.
Top 5 Supply Chain Performers:
|1||Hyundai Department Store Co Ltd.||South Korea||2||1||1||2|
|2||Lifestyle International Holdings||Hong Kong||3||5||2||2|
|3||Shinsegae Inc.||South Korea||1||4||5||22|
|Gross Margin & Inventory frontier for department store retailers||5 Year Industry Supply Chain Performance|
|Image Here||Image Here|
|Overall based on the pool of 34 companies, there is a relatively flat trade-off curve between inventory days and gross margins for department stores. However, the class has clear distinctions between leaders and stragglers. While a few leading companies appear to earn high gross margins while maintaining short inventory days (Hyundai, Lifestyle, Gwangju Shinsegae), department store companies primarily in the US and UK lag the industry averages.||Key supply chain matrices have held flat for department stores over the last five years. While EBTDA margins have improved 4% in 2016 compared to 2012, inventory days holdings have also gone up by 5% over the same period.|
About UsSolvoyo is a cloud-based SaaS solutions provider for Supply Chain Planning and Optimization. Solvoyo’s all-in-one and easy to use Retail Planning and Analytics platform integrates pre-season and in-season planning and execution processes by providing:
- Financial Planning and budgeting
- Category Planning
- Assortment Planning
- Purchase Order Planning and Size Optimization
- Allocation and Replenishment and
- Promotions Planning and Markdown optimization capabilities concurrently
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