Global Department Store Industry
The world department store industry is expected to witness an increased annual growth rate, exceeding 2% between 2010 and 2015 to reach almost $395 billion, reports MarketLine. Clothing and footwear represent the leading segment in the world department store market. In 2010, sales of clothing and footwear generated revenue of close to $200 billion for almost 56% of overall market value.
Department stores are involved in the retail sale of a wide range of merchandise, including general household products, cosmetics, jewelry, sporting goods, apparel, home furnishings, appliances and toys. The industry encompasses discount department stores, which are involves in the retail sale of similar goods but at lower prices.
The global department store market is characterized by concentration, according to Canadean. Leading players operating in the department store sector include US store chains such as TJX, Macy’s and Sears Holdings. These names dominate the world market, which continues to suffer from rivalry from online retailers, discounters and hypermarkets.
To remain competitive, leading players have had to adapt through international expansion, diversifying their distribution channels by offering consumers online shopping, and changing retail formats. Department store operators can target specific demographic groups such as tourists, strategizing to boost tourists’ in-store spending.
Regional Market Share
- Following a period of declining demand due to the economic recession, the global department store market has begun recovering in recent years. Verdict predicts this recovery will continue in the coming years in tandem with economic recovery, rising employment rates, and consumer confidence. The main growth driver will be demand from emerging markets such as China. Other regions such as the EU and the US will witness a degree of stagnation and other regions such as Japan will record a decline due to oversaturation.
- Between 2011 and 2015, there is expected to be some degree of growth in all regions apart from Japan, which will remain in decline, though domestic department store operators are likely to invest in new retail formats in a bid to slow decline. Japan’s department store market is mature and its present state of decline has also seen natural disasters thwart potential recovery, especially with their direct impact on tourism and domestic spending. This reduced level of spending is predicted to continue over the four-year period ending 2015, at which point Japan is likely to represent only 12% of the global market.
- The EU market for department stores is expected to record close to 1.5% yearly growth between 2011 and 2015. North America is expected to come closer to yearly growth of 2% over the four-year period. The reason for this slower growth is mainly due to recovery from the economic recession. While consumer confidence is improving, it has not yet reached pre-recession levels, making consumers shy of paying full price for goods. Retailers have been forced to adapt by opening discount outlets to offer lower prices to consumers unwilling to purchase full price good, and also in an effort to shift old stock and bring in new customers. In the EU department store sector, Marks and Spencer is currently in the lead in terms of performance, according to research from Canadean. This strong performance was not across the board, though Marks and Spencer did well in terms of scale, growth and operational efficiency. It did less well in other areas such as financial performance, where it registered around the channel average. Easter Europe represents a region with good growth potential for department stores, unlike Western Europe where the department store market is stagnating.
Leading players currently operating in the global department store market include Marks and Spencer, Sears, Home Retail, Kohl's, Front Retailing, Macy’s, Isetan Mitsukoshi, Penney Company, Takashimaya, and TJX. The top spot in the global department store market is held by TJX, which continues to perform well in terms of scale, growth, operation efficiency, and financial performance. At the other end of the scale, Isetan Mitsukoshi is lagging behind with the weakest performance.
Players in the global department store industry are obliged to wait for the positive impact that economic recovery following the recession will bring. After a period of declining spending, consumers should come back to department stores and spending on discretionary goods again. However, as consumer spending habits seem to have evolved, department store chains risk losing market share to alternative channels such as online retailers, discounters and hypermarkets.
Leading Industry Associations