Luxury department stores such as Harrods, founded in 1834, and Selfridges, founded in 1908, are great examples of modern department stores, which are known around the world. Department stores are known of great customer experiences, which are provided by excellent corporate values and customer service, a great variety of products and prestigious brands, amazing interiors, high-level events, exclusive and lucrative loyalty programs, digital solutions in e-commerce and marketing, fantasy showcases and many others. Consumers are typically waiting for progress, experiments, visuality and caring.
Department stores are not just for shopping but they are also about socializing. Cafeterias, restaurants, bars, lounge clubs and many others are important elements when department stores become open clubs or societies. For tourists department stores are important tourist destinations. From there you can buy special products, which can be otherwise hard to get. Tourists also want to brag where they have been and what they have bought. Therefore, department stores are special.
However, as you may have heard from the news that in the United States department stores, mainly mid-end, have been hit by e-commerce, independent stores, and new labels, which are not available in department stores. Hence, e-commerce is not the only disruptor. Some innovators are searching for a solution to e-commerce and brick and mortar sales, which will bring a new level into retail. Disruptive solutions are still quite far away because this would require adopting new technologies, which are not ready, or they are expensive, or simply, people and businesses do not like those new solutions, which are available in the marketplace.
As you know that brand applications and loyalty cards can be used to track customer behaviour in order to gain big data for improved marketing and sales methods. Security cameras are also tracking how people behave and consume in shops. The amount of big data is huge but it has its faults. It is not always purely reliable but at least it is something. Digital market data is nowadays as important as gold.
But let us get back to the question. How can the new retail dimension be achieved? Let us talk about fashion. Most innovators want to get rid of shopping, hence, people would not travel to shops in order to save time. They want to create solutions, which would help consumers to pick right size clothes, shoes, apparels and others with ease. This would lower return rates, and increase profits of e-commerce sites. However, consumers tend to change their minds quite quickly and therefore return rates might not decrease as visioned. But let us go back to brick and mortar. New “fashion fitting” technology could help consumers to discover, pick and try clothes and accessories with ease in shops. Stylists, backed by AI, can help salespeople to choose the right clothes for their customers. Choosing clothes and others would become even easier when a brand has collected and received personalized information from their clients. However, fashion trends change, and therefore, the data, which a brand has received shows only historical fashion preferences but it is at least something.
Why will luxury department stores survive? They will survive when they take e-commerce competitors seriously, have a large variety of brands and products, and they will pick new labels quickly into their stores. But they have one key advantage, which shops do not have. Department stores must function as “fantasy lands” for their customers in order to give progressive customer experiences also in the future.