Harrods, Selfridges and Harvey Nichols lead department store revival

by Jemima Bokaie, Marketing 29-Feb-08, 09:30

LONDON - Premium and luxury retailers are driving growth in the £14.7bn UK department store market, according to a new report.

The UK Department Stores 2008 survey, by Verdict Research, showed that luxury department store brands Harrods, Selfridges and Harvey Nichols have been instrumental to the sector's turnaround since 2006, following two years of decline.

The department-store market contracted in 2004 and 2005 as a result of a weak performance by market-leader Marks & Spencer and the exit of struggling brands including Allders.

While Marks & Spencer's recovery contributed to 4.7% growth in the sector in 2006, strong performances by Harrods, Selfridges and Harvey Nichols underpinned growth of 3.5% last year. The report predicted the three premium retailers will boost growth to 4.1% in 2008.

Other findings from the survey showed that Harrods, Selfridges and Harvey Nichols accounted for three of the top five department stores by profit densities, ahead of Marks & Spencer and John Lewis.

Of the top 10 department stores, Harrods recorded the biggest improvement in operating profit per square foot, rising £30/ft² between 2005/06 and 2006/07, followed by Selfridges with an increase of £16/ft². According to the report, this was achieved by making existing space more productive rather than opening new stores.

'These retailers are creating a virtuous circle by investing in their stores and ensuring the store experience matches the aspirational status of the brands they stock,' said Maureen Hinton, lead retail analyst at Verdict Research. 'This not only differentiates them from the rest of the high street, and crucially from supermarkets' burgeoning non-food offers, but also provides consumers with a pleasurable shopping experience that combines the convenience of having a comprehensive offer in one location with leisure and indulgence.'

The research predicted that store expansion activity by Marks & Spencer, John Lewis, Debenhams and House of Fraser will also contribute to market growth this year.

It also expected consumers to continue spending with premium operators during the economic slowdown. 'As money becomes tighter, consumers are more selective about where they spend and are more in need of a rewarding and indulgent shopping experience to lighten their mood,' said Hinton.