British Department Stores In The Cold Winter, E-Commerce Online Shopping Or Not The Biggest Opponent

Recently, the 130 year old British retail giant Martha (Marks&Spencer) announced a new shop plan.

Not long ago, another famous British retail department, Debenhams, also applied for bankruptcy protection and announced bankruptcy reorganization.

These 100 year old stores are in a predicament, partly due to the price impact of online retailers, because they do not have to face huge rental and labor expenses in the physical stores, which are more competitive in price.

But in addition, Martha department stores admits that being in today's dilemma is not related to its past development strategy errors.

Martha's Department announced that it would close 85 stores and 25 food stores in 2020, two years ahead of schedule.

In the 12 months ending March 31st this year, sales of Martha's Department fell by 3% compared with the same period last year, while pre tax profits fell 9.9%, and the decline has been in three consecutive years.

During the reporting period, Martha's department store closed 26 stores and opened 48 new stores, and clothing and home sales fell 3.6%.

In Martha's annual earnings report, the company's after tax profits rose 28.2%, but CEO Steve Rowe said that although the company appeared to be a sign of turning losses into business, the environment was still "very unfriendly" to them and could not predict when to revive Martha.

Before the Martha department store, the Debenhams department store in Britain, which has a 241 year history, filed for bankruptcy protection in the middle of last month after a more complicated "dilemma". In the bankruptcy reorganization plan, 50 stores in 165 Debenhams are expected to go through the bankruptcy proceedings of the company voluntary agreement (CVA), which will affect the livelihood of about 4000 employees. The first phase suggests closing 22 stores in 2020.

In the impact of the online shopping tide, traditional department stores have opened the way to explore online sales channels, but Martha has not paid enough attention to it.

The current CEO Steve Rowe has admitted that the company's previous business development path has some mistakes: Martha started slower in promoting the business of the electricity supplier, and was slow to respond to changes in the British retail market.

Specific problems include: former CEO Marc Bolland put more energy and cost on overseas expansion business, but with little success.

In November 2016, the company announced the withdrawal of 10 overseas markets, including China, to close 53 wholly owned shops.

Marc Bolland has also worked hard to improve the business of the electricity supplier. He spent 200 million pounds to install many highly automated retail facilities for Martha stores.

However, these unstable instruments reduce operation and delivery efficiency.

In addition, when sales fell, Marc Bolland hoped for higher gross margins to boost revenue.

Meanwhile, other retailers are cutting prices, and Martha's clothing and food prices have lost their competitive edge. This is still one of the reasons for Martha's current predicament.

Rui Yin (UBS AG) analyst Andrew Hughes analysis said Martha's full price clothing sales have been weaker than peers, and will continue to bear pressure in the future.

Richard Chamberlain, European analyst at RBC Europe, pointed out that Martha's food business is also weaker than peers, and needs to improve product range and consumer price recognition.

The traditional department stores in the world are facing difficulties. Many department stores in the United States are also facing a decline in sales recently.

For example, Nordstrom, a well-known US Department store, released its first quarter earnings. Its sales were down by 3% in the three months to May 4th, and its net profit fell 57.4%.

Erik Nordstrom, President of Nordstrom, also admitted that the company's strategy in attracting consumers has made a mistake, and now they are facing a dilemma of reducing passenger traffic.

At the same time, the company lowered its forecast for annual sales and profits.

How to attract consumers has become the top priority in the development of traditional department stores.

In March, chain store Target launched three underwear brands, mainly selling bra, underwear and pajamas.

The average price of Wei is $60, while Target sells only 1/3 of its price.

From the data point of view, Target's sales in the first quarter increased by 9% compared with the same period last year, the comparable sales growth of the electricity supplier channels increased by 42%, and the net profit increased by 10.8%.

The chairman and CEO Brian Cornell said the growth of performance proved that the pformation strategy of the group was coming into effect.

In addition, the traditional department stores embrace the Internet business predators is also the trend of the times.

Two years ago, Kohl s, a US Department store chain, began working with Amazon to provide its 100 restricted Kohl 's stores to accept the return of Amazon.

In July, this service will expand to 1100 Kohl 's stores in the United States.

In addition, Kohl 's has about 200 stores' door-to-door services with Amazon products. It also provides consumers with an offline experience place, "Amazon smart home experience zone".

Kohl 's is certainly not the only retailer to embrace Amazon.

Another US centenary Stein Mart recently announced its installation of Amazon self help lockers in its nearly 200 stores to provide convenient pick up and return services for Amazon's online shoppers.

The news prompted Stein Mart's share price to soar 17%, the biggest gain in a year.

For the traditional department store industry, how to spend the winter, UBS has also made some suggestions.

For example, the offline store is a supplement to online sales, mainly based on commodity display.

In addition, offline stores should be as small as possible and stock as little as possible.