Debenhams: What Future in Store?
For years Debenhams has been struggling to break its discounting dependency habit. June's trading update won't have helped to restore investor confidence as profits appear to have flat-lined. But, to be fair, these results should be compared with their contemporaries, most of whom are also treading water.
Debenhams' problems are hardly unique. The global retail industry is in the midst of a rapid transformation, fuelled by constantly shifting consumer trends and the hugely disruptive impact of digital technology.
Getting the balance right between higher margin, stylish private label ranges and lower margin aspirational brands has always been key to delivering a strong bottom line for department stores. The emergence of pure-play eCommerce fashion brands, like Asos, Boohoo and YOOX Net-a-Porter, with their distinctive offerings, short lead times, and keen prices is making it even more difficult to compete. To complicate matters further, Debenhams has conditioned customers not to expect to pay full price for merchandise and, predictably, this has drained the company's profitability.
The recent announcement that CEO Michael Sharp is to be replaced by Amazon's European fashion VP, Sergio Bucher, came as a surprise to most UK retail commentators. Bucher, who joins Debenhams in October, spent his early career with Spain's Grupo Cortefiel and Inditex, followed by top leadership positions with Nike, Puma and Amazon Europe.
Mr Bucher will undoubtedly bring fresh ideas and unconventional thinking to the business and his appointment could well prove inspired. Digital expertise, international experience, and brand-building credentials; all skills Debenhams have been sorely missing in recent years.
At a time where a recent survey conducted on behalf the World Retail Congress found that over a third of UK retail CEOs are “not fit for purpose” when it comes to their of mastery of digital and data-driven skills their roles now require, Debenhams may have stolen a march their rivals.
The billion-dollar question is this: will investors give Mr. Bucher sufficient time to create a 'new Debenhams' as a leading international multichannel retailer? If they do they might just have discovered what has so far has eluded everyone else; namely how to make money once again from the department store business.
Only time will tell.
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