The fall of a retail icon: Lessons from Robinsons and the future of department stores

I woke up on 30th October morning to ominous ‘pings’ of text messages announcing the closure of our 162-year old iconic department store, Robinsons. As I read the news that Robinsons will be shuttering its stores at The Heeren and Raffles City, I could not help having mixed feelings of nostalgia and inevitability about the future of department stores in Singapore and globally.

The writing was already on the wall since the 2000s when we saw the first wave of Japanese and European department stores such as Sogo, Seibu, Daimaru, Galleries Lafayette and Printemps exiting Singapore. This was followed by the closure of John Littles last outlet in Plaza Singapura in 2016, and the shuttering of Isetan’s store at Jurong’s Westgate mall and the Robinsons store at Jem earlier this year.

The retail body count continues to increase globally especially for the once dominant retail format, the department store. According to GlobalData Retail, more than 190,000 stores accounting for nearly 50% of retail square footage in the U.S. have closed due to the crisis brought about by the Coronavirus pandemic. Many of these retail stores which are non-essential may never re-open. Some of the established department store chains such as Neiman Marcus and JC Penney have filed for bankruptcy. Nordstrom’s and Macy’s are restructuring and raising capital to stay afloat and be relevant. In Singapore, the prospects look equally challenging for established players such as Metro, Tangs, OG, BHG, Takashimaya and Isetan.

While many observers agree that this trend has been exacerbated by the coronavirus pandemic which has affected shopper traffic to shopping malls anchored by established department stores, there is a multitude of business and competitive factors including permanent shifts in buyer behaviour and lifestyles that do not augur well for department stores.

Growth of Online Retailing and the Isolation Economy

Mr Danny Lim, Robinsons’ senior general manager was quoted by Straits Times recently citing changing retail trends due to the rise of e-commerce, cost pressures and lower demand for department stores as the major reasons for its decision to liquidate its stores in Singapore and Malaysia. He further highlighted that the department store model is outdated and that the pandemic has exacerbated the challenges department stores face.

The popularity of on-line shopping has been growing as shoppers can purchase their favourite high-end and mass market brands from e-commerce marketplaces such as Lazada, Shopee and Amazon as well as directly from the brands’ websites. The sheer variety and assortment of merchandise and competitive prices available online 24/7 and 365 days a year, has made online shopping the preferred option for shoppers, especially the younger, digitally savvy demographic.

Designer brands such as Gucci, Louis Vuitton and Channel that used to retail their products in upmarket department stores have gone direct by opening flagship luxury boutiques offering personal shopping assistance and customisation, and through their direct-to-consumer (DTC) channels such as their immersive and interactive websites and mobile apps. This has made departments stores less popular as a destination for designer brands.

Additionally, the trend toward what some experts call the Isolation Economy is gathering momentum as more and more people get used to the convenience of consuming products and services in the comfort and safety of their homes. The pandemic has also forced many to work from home and avoid crowded shopping malls and department stores due to infection risks. The Isolation Economy has fuelled demand for not only online shopping but also e-learning, telemedicine, entertainment, and streaming services such as Netflix and Spotify.

Location, Location and Location!

The famous maxim for the success of a department store – location, location and location – may no longer be relevant. With the rising popularity and convenience of e-commerce and voice commerce (shopping assisted by digital assistants such as Amazon’s Alexa and Apple’s Siri) in the future, paying sky high rentals for stores in premium shopping locations such as Orchard Road may not make commercial sense even if these locations attract high pedestrian and shopper traffic. The high operating costs and difficulty of attracting and retaining good retail talent is making it very difficult for department stores of be financially viable and at the same time deliver high standards of service quality and shopper experiences.

Robinsons and Isetan who have adopted the location-based strategy of competitive saturation by opening more than one store in high traffic locations such as Orchard Road may no longer be viable due to the high rentals, accessibility of suburban shopping malls, and the fact that department stores are no longer seen as destination stores. However, competitive saturation still makes sense for chain stores such as Starbucks who can afford to open multiple outlets in proximity in high traffic locations, and at the same time pre-empt competitors from opening stores in the same locations that could cannibalise their revenue.

Can Omnichannel Retailing Save the Department Store?

From Robinson’s experience, the attempt to go omnichannel (bricks-and mortar, e-commerce and mobile) to attract younger shoppers including the annual Black Friday sale to provide variety, value and convenience was eroded by competition from online retailers and brands’ director-to-consumer (DTC) channels. Basically, department stores will continue to face challenges even if they embrace digital transformation and omni-channel retailing.

Ultimately, success and sustainability will depend upon whether shoppers still value the touch-and-feel, personalised shopping experiences with great ambience that upscale department stores provide. However, evidence from shopping trends and behaviour in Singapore and globally seems to indicate otherwise. Is it the beginning of the end for department stores?

What will Christmas shopping without department stores look and feel like? Will it be replaced by festival markets and pop-up stores at decorated shopping malls and open community spaces?
As a shopper, I certainly hope department stores will continue to be part of Singapore’s retail scene providing immersive and social experiences that online shopping cannot replace.