It is a somewhat worrying anniversary for INNO: the Belgian department store chain can look back on a rich history, but now needs to take drastic action to secure its future. Is the current strategic transformation plan sufficient?
Financial distress
When it opened on 2 May 1897, “A L’Innovation” – as the department store was originally called – was one of the pioneers in Europe. The industrial revolution meant the birth of a new economic model: luxury department stores were the inventors of modern retail. The mere fact that INNO managed to survive for 125 years in a turbulent sector is therefore worth celebrating.
But it is a party under a cloudy sky. A few weeks ago, the retailer was forced to put half of its own staff on temporary unemployment, due to disappointing figures and financial difficulties. Since today, they are back at work, but this cannot hide the deeper problems: INNO has been generating losses for years and urgently needs to work to secure its future.
No priority
The diagnosis is well known: we described it in detail in our book The Future of Department Stores. Department stores have waited far too long to adapt to a changing society. They saw their audience get older, had no answer to the rise of e-commerce and had to watch luxury brands take control of their own distribution. Then a pandemic broke out, paralysing international tourism. Various players went bankrupt – such as British Debenhams and Dutch V&D – or had to drastically restructure, such as Marks & Spencer.
INNO survived the storm, but was never a priority for its successive owners. Since its acquisition by the German company Kaufhof in 2001, the department store has had to cut corners. The Germans were not in touch with the Belgian market. The arrival of Hudson’s Bay Company in 2015 brought no improvement – on the contrary, the Canadians were driving a veritable obstacle course in Europe. And the major merger operation between German rivals Kaufhof and Karstadt, spurred on by Austrian real estate magnate René Benko, once again pushed INNO into the background.
Strategic transformation plan
In 2019, a new CEO took office. It has to be said that the strategic transformation plan launched by Armin Devender in the midst of the pandemic contains many good ingredients. INNO is giving the stores a makeover, with an interior that aims to inspire and a brand range that also wants to appeal to younger target groups. The department store wants to position itself higher in the market and is making more room for food and catering, including a partnership with lunch chain BON.
There was a rebranding, followed by an advertising campaign. The retailer also – finally – opened a fully-fledged webshop cum online marketplace, where consumers can also find categories and brands that are not available in the physical stores. All these measures are justified. But they are not radical: everything is moving rather slowly and cautiously. Will these interventions be enough?
No money, no time
It seems that INNO is afraid to really intervene. The department store chain does not want to cut the number of stores and jobs, possibly out of fear for the strong unions in the company. It is to be feared that this will put a strain on the future. The retailer still has sixteen stores in Belgium. In comparison, the Bijenkorf in the Netherlands only has seven, beautiful properties in the largest cities. At the same time, that company operates successfully online in international markets. Quite a contrast.
Refurbishing sixteen department stores to bring them up to a truly future-proof standard and keep them there costs a great deal of money, which INNO does not have. Nor does the retailer have any time: the clock is ticking mercilessly while yet another crisis looms. The war in Ukraine and the threat of inflation do not exactly stimulate consumption. In principle, the luxury segment should be able to withstand crises, but if INNO really wants to position itself as a modern luxury department store, along the lines of Selfridges or Galeries Lafayette, it will have to move much faster and make much sharper choices.
