Large flagship stores continue to distinguish themselves through their unique experience and local anchoring, according to former Kaufhof leader Olivier Van den Bossche. Department stores might also take on the role of omni-channel hubs in the future.
Masterclass in retail
When you take stock of the European department store industry, you can’t ignore Olivier Van den Bossche. The retail manager has built up considerable experience over the years: at Galeria Inno in Belgium, he went from shop director to managing director, then became chairman of the management board at the headquarters of Galeria Kaufhof in Cologne, and finally CEO of Hudson’s Bay Company Europe. He experienced a rather turbulent period in the history of the European department stores.
Today, Van den Bossche holds an international top position as an operating partner at food service wholesaler Metro and continues to follow events in the department stores sector with great attention from a certain distance. The love for department stores remains intact after all this time, he confirms: “I love department stores for two reasons. In terms of operations, managing a department store is a master class in classic retail. And in addition, most department stores are iconic companies that are part of the history of their country.”
The favourite: Selfridges
He still enjoys visiting shops, both professionally and in his spare time. “I like to walk around every place where there is trade. From an open market in Sofia to new store concepts in Asia or America or exploring the virtual space in online marketplaces or webshops. But it is clear that the experience of walking around in a good department store cannot be compared to anything else.”
Van den Bossche has seen many department stores in the world, from west to east and from north to south. “But Selfridges on Oxford Street is and remains my favourite shop. The combination of innovation, architecture, brands, service… is in my opinion quite unique, especially in Europe. Le Bon Marché in Paris, Isetan in Tokyo, El Corte Inglés in Lisbon and Hudson’s Bay in Toronto complete my top five”. He doesn’t have an outspoken favourite department. “The beauty of a department store is that it’s a department store, which means that every department has to have its place. Needless to say, perfume, watches and handbags are essential categories. But that doesn’t mean that we should neglect the luggage department or the home textiles, especially in terms of profitability.”
Iconic spots
“A strength of department stores is often their local anchoring,” he analyzes. “They have a close relationship with their local community, their city or their country. Department stores are simply iconic places in a city. Look at the history of Galeria Kaufhof in Germany, the Bijenkorf in the Netherlands, Stockmann in Finland, Palacio in Mexico or El Corte Inglés in Spain, and I could go on like this for half an hour… Each department store is part of local history, which is what makes department stores so unique. So if you can combine that iconic location with the rich history and at the same time create a seamless channel model that connects online, offline, a marketplace and apps with excellent service and innovation, then it’s clear that you have a winning model. But of course that’s easier said than done…”
“Investors prefer to internationalize, but that rarely works. After the takeover of Inno by Kaufhof, for example, there was a long debate about the new name. In the end it became Galeria Inno: we didn’t want to give up the locally very famous name Inno completely. In the Netherlands, after the bankruptcy of V&D, HBC opted for a completely different approach: they pushed through their own name and vision. But Hudson’s Bay didn’t catch on in the Netherlands. Their withdrawal didn’t come as a surprise. The locations themselves were not bad, but conceptually and in terms of experience the stores were lagging seriously behind the competition. This may be due to insufficient knowledge of the local market. The Netherlands is a very competitive environment, the online share is already high. It is, of course, a very sad thing for the Dutch city centres in general.”
Strong corporate culture
On the German market, the merger between Karstadt and Kaufhof may have been the only way to save the department stores, he thinks. “I think it’s an intelligent move, the company has been sold to the right party. The merged company now wants to retain as many stores as possible. This will not be easy, because in many cities there are too many shops. And you can see that there is a trend in the department store sector to focus on flagship stores in the big cities. In medium-sized cities, the picture is mixed. In smaller cities, a department store can survive, provided it is the only one left over. The German department stores of the merged group are now called Galeria Kaufhof Karstadt. Quite a mouthful, but of course these are two iconic names. 140 years of history cannot just be given up. That history, that is precisely the beauty of the department stores sector.”
How are the Belgian shops of Galeria Inno doing in the meantime? It recently became known that Inno is one of the most profitable parts of the Kaufhof Karstadt group. “Inno has a strong local brand awareness, it is a real name in Belgian retail. The mentality is good, the people are proud of the company. It is still the only survivor in its sector. What characterises Inno is the close operational cooperation with its suppliers. Employees of the brands that operate a concession in the department stores are part of the Inno family. For other department stores, these are often two separate worlds. Customers also do not see the difference between the employees of the dealers and their own employees. Both departments are operationally interwoven. This strong corporate culture bears fruit.”
A walk in paradise
How did the top man become acquainted with the phenomenon of the department store? Which moment made an impression? “At the age of 10 in the summer of 1986, the year of the great football World Cup, I was in Brussels with my parents. Walking into the ‘Innnovation’ in the Nieuwstraat at that time was like walking around in a paradise. A huge shop with clothes, household, food, but also with toys in those days. That was a great experience. I will never forget the escalators. Eighteen years later, in 2004, I was appointed in this iconic store as the youngest store manager ever…”
It was the beginning of a successful career. What is the most important lesson he learned? “I have spent most of my professional life in department stores, and in my experience three things are crucial to success: people, people and people. First, people as employees. Own staff on the payroll, or employees of dealers, that doesn’t matter: they make the difference in the shop. Brands around the world are more or less the same, but the people are unique. Secondly: people as customers. Many retailers say they are customer-oriented, but there is a big difference between saying and doing. Developing your people, continuously improving your service level, and aiming to make your customer a fan of your store, that should be the ultimate goal. And finally, people as shareholders. Shareholders are of crucial importance in your company. Both at Kaufhof/Metro and HBC, I was able to work with shareholders who trusted me and gave me the necessary credit to improve the company and to put a clear signature to it.
So it’s always about teamwork. “The positive development that we showed as a team at Galeria Inno from 2007 to 2014 was not due to one idea, but to a mix of hard work, passion and team spirit. That’s the advice Olivier Van den Bossche has for people who want to work in the department store sector: “It’s all about passion. If you love your job, you’ll never get tired. The most important thing, of course, is the passion to serve the customer better every day. It’s also about mutual trust. You work with but also for colleagues. To managers in a department store I would say: if you want to be loved every day as a leader, you just have to start selling ice creams. Sometimes it can be a hard game.”
Solution for the last mile
However, our interlocutor also sees dark clouds hanging over the sector. “I have not been active in the department store sector for more than two years, but if you see the speed of digitisation and online or omni-channel today, we weren’t fast enough in retrospect,” he concludes. Because if there is one threat to the future of the department store, it is digitisation: “The largest department store in the world is undoubtedly in a small device called a smartphone. When you see how many physical department stores have been closed in North America in recent years…”
Can the internet and online shopping play a role for department stores? Maybe we should turn the question around, says Olivier Van den Bossche: “What is the role of department stores for online shopping and the internet? It goes without saying that the behaviour of our customers has changed drastically over the past ten years. Now we have access to everything, wherever and whenever we want. We see more and more extremely fast deliveries in metropolitan areas. The Chinese Hema delivers to Shanghai within thirty minutes, in Manhattan delivery within two hours is the standard. This is only possible if you have a dense network of shops in large cities. As a result, the role of the department store is widening: one of the rescue options may be to turn it into omni-channel hubs where you can also pick up orders. For example, it’s what John Lewis does in the UK, where the online share is larger and click & collect is already more established. It is one of the options for the last mile. The fact that Karstadt made a deal with Zalando is smart in my opinion: you bring together a virtual and a physical marketplace. This also applies, for example, to the collaboration between Delhaize and bol.com in Belgium and the combination of Amazon–Whole Foods in the US.”
Tourism as a driver
Finally, the past of the department store industry is beautiful, but is there also a future? Is Olivier Van den Bossche, despite everything, optimistic? Our discussion partner sounds positive. Ultimately, the large flagship stores still offer an incomparable experience: “Selfridges, La Rinascente, De Bijenkorf… They are unique after all. Tourism is an important driver, in many cities the local department store is part of the city tour. If you’re going to Amsterdam, you have to go to the Bijenkorf. The same goes for KaDeWe in Berlin or Oberpollinger in Munich. For department stores in major European cities like Paris, Berlin, Barcelona, Milan, Amsterdam, Brussels, Hamburg… the future is very bright. If you look at the prospects of the top 100 shopping streets in Europe, the real estate prices for the next ten years remain positive. This can only help to increase the underlying value of the department store. Elsewhere, store closures may follow. In smaller and medium-sized cities, it will depend heavily on city marketing and the attractiveness of the city. In some cities, the cooperation between inner-city retail and the city is very good, in other cities it hardly exists. Wish these cities every success for the future…”
