Battlelines are drawn in Asos Vs Debenhams
One is the archetypal department store, the other is an online-only success story, but Simon Neville says the lines are getting blurred and both groups are changing
Michael Sharp, the veteran chief executive of the department store chain Debenhams, has admitted his company was a little slow off the mark when it came to creating an internet offering worthy of the 200-year-old retailer.
Male customers would receive email offers for dresses and lingerie, while click-and-collect was unheard of and the website was slow and clunky.
By comparison, online fashion retailer Asos has swathes of data on every single customer, knows each and every item they have bought and has screens dotted throughout its head office showing real-time sales data, including the customer's location, gender and items bought.
It has left Asos with a market value of £4.4bn while Debenhams is worth just £1.4bn, in arguably one of the clearest examples of traditional bricks-and-mortar retailers losing out to their younger online upstarts.
But all is not lost. Retail expert John Pal at Manchester Business School explained: "The department store format has often been compared to a dinosaur yet as Debenhams reaches its 200th year of trading there still seems cause for optimism as it spreads its risk by having a well-regarded international and online presence."
Online sales this year are up 46% at £366.3m and now account for about 15% of sales, which were up 2.5% at £2.28bn and way ahead of Asos's £769m. But perhaps the most interesting aspect of Debenhams' online growth has been as a direct result of the new stores it has opened.
In Chesterfield, where the company recently opened its first store, bosses were amazed to see online business in the postcode area double in 12 months – a trend that has played out across other stores that have opened or been modernised. Mr Sharp said: "I think the future of retailing is multichannel. It is quite clear customers still shop over a number of different channels, and the more channels you have, the more they will spend with you. I think it's all joined up and will remain so."
He explained that 25% of all online orders were collected from stores, up from 15% last year, and he expects this to rise.
"It gives us an opportunity to get people into the stores, where they may browse, see the new layouts and make additional purchases," he said.
But Debenhams may never get to full gallop as it suffers from the high street's biggest bugbear – business rates.
Mr Sharp added his voice to the debate and said the company had to carefully consider where to open new stores because rates were so high.
He said: "It's quite clear that the current method of calculating business rates is archaic and not fit for the future."
And as business rates continue to rise in line with inflation, online-only retailers will only continue to see their major distribution costs fall as they become more efficient. Asos, for example, has announced an expansion of its US warehouse, meaning current US customers will no longer have their goods shipped from the UK. Previously returns had to be sent back to the UK, at great expense.
Debenhams is making strong progress and has the potential to continue growing through its combined online and high street offer, although convincing the market might prove more difficult.