Just a couple of years ago, downtown department stores seemed on the way out, with retailing gurus telling us the future was shopping malls, big malls, with mega-car-parks and lots of branded clothing boutiques. In Germany, which has plenty of both types, the department store seems to be bouncing back, and not only because retail demand is picking up as the country comes roaring out of recession.
Tourists don't bus out to suburban malls to savour the ambience of piped music and familiar brands. But they love department stores like Harrod's in London, Illum in Copenhagen and Galeries Lafayette in Paris. In Berlin's Kaufhaus des Westens, better known for short as KaDeWe, the aisles were often blocked by the crowds in the days before Christmas as the pep returned to German retailing.
A store spokesman said well over 100,000 shoppers per day were in KaDeWe, the biggest department store on the Continent. Significant numbers were US, Japanese, Chinese, Russian and United Arab Emirates (UAE) tourists. The store belongs to Germany's Karstadt group, a chain that was taken over by its creditors and is now run by billionaire US investor Nicolas Berggruen. Chief executive Thomas Fox says the business is not just back on an even keel but has a promising future.
"I'm convinced that the best era for department stores is still in the future," he told a recent commercial conference in Berlin. "Our sales were up 7.4 percent in the third quarter." Fox, who plans to bow out from running the 120-store Karstadt group in early 2011, said the tide has turned back to big stores after years where malls and specialised marts made the running.
The big-spending 20-40 age group is moving back into Germany's inner cities, he said, a point on which the Nuremberg-based retail surveys company GfK and the German retailing federation HDE agree. Big stores have suffered under a reputation of being retail dinosaurs with bored and truculent sales assistants, out-of-date goods and stale air. GfK has noted an annual sag in department-store sales over recent years in Germany. In 2010 the slump stopped.
HDE's chief executive Stefan Genth added, "We are firmly convinced that the modern department store will continue to be the anchor of downtown retailing." He noted that residential tenancies by both young singles and families are on the rise in mid-city areas.
Genth said the stores must think smart. "They have to cater to modern tastes," he said, defining that as quick and friendly service and "light and airy interiors." Manuel Jahn of GfK's Geo-Marketing unit recommends the stores also take into account the greying of European society and burnish their appeal to those in the 60-70 age group who prefer to live downtown close to retiree attractions such as theatres and opera houses.
The stores need to tailor product ranges to those buyers, who appreciate being able to do all their shopping under one roof. "Older people often can't be bothered trudging from one store to the next," said Jahn. But that does not mean stocking up on walking sticks: products with a retiree stigma put off all shoppers including retirees. Smaller German chains are mulling plans to expand to cities where they have no branches yet, and even Germany's biggest retailer, Metro AG, seems to have idled the plans it had a year ago to spin off its underperforming 123-store Kaufhof chain, Karstadt's main rival.
Jahn points out that the renaissance in Germany has been helped by the collapse of several weak players. Over the past three years, nearly 600,000 square metres of general retailing space has been purged from the market as chains like Hertie and the German Woolworth company have shut up shop. "The big lossmakers have vanished from the market," Jahn said.
Karstadt's Fox says the ambition of his stores is to become glamorous "malls without walls." He believes that concept can work even for haberdashery: the buttons, zips and cotton reels that most folk count on finding in every department store. "I've even seen ways to make haberdashery sexy," Fox said.