How department stores and multi-brand retailers can overcome modern challenges

TheIndustry.fashion uses a new in-depth report on department stores to uncover core roadblocks faced by multi-brand retailers, and the technologies, tactics and opportunities being harnessed to stay competitive in the modern market.

If anyone needed telling, physical retail is back. The bricks-and-mortar presence has dusted itself off from Covid wreckage, and consumers are increasingly seeking physical shopping experiences. Just last month, Saudi’s Public Investment Fund (PIF) announced that it would be increasing its stake in Selfridges from 10-40%, marking increased international backing of UK department stores. And what better foundation for building strong, in-person customer experience than a department store?

However, UK department stores continue to perform below desired level, as NuOrder by Lightspeed’s ‘Decoding Department Stores: Research & Insights’ free report explains. One reason for this is that these retailers largely present the same offering.

These stores are also challenged by direct competition with the convenience and price point of online retail giants like Amazon, so much so that the Treasury has announced plans to increase business rates on large distribution warehouses used by these online retailers, aiming to fund reduced tax bills for high street shops, in an effort to rejuvenate the high street.

This means that department stores must be increasingly creative in their modes of customer acquisition and retention. Pop-ups are popping up more than ever before, and some are making the most of their multi-product offering in the golden quarter via advent calendars.

In the UK in the last two months alone, British heritage department store Fenwick doubled down on the beauty boom, opening the largest beauty hall in the UK outside of London; H&M launched a kidswear pop-up in Selfridges, showcasing its new premium line, H&M Adorables; Liberty announced its Sézane pop-up; and Harvey Nichols’ new advent calendar acts as a miniature voyage through its beauty department.

“It’s a very interesting time, as there seems to be a shift back to physical stores. We see our clients, like Nordstrom and Bloomingdale’s, opening locations to make it even easier for their customers to shop with them locally. For example, Bloomingdale’s is opening smaller concept stores called Bloomies, and Nordstrom is opening more Rack locations. Hyper-curated stores will continue to be the strategy for some time to come,” says Ashley Collins, Retail Client Director at B2B e-commerce platform, NuOrder by Lightspeed.

Department stores represent an opportunity for UK brands outside of the UK too. Womenswear destination Sosandar, is using department stores in Ireland as a mode of expansion without the greater risk of opening physical stores.

The global report, informed by insights from senior leaders in merchandising, buying, and planning roles at major department stores like Saks Fifth Avenue and Nordstrom – with 35% of research conducted in Europe – delves into the challenges retailers face in today’s dynamic marketplace. The findings underscore the importance of enhancing customer experiences to drive brand success while grappling with operational inefficiencies.

Retailers are sharpening their focus on profitability through strategic brand partnerships and customer loyalty initiatives. However, inefficiencies – especially within product data and differentiation, and supply chain management – pose significant obstacles. While data analytics plays a critical role in decision-making, intuition remains a key factor in responding to emerging trends.

The survey, conducted between July and August 2024, gathered responses from senior retail leaders in sectors including fashion (44%), luxury (25%), and beauty, all representing companies with revenues exceeding £38 million.

The report highlights three key priorities: improving customer engagement, streamlining operations, and optimising product assortments to meet evolving consumer demands.

Personalisation is widely recognised as a differentiator in the shopping experience, yet retailers acknowledge that supply chain innovations have a more immediate impact on profitability. Some have turned to AI for improved forecasting, though reliance on historical sales data persists.

Looking ahead, retailers predict that enhanced shopping experiences, from faster returns to improved personalisation, will shape their business strategies over the next 12 months.

Successful partnerships with brands—those that align with retailer goals, offer quality products, and ensure timely deliveries—are emerging as critical.

“Building a strong brand-retailer partnership is essential for fostering trust and achieving success,” continues Collins. “Key factors in maintaining a positive relationship include timely and complete shipments, transparent communication on collection updates, and the exchange of honest insights between both parties.”

Despite the emphasis on data-driven approaches, retailers continue to face significant hurdles in product data inventory management. Many still rely on a blend of historical data, market trends, and customer insights to guide their product selections, but outdated backend systems and the burden to reconcile millions of data points across different suppliers and sales channels hamper their ability to optimise assortments and manage inventory effectively.

“The challenge lies in how expensive and labour-intensive it is to change an entire infrastructure,” says Danielle Fairfield, VP Head of Retail at NuOrder by Lightspeed. “Depending on its complexity, it could take a considerable amount of time and money to fix. Retailers are forced to make very tough decisions. Therefore, the backend systems, more often than not, fall off the roadmap to prioritise items that will drive immediate ROI.”

Though advanced technologies like AI and machine learning are gaining traction for enhancing forecasting accuracy and product assortment, traditional tools such as Excel remain prevalent. Retailers are also balancing data with intuition to navigate the unpredictability of emerging trends.

Ultimately, the success of each department store in today’s retail landscape is nuanced, but using detailed research such as NuOrder by Lightspeed’s free report, brands and retailers can begin to better understand the issues their industry faces, and how these can be mitigated in order to iron out inefficiencies and promote customer acquisition and retention.

Download the free report here.

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