What went wrong with Debenhams?
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In a time when department stores seem to have lost their spark, this week has been a particularly busy one for Debenhams. On Monday, it was reported that Mike Ashley (Sports Direct) was considering a cash offer to take over the chain for 5p per share, valuing it at a mere £61.4m. The offer, which was Sports Direct’s latest attempt at gaining control of the chain, followed a revelation on Friday that Debenhams was looking to raise £200m from existing investors, causing the share price to plummet 61 per cent. While Mike Ashley’s bid led to the share price soaring 42 per cent, it was eventually snubbed by Debenhams, who instead announced it had secured a £200m refinancing deal.
In a bid to cut costs, Debenhams has already announced it will be closing up to 50 stores – and this week it was disclosed that the lease for the company’s headquarters, located at Regent’s Place in the West End of London, had been surrendered in favour of moving staff back to the upper floors of its Oxford Street flagship store. British Land, which owns the Regent’s Place premises, announced it had relet the 175,000 sq. ft. space to Facebook, which now occupies a total of 290,000 sq. ft. at Regent’s Place. Sergio Bucher, Chief Executive of Debenhams, commented saying that the move would mean material savings, while customers would still be able to enjoy a store trading over five floors.
When it comes to struggling high street department stores, Debenhams is in good company with, amongst others, House of Fraser, which last year announced it would close 31 of its 59 stores – including its Oxford Street flagship. One could argue that the pair are just two amongst many retailers hit by declining high street footfall and the advent of online retailing – but are these external factors really the entire story, or are internal issues equally to blame?
It has been argued that the reason Britons have fallen out of love with the department stores they once adored is due to a lack of innovation – or not jumping on the experiential bandwagon that is said to be the saviour of physical retail. As a case in point, one can look at what thriving department stores are doing differently. Harrods, for example, recently launched its first-ever podcast to explore the luxury fashion sector through a series of one-on-one conversations – a move that is sure to put the department store firmly at the forefront of the luxury retail market. Meanwhile, Selfridge’s has been reinventing its shop floor to offer customers an experience that cannot be duplicated online, for example by introducing the UK’s only free wooden indoor skate bowl. Looking outside the UK, French department stores – the so-called les grands magasins– are dusting off their marble floors and gilded adornments to revamp their offering for a younger consumer. Time will tell if some of Debenham’s £200m will be used to ramp up on customer experience – and what the future of Debenhams will be. One thing is for sure: the British high-street stalwart needs to up its innovation game if it is to stay afloat in the ever-challenging retail market.