September 2017 was a hectic month for now defunct UK department store Debenhams.
Two shiny, expensive new Debenhams stores had opened within days of one another. One was located close to the railway station in Stevenage, a commuter town north of London. It was billed as a glitzy “flagship,” which was odd given it was in a town of less than 100,000 people.
Almost 17,000 kilometres away, the doors were swung open on another Debenhams. This one that took over the basement of a shopping centre in Melbourne on the not-quite Paris end of Collins St.
Each opening involved bells and whistles and celebs cutting ribbons. Management had high hopes the expansion would pay dividends with customers buying up big on cosmetics, clothes, only stopping for a breather at the instore cafe.
The store openings were a disastrous move.
A retail analyst has told news.com.au that the company’s strategy to keep opening more and more stores when other retailers were closing branches was the single most “reckless” decision Debenhams made and one of the key reasons it went bust so spectacularly.
It was a decision that didn’t just fell Debenhams but almost took down an Australian department store with it.
“All the signs were there not to open more stores and they did it anyway,” said CEO of retail advisory firm Retail Doctor Brian Walker.
Debenhams’ ‘reckless’ mistake
Last weekend, the final clutch of 124 Debenhams stores shut for good – their shelves stripped bare by bargain shoppers hunting for fire sale bargains.
Founded in 1788, Debenhams was to the UK what Myer is to Australia: mid-market, dependable and venerable.
Its large landmark stores could be found in every British city as well as many major towns and suburbs.
All the big brands were in one place. In the 1990s the “Designers at Debenhams” collection of diffusion lines from big-name designers wowed British shoppers.
It was the place you went to for Clinique makeup, Jasper Conran fashions and Van Heusen shirts.
In 2006, after going through several bumpy ownership changes, Debenhams returned to the stock market with the firm valued at a cool 1.7 billion pounds (just over A$3 bn). It sounds good, but it was at the lower end of market expectations – investors were immediately jittery.
Not management, however. Flush with cash and with its market share strong, Debenhams went on a half billion dollar store opening binge. Over the next decade or more, the expenditure on new stores would just grow and grow.
But because it already had stores in most major UK cities, many of these new stores were in smaller suburbs or market towns with fewer shoppers. Places like Wrexham, Bury St Edmunds – and Stevenage.
In South London, Debenhams opened a new store in Wandsworth – hardly a shopping mecca – just 2 kilometres from an existing store in Clapham Junction. In good traffic, that’s just a five-minute drive between the two.
“In 2006, it was 10 years after Amazon had opened and online growth was beginning and Debenhams was on a store opening spree,” said Mr Walker.
“It was an expansion strategy that was really quite reckless.
“It was overexpanding when there was a real need to be judicious.”
Department stores could work, Mr Walker said, but the profitable locations were more likely to be CBDs and other high traffic destinations, preferably with lots of tourists.
“At one point Debenhams had 240 stores when all they really needed was 50.
“They were over indexing on space with high operating overheads and too much square footage but not enough differentiated brands.
“The margin for error was just too great”.
That Debenhams continued to open new stores, right into the late 2010s, despite the rise of online as well as the increasing power of fast fashion retailers like Primark, H&M and Zara, baffled.
RELATED: ‘Sad’ final hours of iconic British retailer Debenhams
Debenhams’ role in failure of major Australian retailer
One of the UK giant’s most perplexing decisions was its brief sojourn down under.
It teamed up with Adelaide-based Harris Scarfe to initially sell Debenhams branded clothes in its stores. Then, in September 2015, a Debenhams store opened in the swish St Collins Lane centre.
The plan was for a small collection of Debenhams stores to open in major capitals – a higher end alternative to Harris Scarfe.
“It was a courageous move, but there was no evidence of logic,” said Mr Walker.
“At the time Roger David and Ed Harry had gone under and even H&M had probably overexpanded on physical space in Australia”.
Indeed, H&M has since closed some regional Queensland stores.
Mr Walker said he expected Harris Scarfe and Debenhams had noted some Australian customers were buying Debenhams clothes online so assumed they would flock to the Melbourne store.
They didn’t.
“It was hubris – they just didn’t read the tea leaves well.
“When Debenhams opened they didn’t do a spectacular job either.”
Bereft of customers, the doors closed to Debenhams Melbourne in late 2019.
Debenhams ill-fated opening in Australia was such a department store disaster that it played a key role in the insolvency of Harris Scarfe which fell into administration in December 2020.
A report lodged by administrators BDO in March 2020, said the closure of Debenhams in Melbourne had “resulted in a looming unresolvable default under the lease with a significant associated cost,” reported the Herald Sun.
Harris Scarfe, now owned by Spotlight, has shed 23 of its 66 stores. But at least, unlike Debenhams, it continues to actually have stores.
RELATED: Australian retail icons risk a Debenhams style ‘failure’
12,000 jobs lost
There were other reasons for Debenhams’ downfall. It stores were big, bulky and came with the high rents which demanded high sales.
Yet, it was seen as fusty and tired compared to nimbler and newer competitors. It failed to make its online offer as appetising as rivals such as ASKS and The Iconic.
Then online came COVID-19.
It’s estimated some 12,000 people will lose their jobs due to Debenhams’ demise. The brand will live on but online only after it was purchased by Boohoo for 55m pounds (A$100m), a far cry from its $3bn 2006 stock market listing.
QUT marketing expert Professor Gary Mortimer said Debenhams’ distress was a reflection of retailers everywhere.
“The days of the big full line department stores have changed. A failure of the likes of Debenhams could happen in Australia and we’ve seen it happen before,” he told news.com.au.
But it also made a huge mistakes.
Head to Melbourne or Stevenage today and the buildings that once housed Debenhams are there – but the iconic brand is no more.
They both stand as monuments to the poor decision that ruined a retail giant.
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