Los Angeles Rive Gauche - Gabrielle de la Chapelle Grand Magasins
Le Bon Marché’s Los Angeles Rive Gauche exhibition celebrates all things LA

A department store is not an obvious location for a skate park but that is exactly what Le Bon Marché in Paris unveiled one evening this month — with a skateboarder showing off his moves on bright pink ramp suspended from the ceiling.

The soirée was to launch its Los Angeles Rive Gauche exhibition, in which Le Bon Marché has given itself a West Coast makeover. For the next few weeks it will celebrate all things LA: featuring pop-up stores and American brands in fashion, food, beauty, home, the store’s first-ever yoga studio — and even a tattoo artist.

“You have to give customers another reason beyond shopping to come to the store, such as an exhibition or collaboration,” said Patrice Wagner, chairman and chief executive of Le Bon Marché Group, which is recognised as the first-ever modern department store and was the inspiration for the luxury emporium in Emile Zola’s 1883 work Au Bonheur des Dames.

Despite its long history, the department store model is under scrutiny as profits and sales at chains across Europe and the US fall as they struggle to attract customers.

This week in the UK, Middle England’s favourite chain John Lewis reported that profits dropped 99 per cent in the first half, with its department stores hit by falling sales. High-street stalwart Debenhams instructed advisers to draw up turnround plans that could involve store closures, sending its shares plummeting. A month earlier, rival House of Fraser collapsed into administration before being bought by Sports Direct.

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Meanwhile, two of the biggest names in German retail announced plans to unite. Toronto-listed Hudson’s Bay, which owns the upmarket US chain Saks Fifth Avenue, has agreed to merge its German Kaufhof department store group with local rival Karstadt, controlled by René Benko’s Signa Holding. Hudson’s Bay, like struggling US department store rivals Macy’s and JC Penney, is fighting to adjust to online competition and strengthen its position amid falling sales and mounting losses.

France’s grands magasins, as the department stores are known, are seeking to rewrite the traditional retail format to safeguard their future.

At the Galeries Lafayette across the Seine from Le Bon Marché, designer clothes rental service Panoply staged a fashion show earlier this month. The show was among a series of events and capsule collections that Galeries Lafayette has planned until the middle of October as part of a Go for Good initiative to promote more responsible fashion.

Backed by private families with deep pockets — Le Bon Marché is owned by the Arnault family’s LVMH, while Galeries Lafayette is ultimately owned by the Moulin family — the grands magasins have been able to invest and take a long-term vision. In doing so, they have largely avoided the desperate plight experienced by many of their counterparts elsewhere, say analysts.

“The family-owned structure gives management a true serenity to build for the long term,” said Laurence-Anne Parent, senior partner at consulting firm Advancy in Paris. “The flip side of this is that sometimes they might not be bold enough in terms of acquisitions, testing new business models and taking risks.”

According to Nicolas Houzé, chief executive of Galeries Lafayette, the stores’ “mission has evolved from a logic of transaction to a logic of relationship. We need to surprise, advise and entertain our clients, in order to offer them unique experiences that a website can’t provide.”

The grands magasins, for their part, are more comparable to upmarket UK stores such as Liberty and Selfridges, which are thriving, than they are to Debenhams and House of Fraser.

For the French groups, despite different business models — ranging from the smallest, Le Bon Marché, which has just one department store and two gourmet food outlets in Paris, to the largest, Galeries Lafayette, which has more than 60 stores across France and overseas — their overall outlook is positive.

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Last year, sales in the grands magasins sub-sector grew 4.1 per cent, outperforming the wider clothing market in France, which was up just 0.4 per cent, according to consultancy Kantar Group. That is despite an environment in which clothing sales are on track for their worst year since 2011 and online rivals are eating into the market share of physical retailers, according to the Institut Français de la Mode.

“France is unique in this context,” said Paolo de Cesare, chairman and chief executive officer of Galeries Lafayette’s local rival, Le Printemps, which is owned by Divine Investments, a US-based real estate firm. “There is a French way,” he added, bringing “uniqueness, differentiation and experiences” to consumers.

Luxury clothing rental service Panoply staged a fashion show at Galleries Lafayette. Slogans include ‘renting is trending’ or ‘rent an unlimited dressing room with a limited budget’
Luxury clothing rental service Panoply staged a fashion show at Galleries Lafayette. Slogans include ‘renting is trending’ or ‘rent an unlimited dressing room with a limited budget’

The three French groups are tight-lipped about their profits. LVMH does not publish figures for Le Bon Marché. Galeries Lafayette’s said its Haussmann flagship recorded sales of €2bn in 2017. Meanwhile Le Printemps posted sales of €1.6bn in its latest fiscal year and said it expected sales to rise 6-8 per cent this year.

Mr de Cesare said the grands magasins have been boosted by two key trends: the recent return to health of the luxury market, and a pick-up in international visitors. France’s tourism market suffered in 2016, after a series of terrorist attacks. It rebounded last year, and so far this year the number of tourists is up 4.1 per cent on the first half of 2017, according to Île-de-France. The groups have also benefited from the introduction of Sunday trading in January 2017, which Galeries Lafayette said added 10 per cent to sales in its Haussman flagship that year.

All of this has been accompanied by a series of investment and refurbishment projects. For example, Galeries Lafayette has transferred tens of regional stores to franchise operators to focus on bigger cities, and next year will open a new flagship store on the Champs-Élysées.

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Le Printemps has spent €100m refurbishing its flagship store in Paris and ramping up areas such as menswear. Le Bon Marché has built a name for itself discovering emerging designers and has led the way with cultural collaborations, teaming up with a wide range of artists from China’s Ai Weiwei to Japanese installation artist Chiharu Shiota, who suspended a fleet of woven white boats inside the store last year.

Yet challenges remain, notably ecommerce. “Digitalisation is clearly our number one challenge,” conceded Mr Houzé. Last year, Le Bon Marché launched a belated digital push with its 24 Sevres website, entering a highly competitive luxury market that is dominated by the likes of Yoox Net-a-Porter Group and Matchesfashion.com. Galeries Lafayette and Le Printemps have also been slow to embrace online sales but have sought to catch up through acquisitions, with the former buying etailer La Redoute and the latter snapping up ecommerce group Places des Tendances.

Groupe Printemps restaurant Perruche
Le Printemps Haussmann’s Perruche rooftop cocktail bar and restaurant

As stores fight it out to win customers, they have been expanding their food and restaurants.

Last November, Le Bon Marché unveiled a second Parisian outpost of its gourmet food store, La Grande Épicerie. Le Printemps Haussmann this year opened a gourmet food hall and Perruche, a rooftop cocktail bar and restaurant. And Galeries Lafayette is planning to open a vast food hall at its BHV department store in Paris, after signing an exclusive franchise in France with Eataly, the high-end Italian food chain.

“The grands magasins are positioning themselves as a place you go to have a good time, to meet friends and discover things,” said Advancy’s Ms Parent. “This is the hardest thing to do in retail today.”

Pioneers that have been slow to adapt

Retailers like to describe stores as “experiential destinations”, rather than mere emporiums stocked with goods. Management-speak aside, their forebears would have understood exactly what they meant, writes Jonathan Eley.

Department stores started to appear in numbers in the mid-19th century, a product of the industrial revolution and the upsurge in middle-class wealth that it brought. Many of the first stores, from John Lewis in the UK to Mitsukoshi in Japan, were founded by cloth merchants, tailors or drapers. The name of Spain’s El Corte Inglés refers to a particularly English cut of suit.

When Harry Gordon Selfridge arrived in Europe in 1905, he sought to recreate the panache of Chicago department store Marshall Field’s in London. His eponymous store on Oxford Street featured restaurants and a roof garden and became a social destination in its own right.

These emporiums often occupied grand buildings — from the Beaux Arts splendour of Selfridges to the daring Modernism of Schocken stores in Germany — in prominent city-centre locations. The stores also pioneered things like fixed prices, sales for cash rather than on account, and loyalty cards. Their big first challenge was the postwar rise of the motor car, which led to out-of-town shopping centres and hypermarkets. Cheaper imitations of the department store format proliferated. The internet, with its vast choice and price transparency, is a comparatively recent problem.

“What sets a good department store apart is its lack of ubiquity. The best offer unique experiences with lots of brands that are not available elsewhere,” said Jonathan de Mello, a consultant at Harper Dennis Hobbs. “They have maintained brand value in a way that the more ubiquitous offerings have not.”

A long-term owner and a willingness to invest in the brand helps, too. Many of the French department stores remain in private hands, Selfridges is owned by the Weston family, Harrods by the Qatar Investment Authority. Financial engineering, excess leverage and over-expansion have tended to end badly, both in Europe and the US.

Most were slow to adapt to online. “Department stores initially felt insulated from online,” said Natalie Berg, a consultant at NBK Retail. “The first categories to be disrupted were things like books and music, where they weren’t big players.” Now they are being forced to invest heavily in online capability while retrenching in physical retail.

In the US, groups such as Macy’s, Sears, Nordstrom and Nieman Marcus have closed hundreds of stores. The proposed merger of Germany’s Kaufhof with compatriot Karstadt is likely to result in rationalisation. In the UK, Debenhams and House of Fraser are trying to cut back on square feet.

The department stores of the future will need to be slick operators online, and run fewer but betters stores that inspire in the way that their 19th-century incarnations did. “Department stores are not necessarily outmoded,” said Mr de Mello. “We just don’t need so many of them.”

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