Debenhams: Is there a sting in omnichannel’s tail?

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Debenhams’ online sales are rising. Yippee. Debenhams physical store sales are… well, we won’t be sure until its trading update comes out in January. But some people in the know are concerned.

Now, we’re used to department stores reporting ever-increasing online sales as a complement to sales made face-to-face. But Debenhams, analysts believe, has a problem.

Its share price fell late last week after Goldman Sachs analysts recommended selling the shares and made distinctly pessimistic noises on its outlook. They said Debenhams’ growing online business is cannibalising physical store sales and that the retailer is the most vulnerable of a number of businesses facing similar challenges.

The conclusion? Goldman Sachs thinks “tough times lie ahead”, especially with fewer UK store openings planned.

Not that Debenhams is calling a halt to new stores. It will open 11 internationally in the next few years and I recently reported a major push into Russia, where it’s buying Stockmann’s department stores.

And not that it’s said anything negative about the development of its online business. In fact it recently said click and collect is benefiting the stores as it gets online customers through their doors.

But do they spend when they get there? We don’t know any details for Debenhams but this summer, value fashion retailer New Look said 28% of its online orders were via click and collect and 19% of these customers make a further purchase in-store when pick up their online orders. Since then, click and collect has risen to 31% of online orders but we don’t know whether that 19% figure has changed.

A report from Deloitte and eBay last year suggested cannibalisation from e-sales isn’t a problem for the fashion sector. It said around 95% of dresses bought online were in addition spending in physical stores.

But even if that’s still the case, the balancing act between online and physical stores is certainly a delicate one. I see a lot of sales reports listing anaemic physical store growth compared to surging e-sales. While they don’t come loaded with complaints about online sales rising too fast, it has to be said that many chains are assessing their store portfolio, reining-in openings and cutting lossmaking sites.

Some retailers manage the omnichannel process superbly and it’s significant that in the report where Goldman Sachs questioned Debenhams’ prospects, it also praised Next. That’s one retailer that has been doing omnichannel for decades, treading the line between store and mail order sales and making a huge success of both before online stores were ever even thought of. Whether Debenhams is also making a success of omnichannel could become clearer next month. Can’t wait for that trading update.

2 thoughts on “Debenhams: Is there a sting in omnichannel’s tail?

  1. Pingback: Christmas 2015: Debenhams says “na na na na na na” to doom-mongers | TRENDWALK.net

  2. Pingback: Deep dive into digital rewrites rules for stores say reports | TRENDWALK.net

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