Improving department store productivity - Mini malls

​Photo credit - Jason Kempin/Getty Images

“We think of each one of our stores, in many ways, like a mall.”

— Richard Baker, Chief Executive of Hudson's Bay Co

Hudson's Bay, North America's oldest department store, has seen small increases in their performance to date.  Sales per square foot reached $140 in 2012, up 5 percent from the previous year.  This is well below the $1,936 per square foot lululemon achieved in in the same year, and the estimated $1,000 per square foot at privately-held Holt Renfrew.

JC Penney has had the same space performance challenge, and the introduction of the Sephora shop-in-shops increased that space to $600 per square foot.  Similarly, Hudson's Bay introduction of Top Shop netted $700 per square foot in the branded shop.  Hudson's Bay CEO, Richard Baker recently told the Financial Post, "we think of each one of our stores, in many ways, like a mall".  The retailer recently announced Kleinfeld bridal boutiques will be opening within their stores next year.

 

Is increased productivity the only reason for the influx of branded shop-in-shops at North American retailers?  Many designers and brands prefer the model, as it gives them greater control over brand messaging, inventory and profit.  For department stores, it means filling floors with in-demand merchandise, which they would be unable to purchase normally. 

 

Bloomingdale's, Holt Renfrew, Hudson's Bay, and JC Penney are all actively looking to the concession model for growth.  How do you define your store's identity if what you offer is simply an umbrella for other brands?  The ability to make significant deals with big brands, like Prada and Ralph Lauren, becomes a driving force in a retailers success.  It is less about the experience offered by the umbrella department store. 

 

To learn more about business productivity - The Retail Math Workshops are a good place to start.