Strategic Brand Development Report - Debenhams

THE UNIVERSITY OF MANCHESTER

Group 6

Strategy Report Yingshi Chen – 8512662 Katie Jeffreys – 9695369 Hannah Toal – 9984810 Veronika Anzjane – 9962646 Niamh Magee – 9627456 Lalisa Trirattanajaraspon – 9984196 Amy Leyland – 9594158

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REPORT CONTENT PAGE 1. Company Overview Brand Introduction and Issues…………………….……………..8 Value Chain………………………………………..………………9 Porters Generic Strategies ……………………………….…… 10 Value Disciplines………………………………….………………10 Brand Identity Prism…………………..…………...………….11/13 2. Marketing Mix Product…………………………………………………………….15 Price………………………………………………………………..15 Place……………………………………………………………….16 Promotion……………………………..………….………………..16 Service Mix……………………………………...……………..17/18 3. Customer Analysis Current Customer Profile……………………………………..20/21 Future Customer Profile…………………..……………………..22 4. Market Research Primary Research…………………………….……….………….24 Primary Research Findings………….……….………………25/26

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REPORT CONTENT PAGE 5. Competitor Analysis Direct Competitors………………………….…….……..……….28 Aspirational Competitors…………………….…………………..29 Online Competitors……………………………………………….30 Conceptual Map…………….……….……………………………31 Comparative Shop…………………..……………………………32 6. External Analysis Porter’s Five Forces ………………………...…..……………34/35 P.E.S.T.L.E…………………………………..………………..36/40 7. WGSN Trend Analysis A/W 19/20 Younger Consumer Trend……………………………………….42 Older Consumer Trend…………………………….……………..43 8. Strategic Development Ansoff………………………………………….…………………..45 SWOT & TOWS……………………………………………….40/50 9. Strategic Objectives S.M.A.R.T…………………………….…………………..……52/56 Gantt Chart……………………………………………………….57

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4 REPORT CONTENT PAGE 10. Conclusion Overview of Strategy Plan……………….………………59

References……………………………………………60/68 Appendices  Appendix A- Financial Summary …………………69  Appendix B- Value Chain ………………………..70  Appendix C- Competitor Sustainability Strategies.71

5 List of Figures Figure 1- Current Brand Problems Figure 2 – General Problems in the Department Store Sector Figure 3 – Timeline Figure 4 – Current Brand Identity Prism Figure 5 – Perceived Brand Identity Prism Figure 6 – Facets of the Brand Identity Prism Figure 7- Marketing Mix (McCarthy,1960) Figure 8- Service Mix Figure 9-Strategic Implications of Internal Analysis Figure 10-Casual Conventionals Figure 11- Social Chameleons Figure 12- Trust pilot 2018 Figure 13-Key Findings from Primary Research Figure 14- key Findings from Online Market Analysis Figure 15- Direct Competitors Figure 16- Aspirational Competitors Figure 17- Online Competitors Figure 18- Conceptual Map Figure 19- Comp Shop Figure 20- 5 forces Figure 21- P.E.S.T.L.E Figure 22- Ansoff Figure 23- SWOT Figure 24- TOWS Figure 25 -S.M.A.R.T Sustainability Figure 26- S.M.A.R.T In store Figure 27- S.M.A.R.T Product Figure 28- S.M.A.R.T Social Media Figure 29-Key Performance Indicator Figure 30- Gantt Chart

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PART ONE COMPANY OVERVIEW

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Company Overview Core Competencies Core competencies are the strategic

advantage of a business, what they do best that distinguishes them from competitors

(Hamel & Prahalad, 1990).

For Debenhams this is their Designers at Debenhams exclusive Fashion Brands (Mintel, 2018) as this is considered a differentiator amongst its mid-market department store competitors.

Current Brand Problems It’s important to understand existing problems, to efficiently formulate alternative strategies to help solve them (Hill &Jones, 1998)

Problems 

Lack of investment regarding the in store environment, with dated fashion and fixtures (Wood, 2018). As Debenhams are paying high rent costs due to their prime locations, they need to give more depth to the shopping experience to entice customers in store.



Are considered out of fashion by both old and young consumers. Their product ranges aren’t good enough to keep up with the highly competitive market (BBC News, 2018).



Key employees are choosing to leave the company showing little faith in their future developments (Drapers, 2018). Similarly Artradius their long term insurance provider has halted its cover amid fears over future trading speculated in the press (Fashion United, 2018a.)



They also have plans to close up to 50 of their stores after revealing a full year loss of £491.5 million, their worst results to date (Mintel, 2018).

Figure 1 -Current Brand Problems

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Company Overview General Problems in the Department Store Sector Problems

 Many of the leading players are too reliant on promotions to be competitive (Mintel, 2018).  Department stores have become lifeless with little consideration to experiences, uniqueness, Customer Service and visuals (Fashion United, 2018b).  The sector is under intense pressure as department store closures and failures are regularly in the headlines (Fashion United, 2018).

Figure 2 –Department Store Problems

Value Chain

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Porters Value Chain (1985) can be used to establish how Debenhams create value for their customer and areas for development in achieving competitive advantage.



Debenhams have developed a localised strategy (Rogers,2018) in their new stores whereby instore products are chosen based on online demand in that area, thus reducing unnecessary expenditure as supply meets demand (Henderson, 1961).



Debenhams have some level of differential advantage with their “Designers at Debenhams” collections, which account for up to 50% of sales. However collaborating with younger designers/brands can help widen their customer base by attracting younger customers in store.



Have created experiential value (Jackson and Shaw, 2009) in their redesigned stores by making shopping more sociable through the use of eateries etc. However moving forward this should be carried through to more stores as well as ensuring customer service isn’t compromised through these changes.

See Appendix C for Debenhams Value Chain

Value Disciplines and Generic Strategies

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Porters Generic Strategies According to Porters (1985) Generic Strategies Debenhams are currently stuck in the middle as they can’t compete on low prices nor do they offer enough differentiation. Customers don’t shop in department stores for low prices (Rogers, 2018) therefore Debenhams should no longer focus on incessant promotions and instead focus on differentiating their brand. They should also move their attention towards experiential retail by creating a stimulating in store experience whilst also creating more innovative products through their Designers at Debenhams Collections moving away from the sea of sameness the store has to offer (Rogers, 2018).

Value Disciplines Debenhams confused brand identity means they don’t currently excel in any of the value disciplines identified by Treacy and Wiersema (1993).

However they should strive to achieve customer intimacy. This means building customer loyalty focusing on the customer’s lifetime value on the company and not single transactions. Debenhams can capitalise on this by ensuring they deliver a superior customer service e.g. fitting advice given from experts. Developing a localised strategy (Rogers, 2018) can also help achieve this by not taking a one size fits all approach.

Brand Identity Prism

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The Brand Identity Prism is used to help a business build a strong brand identity and showcase their core values (Kapferer, 2012). Below is how Debenhams view their current identity.

Figure 4 Current Brand Identity Prism (Kapferer, 2012)

However there is a gap between how Debenhams view themselves and how consumers see them. The identity is therefore more reflective of the brands aspirations rather than the image they portray (Marguiles, 1977). Below is a brand identity prism based on customer perceptions of Debenhams (see market research). For Debenhams the identity and the image clearly need to be more aligned. They therefore need to alter their branding strategy to better influence how the customer views them.

Brand Identity Prism There are some similarities highlighted below that Debenhams should capitalise on.

Figure 5 perceived Brand Identity Prism (Kapferer, 2012)

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Figure 6 Facets of the Brand Identity Prism Facets of the Brand Identity Prism

Physique

Personality

Relationship

Culture

Reflection

Self-Image

Debenhams View

Customers View

Strategic Implication

Debenhams are known for their “Designers at Debenhams” collections aligning with their core competency. They also have a width and breadth of product ranges.

Customers also see Debenhams for their “Designers at Debenhams” and wide product ranges, however view them as having a low fashion status.

Customers see Debenhams as being old fashioned in both products and building appearance.

Maintain investment in Designers at Debenhams Collections; however focus on developing more Fashionable ranges to reach a more fashion conscious customer to continue selling a wide product range.

Customers shop at Debenhams because it’s a staple of British high street it’s always been there.

Long history of Debenhams means customer view them as a traditional brand with traditional values.

Influence younger customers by improving fashionability and offer more experiences in store e.g. demonstrations as young people in particular are attracted by interactivity (Mintel, 2018). Debenhams can thus build relationships with new customers whilst maintaining their current ones. Increasing footfall in store.

Focus on their British heritage by collaborating with more British designers in store. They can also capitalise on tradition e.g. focusing on the in store environment and the traditional theatrical aspect of it such as window displays and interesting product displays.

Customers see them as being affordable however also have a confusing price structure with incessant promotions.

However customers feel cautious because they’ve chosen the company because of their nostalgic and reliable connotations with them.

Customers go to department stores to discover new brands and exclusive products and seek value over cheapness. Debenhams should concentrate on offering quality, Fashionable products rather than constant promotions that dilute the brand to suit their midmarket audience.

Debenhams aims to appear confident in their values and what they stand for as well as being seen as a modern brand.

Debenhams has a nostalgic relationship with customers so has a loyal customer base who trust them.

Debenhams aims to capitalise on the traditional aspect of department stores whilst also offering on trend products.

Their mid-market position means they focus on affordability whilst also offering quality fashionable items for all the family.

Debenhams aspire for their customers to feel like trend setters and sophisticated when they leave the store.

Redesign their marketing and product offering to deliver a more contemporary experience. This will better achieve the brands hopes to be more modern and a stronger alignment between identity and perception will also make Debenhams appear more Confident of what they’re offering to customers.

Debenhams desired identity is failing to align with customer perceptions; they need to alter their marketing approach focusing on appearing more stylish and trendy. Offering a more fashionable product range and better in store experience will also make this happen. Customers want department stores to be a destination filled with experiences (BBC News, 2016).

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PART TWO MARKETING MIX

Marketing Mix Marketing Mix

Figure 7 Marketing Mix (McCarthy, 1960)

Product Debenhams offer a variety products ranging from menswear, womenswear, home and electricals as well as services including hair, nails and makeup. They collaborate with hundreds of brands who hold concessions instore; MAC, Coast, Dior and D&G. Debenhams sell the same products as JL and HOF so must remain competitive to survive.

Price Pricing depends on the brand and type of product. Debenhams offer products at both the higher and lower end of the market to compete with other department stores. Debenhams’ continuous sales promotions and discounts running throughout the year show signs that they’re struggling.

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Place

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Debenhams currently has 240 department stores and ship goods worldwide through their global website (Debenhams Plc, 2018). However, they’ve recently announced the closure of 50 stores due to tough trading conditions on the high-street (Telegraph, 2018). They've actioned a £100M cost-cutting plan which highlights that Debenhams’ current strategies and operations aren’t working and need changed to fit the current environment. Debenhams have implemented a new distribution model which is designed “to simplify processes and introduce a flatter management structure which will support faster decision-making” (Logistics Manager, 2018). Adapting this approach means their business model will become more efficient, productive and eliminate unnecessary waste. (Treacy & Wiersema, 1993).

Promotion Debenhams use multiple promotional techniques including celebrity endorsement, making Alesha Dixon their Beauty Club brand ambassador (Drapers, 2017). However, to attract a younger market they must select a young, current celebrity that millennials can relate to.

Debenhams use loyalty schemes enabling customers to collect points and receive discounts which attract loyal customers (Fashion United, 2017). Debenhams also collaborate with charities, this year creating a collection for Breast Cancer Now, “Fashion Targets Breast Cancer”, with 30% of profits donated to the charity, improving corporate image (Breast Cancer Now, 2018). In September Debenhams launched a rebranding campaign, “do a bit of Debenhams”, showing a new found confidence to attract consumers (Marketing Week, 2018). The logo was modernised and 5 stores invested in to improve instore experience.

However, to change consumer perception, Debenhams’ whole model needs improvements.

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Service Mix

Booms and Bitner (1981) extended the Marketing Mix to include 3P’s of service. This is especially important for Debenhams to consider if they aim to excel in customer intimacy, as delivering a superior service is critical to their success.

Figure 8 Service Mix

People

Process

Physical Evidence

Debenhams hire people who aim

Debenhams operates a multi-

This is a weak area for

to excel in delivering customer

channel business, integrating in

Debenhams; their stores are quite

service.

store and online shopping.

outdated so are less appealing to

(Debenhams Plc, 2018)

customers.

In store sales assistants providing

Customers can order online and

extra services e.g. bra fittings and

can have items delivered to store

However stores consist of signs to

advice at the makeup counter.

or home. These flexible delivery

help guide around.

options are also applied when Experienced Personal Shoppers

customers order in store.

Their website is simple to use as

in store offering advice (this

However there could be a further

areas are divided up with drop

service is free).

opportunity for integration by

down menus for convenience.

adopting an Omni-channel approach, to make the link

Brands are split up into categories

between channels more seamless

in store for simplicity.

and continuous (Pantano, 2015) e.g. more customer service options online or the option to use mobile technology in store.

Strategic Implications of Internal Analysis Figure 9 Strategic Implications of Internal Analysis 

Invest in the in store environment to enhance the experience.



Create a more Omni Channel approach to make links between channels more seamless.



Differentiate brands/products more by improving fashionability to better target younger consumers.



Aim to excel in Customer Intimacy by offering a superior level of customer service.



Continued investment in promotional campaigns, especially in targeting a younger consumer.

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PART THREE CUSTOMER ANALYSIS

Current Customer Analysis ‘’By clearly identifying target audiences, it becomes easier to capture someone’s attention because their needs and goals are front and center’’ (Evans, 2013)

In line with the fast pace of change in the retail sector, Debenhams have had to re-strategize and invest in research to better understand the different types of consumers and their buying habits. The company have recently introduced an in-house customer segmentation tool which splits consumer buying habits into the below seven segments: 

Social Chameleons



Statement Makers



Life Maximisers



Savvy Strivers



Discerning Pragmatists



Casual Conventionals



Practical Replacers

It is clear that Debenhams are unaware of who their target audience is, and Evans argues that by identifying your target audience, it becomes easier to target them. The current Debenhams consumer can be seen in Figure 3.1 and falls into the Casual Conventionals segment where fashion is about being comfortable, casual and style is less important as there are greater priorities in life (Debenhams, 2018).

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Current Customer Figure 10 Casual Conventionals

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Future Customer Analysis To move the brand forward and appeal to a younger audience, a future addition to the current Debenhams consumer can be seen in Figure 3.2 who fall into the Social Chameleon segment which will be targeted through a new product range being created as well as the in-store experience and social communications being improved to better target this consumer segment. Social Chameleons enjoy sharing trends and being connected and love nothing more than experimenting with clothing and building their social currency (Debenhams, 2018).

Figure 11 Social Chameleons

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PART FOUR MARKET RESEARCH

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Market Research Market Research Research has been conducted to understand customer opinion of Debenhams. Market research helps ensure brands are consumer oriented and can therefore improve the likelihood of success in future developments as strategies are better designed to satisfy needs (Trott, 2017)

Online Reviews Analysis It’s important to undertake a range of different research methods to get the most accurate results and identity common themes throughout. (Virgil and Burton, 2017).

Online Reviews Generally people like the company they have a nostalgic relationship with them, however Debenhams aren’t doing enough to excite them.

Bad selection, fashion mostly targets “mums”

Love the Designers at Debenhams ranges

Boring store Too many discounts more like a closing down sale

Strategic Implications Debenhams have a loyal customer base as people have a fondness of the traditional store, they can use this to create more fashionable products and better store experiences so that those loyal customers continue to purchase from them.

Introduce newer brands in store in both concessions and Designers at Debenhams to entice a more fashion conscious consumer. However being careful not to alienate their current customers by still providing traditional loved brands Debenhams offer.

Continue to invest heavily in this area as it offers some differentiation from other department stores however continue to update regularly with more on trend designs.

Focus on experiential retail to make shopping in store more fun.

Focus on delivering quality fashionable products instead of constant promotions that dilute the brand.

Figure 12 online analysis based on the most recent reviews left on Trustpilot 2018

Consumer Survey Analysis Debenhams core customers are 30-55 year old women, whilst they also aspire to attract a younger

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audience. Primary Research has been performed on 100 participants who fall into these demographics.

The results are summarized in figure 13 below.

Findings

Strategic Implications

The majority of participants had visited a

Improve the in store experience to encourage customers to visit store.

Debenhams store in the past month with only

This can be through improved customer service, experiential retail or

12% having been in the past week.

increased visual merchandising.

In comparison 47% of participants had used

Debenhams should continue to invest in digital platforms, especially for

one of Debenhams online channels in the

targeting a younger demographic (Jackson and Shaw, 2009).

past week.

However these more digitally inclined customers could also be encouraged to visit store by taking a more holistic approach (Teufel and Zimmermann, 2015) to integrate technology in store e.g. store navigation tools on an app or QR codes to scan products on display.

Beauty is the category most people shop for

Continue to invest heavily in beauty, as this is clearly a strong

in Debenhams with only 27 women

category; however aim to introduce more fashionable clothing ranges

purchasing womenswear.

to attract more purchases. For example newer brands e.g. how Selfridges stock Misguided in selected stores.

More than half of those asked said that

Focus on developing sustainability in the supply chain to meet cultural

sustainability was important to them when

demands.

shopping.

Most of those asked said they don’t consider

Changes need to be made to the product aspect of the Marketing Mix

Debenhams to be fashionable.

especially in design of products with emphasis on womenswear as this was considered the most “out of touch� area.

British and Quality were key words

Focus on delivering quality products rather than competing on price

customers associated with Debenhams.

with constant promotions, whilst also focusing on British heritage e.g. collaborating with more British designers or concessions in store.

Most participants rated the in store

Focus on delivering superior service in store e.g. improve displays,

experience as 3 stars.

have more selection for younger consumers and improve the overall image of store to modernize outdated features.

Are more likely to purchase from store with

Concentrate on making the store a place to discover new brands or

more interactivity.

products e.g. giving fitting or style advice and demonstrations in store of how to use products.

Lack of consistency in stores.

Ensure the same level of service is being delivered country wide.

Consistency is key to improving their brand identity

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Online Market Analysis

It’s also important for Debenhams to understand what customers are looking for when generally shopping at Department Stores to implement this in future strategies.

Key Findings Product Assortment and Merchandising of Products (Mintel, 2018).

According to Mintel (2018) 47% of customers when asked said that product displays are an influencing factor for them entering store and them ultimately purchasing.

Customers also look for exclusive products believing that department stores are a good way to discover new brands. (Mintel, 2018) Young customers in particular what experiences and information from Department Stores, e.g. making the store more interactive through demonstrations and areas to experiment with products. (Mintel, 2018)

Figure 14 key Findings from Online Market Analysis

Strategic Implications of Consumer Analysis 

Sustainability is an emerging trend that needs to be considered.



Quality and Fashionability need to be improved in the Marketing Mix



Improve promotional campaigns to eliminate the need for constant promotions



Investigate the potential of targeting younger consumers who are attracted to experiential retail and fashionable products.

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PART FIVE COMPETITOR ANALYSIS

Competitor Analysis Competitors Current Performance Direct Competitors (Figure 15)

John Lewis

Fashion sales increased by 4% in Oct 2018 (Drapers, 2018a)

& Partners Suffering a customer service crisis (The Times, 2018a) Warned they may not make a profit in 2018 (The Independent, 2018) House of Fraser

Bought by Sports Direct for ÂŁ90m in July (BBCc, 2018)

Sports Direct PLC

Bought for ÂŁ351m in 2006 (Marketing Week, 2007) Seven stores including Manchester to close in 2019 (Drapers, 2018b) (Manchester store has been saved, Dec, 2018)

M&S

New brand ambassador Holly Willoughby (Drapers, 2018c)

Group PLC Sustainable Plan A strategy. (Appendix C) Suffered fall in annual profits, costly store closure plan (BBCb, 2018)

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Competitor Analysis

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Aspirational Competitors (Figure 16)

Harrods

‘Store is a seven-days-a-week live theatre experience’

Qatar

Amanda Hill/ chief marketing & customer officer

Holding Gross sales were up 9% to £2.1bn (Drapers, 2018d) Profits rise to £216m (The Times, 2018b) up 9% from the year before Selfridges & Co

£300m revamp of its store increased profits for a fifth consecutive year...

Sales up 11.5%to more than £1.75 billion (The Times, 2018c)

Positive sale growth for both luxury department stores- due to the high investments into the stores environments to create a theatre shopping experience which customer enjoy, purchase and return. As shown, investment into the store environment can pay off when suited to the brand and target market.

Debenhams can improve their current performance and in store environment by researching how they can adopt the aspirational competitor’s strategy to suit their budget and target market. For example, adopting Harrods shoe department refurb on a smaller scale.

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Competitor Analysis Online Competitors (Figure 17)

Very.com Shop Direct

Growth was driven by a ‘mobile first’ strategy (Internet Retailing, 2018)

Group 74% of total sales are made on mobile devices (Drapers, 2018f) LittleWoods.com

Revenues at dropped by 14.5% to £569.7m (Drapers, 2018g)

Shop Direct Group

Plans to open an automated warehouse in 2020 (The Guardian, 2018)

The growth of Very.com has been down to the success of the ‘mobile first’ strategy- There is a large market of consumers who currently buy from online department stores on their mobile. Debenhams should review their current online and mobile strategy to ensure the strategy is effective at attracting this consumer market to their mobile website.

In addition, Littlewoods’s strategies are based on improving their supply chain and the speed of which they can deliver to consumers. Debenhams should take this into consideration as an effective supply chain that works for both the business and consumer is critical to the success of both online and high street retailers in today’s competitive market.

Very.com 74% of sales on mobile devices (Drapers,2018f)

Competitor Analysis Concept Map (Figure 18)

Debenhams has been placed below their direct competitors as the brand lacks a strong brand image in order to develop a better reputation and image of quality, compared to John Lewis and M&S. For example, M&S are able to use their heritage of being a British brand within their marketing which appeals to older consumers who remember when the retailer prided themselves on Made in the UK and consumers looking for quality products at a reasonable price. Harrods and Selfridges & Co are placed highest on the map, as they have a strong heritage, an exclusive shopping experience (The Times, 2018c) and offer luxury designers products.

On the other hand, the online department stores Very and Littlewoods have been placed lowest. As they are the newest brands and have not had the neither time nor experience to create a strong reputation for consumers, and products tend to be lower priced than competitors. Overall, Debenhams lack of brand image as impacted the positioning; a branding strategy would help the brand to be placed higher.

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Competitor Analysis

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Comp Shop (Figure 19)

The competitive shop has been conductive using three products which Debenhams and two direct competitors are currently selling for AW19/20. The overall results indicate that Debenhams products RRP are the lowest with a collective total of ÂŁ170. The collective price difference between Debenhams and John Lewis total is substantial at ÂŁ1,250. As the competitive shop shows, the large price difference is mainly due to John Lewis selling designer brands such as Mulberry within their accessories department.

However, Debenhams pricing strategy could be seen as competitive as they are currently offering the best value for each of the products. In addition, Debenhams clothing size range is the most inclusive with UK size 6 to 22. Inclusive size selection is currently a popular topic and demand from customers and indicates that Debenhams may be listening to customers’ demands more than their direct competitors.

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PART SIX EXTERNAL ANALYSIS

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External Analysis

Porter’s Five Forces (Figure 20) Risk of entry by

High

potential

Street

competitors

Low

Factors that limit the threat of new competitors include financial barriers. The high capital investment required to start up a department store and compete with the established brands. The high fixed costs of rent as department store size is traditionally large and in prime commercial locations.

However, the existing loyalty to major department stores is very low and this increases the threat of new competitors who are able to overcome the financial barriers.

Online High

The risk of a new online department store entry is high. As Very.co.uk customers numbers have grown (Drapers, 2018f), while traditional department store footfall has fallen. The convenience of an online department store appeals to timeshort consumers and the risk is increased by the growth of mobile devices being used to shop online.

Bargaining

High

Power

The information available to buyers provides them substantial power over price and profit margins. Debenhams buyers are

of Buyers

price sensitive and use the internet to compare prices on competitor websites before deciding where to buy. To lessen the impact, it is vital that Debenhams pricing strategy is suitable for their target consumer to increase full-price purchases and reduce promotional events.

Bargaining

Medium

The existing brands at Debenhams are somewhat important, as

Power of

buyer loyalty is low. To decrease the supplier's power,

Suppliers

Debenhams may consider expanding and contacting new suppliers about new substitute brands at a lower cost. This is an available route to saves money, expand their range and attract new customers.

35 The Threat of

Very

The availability of existing substitute products from competitors such

Substitute

High

House of Fraser is very high. The threat is heightened as switching

products

to another competitive product is made easy for buyers as they have a large selection of competitors selling similar products.

Rivalry

Very

Profitability within high street department stores is low because of

Amongst firms

High

intense competition and rivalry (The Independent, 2018). The direct competitors of Debenhams are targeting a similar customer, offering products within the same departments and use promotional discounts to gain footfall and sales.

P.E.S.T.L.E Analysis

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The PESTEL Analysis is an extension of Francis Aguilar’s 1967 PEST model used to analyse and monitor the macro-environmental factors of an organisation.

Political Factor - Recent political uncertainty and a lack of clarity about the UK’s intended exit from the EU, have made it difficult for retailers to effectively plan for life beyond Brexit (Conley, 2017).

Implementation Brexit uncertainty has weakened the sterling and created adverse impacts on Debenhams sales. It is necessary for Debenhams to collect data regularly to recognise potential issues in order to avoid losses. They should also improve their high street and online presence to maximize sales throughout these difficulties.

Economic Factor -

The Consumer Price Index (CPI) rose to 2.5 percent in July from a previous 2.4 percent recorded in the three previous months, the Office for National Statistics (ONS) said (EXPRESS, 2018).

-

UK inflation is accelerated in 2018 (BBC NEWS, 2018)

-

Currency devaluation (figure1): between 2016 and 2018 sterling devalued by around 14% against the US dollar (Macrotrends, 2018).

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Figure 1: Exchange rates for GBP to USD: Year 2016-201

Implementation A recovery in customers’ spending power will continue to slow down as a result of disposable incomes being squeezed by the rise of inflation.

Debenhams may increase their retail prices. However, it may find struggles to absorb higher costs. Debenhams may need to seek for cheaper suppliers to reduce costs.

Social Factor -

Buying habit of the millennial generation: This is a generation that has higher expectations on what a company should deliver: convenience, quality, values orientation, newness and price. (BOF and McKinsey & Company, 2018).

-

Personnalisation becomes the No. 1 trend for 2018 (The BOF and McKinsey & Company, 2018)

Implementation Debenhams could gain more profit if they successfully adapted to the shift in consumer buying behavior, improving the fashionability of products, and consistency in pricing.

Technological

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Factor -

2018 will be the year leading innovators begin to reveal – and revel in – the possibilities offered by Artificial Intelligence (AI) across all parts of the fashion value chain (BOF and McKinsey & Company, 2018).

-

The global online platform revenue has increased by 2 to 3 times between 2015 and 2018 (The BOF and McKinsey & Company, 2018).

-

Consumers’ obsession with mobile grows; the end-to-end transaction will also move to mobile (The BOF and McKinsey & Company, 2018).

Implementation It is a significant trend to use AI to reinvent design, merchandising and marketing.

Debenhams could use AI to improve the efficiency of the fashion supply chain, including speed, cost and flexibility. Also, to improve in-store digital experience.

As the popularity of online shopping continues to dominate, the challenge for Debenhams is how to collaborate with big online platforms and improve their online platform. They could consider taking a more Omni channel approach by integrating the use of their app in store for example to guide customers around or to give extra product details.

They should continue to reinvent the ways in which they deliver that all-important customer experience in order to compete with rivals by responding and adapting to changes in customer needs.

Environmental Factor -

For fashion retailers, environmental protection and sustainability are essential.

Fashion brands should give priority to sustainable fashion (The BOF and McKinsey & Company, 2018).

-

According to the BBC (2018) news: “Winter 2018 to be coldest for 10 years with months of heavy snow.

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Implementation Debenhams should continue to introduce more environmentally friendly raw materials, packaging boxes and manufacturing, and commit to improving product design, especially as more consumers are prepared to pay for sustainability.

Extreme weather can negatively affect Debenhams’ sales, as it reduces people’s outdoor activities, and lead to lots of sales. In April 2018, Debenhams like-for-like sales declined by 2.2%, which was impacted by extreme weather conditions in March (Debenhams PLC, 2018). In situations like this Debenhams should focus on promoting online sales to avoid losses.

Legal Factor -

In April, the national living wage for over-25s will increase by 4.4% to £7.83 per hour (Geoghegan, 2018).

-

The General Data Protection Regulation (GDPR) has come into force in May.

-

In Jan 2018, China has banned imports of 24 kinds of waste (The Guardian, 2018).

Implementation Debenhams need to comply with the new laws and should develop a response plan.

Regarding to the GDPR, Debenhams should ensure the transparency over how they use customers’ personal data. Failure to comply will result in fines of up to €20m (£17.8m) or 4% of annual global turnover (Geoghegan, 2018). This will also improve the relationship with consumers as they will see them as a trustworthy brand.

Figure 21 Pestle Analysis

Strategic Implications of External Analysis



Introduce sustainability in company operations to engage with current environmental trends.



Focus on delivering an engaging/ interactive customer experience to justify high rent costs.



Provide the opportunity for Omni- Channel interaction to reduce the risk of new online competitors.



Improve product ranges and create a more consistent pricing strategy.



The threat of other brands can be minimised by better meeting customer expectations of the brand.

Figure 21 Strategic Implications of External analysis

40

41

PART SEVEN TREND ANALYSIS

WGSN Trend Analysis A/W 19/20

42

WGSN Trend Analysis A/W 19/20

43

44

PART EIGHT STRATEGIC DEVELOPMENT

Strategic Development

Figure 22: Ansoff Matrix (Ansoff, 1957)

Applying the Ansoff Matrix to Debenhams highlights they should focus on market development to target a younger demographic, using existing product types but adapting designs, pricing and promotion. Debenhams must conduct market research to fully understand their new market; otherwise this strategy will be unsuccessful and waste resources.

45

46

Strategic Development

SWOT Analysis Internal and external analysis is completed in a form of SWOT in order to identify factors that influence functioning of Debenhams as well as to provide useful information which is supported in the strategic planning process (Pierre Veyrat, 2016).

Strengths



Figure 23 SWOT

Debenhams has a strong distribution network by choosing DHL supply chain for the past two decades to provide warehousing and distribution. The contract will also continue to support its omni-channel strategy for over the next five years (Logistic Manager, 2016)



The brand has a strong presence of over 240 stores across 27 countries including 58 stores in 18 countries outside the UK and Ireland (Debenhams, 2018).



There are several product categories including clothing, accessories, electrical, beauty, furniture, home decoration and etc (Debenhams, 2018).



There is a 14.6% growth in online sales, driven by mobile orders rising 64% (Sandra Halliday, 2017).



Having loyalty scheme with 1.2 million cardholders builds customer loyalty (Mintel, 2018).



The brand has cooperated with third-party online distributors, such as ASOS, Zalando and Amazon, to give the brand immediate access to new markets where it lacks brand awareness or is unknown (Mintel, 2018).

Weaknesses



There is a decline in operating profits in Debenham’s latest account (Mintel, 2018).



At the beginning of November, Debenham market shares fall by 21% after very poor weekly sales (Rob Davies, 2018). It leads to a plan of 50 store closure in the future (Sandra Halliday, 2018).



In July, Two top credit insurers had reduced cover for suppliers to Debenhams for new business while existing contracts are understood not to be affected (Mintel, 2018). However, some high street suppliers have stopped working with Debenhams due

to uncertainty of cash flow and reduction of credit insurance

47

(Drapers, 2018). 

Without a mobile app, it’s leading to a lack of consumer engagement.

Opportunities



Its physical stores remain tired-looking (Nikki Gilliland, 2018).



The vast majority of innovation in the UK department store sector has remained focused on in-store experience (Mintel, 2018). A 35% of consumers say that they shop with department stores over other retailers to take advantage of the store experience (Mintel, 2018).



The total consumer expenditure in the UK increased 3% in 2017 to reach £1.25 trillion, reflecting a relatively robust economy (Mintel, 2018).



The UK manufacturing is becoming more viable (Drapers, 2018).



Consumer aged 25-34s are the most likely to engage with multichannel retailing (Mintel, 2018).

Threats



There are rising on wage costs and local taxes (Financialtimes, 2018).



A slowdown growth of consumer expenditure has been projected. It’s a signal that consumers are beginning to adopt more cautious spending habits (Mintel, 2018).



Brexit turns Christmas into a season of uncertainty - A disorderly exit from the EU would be negative for UK retailers on currency devaluation and consumer confidence (Drapers, 2018).



The fashion industry is currently experiencing a limited pool of home-grown skilled manufacturing talent (Drapers, 2018).



The premium department stores including Selfridges, Harrods, Liberty and Harvey Nichols, have continued to outperform the mid-market retailers in the sector. Higher-end department stores are continuing to benefit from the uplift in inbound tourism and spending by overseas consumers since the devaluation of Sterling in 2016 (Mintel, 2018).



The major high-end department stores have all been renovating stores

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Strategic Development

TOWS Matrix TOWS matrix is evaluated as a combination of internal and external factors, which enables Debenhams to identify relevant strategic options that could be pursued. It can help Debenhams to see how it can maximise strengths, overcome weaknesses, take advantage of opportunities and minimise external threats by using the matrix.

Opportunities

Figure 24 TOWS

Threats

1. Consumers shop more

1. More cautious consumers

with department stores to

2. Brexit vote

take advantage of store

3. Limited home-grown

experience

skilled manufacturers

2. UK manufacturing

4. Competitors in higher

capability on the rise

market investing in store

3. New trends in consumer

renovation

buying behaviour Strengths

S-O Strategies

1. Strong global presence of

S1O1 - Higher quality of store

S1T2 - Increase

over 240 stores across 27

experience worldwide, for

warehousing capacity

countries

example, service given by in-

outside the UK due to due an

2. Many product assortments

store assistant

anticipation of increased

3. Company’s growth in

S-T Strategies

distribution costs

online sales driven by mobile

S1O2, S2O2, S3O2 - Promote

orders rising

‘made in Britain’ products

S1T3, S2T3, S3T3 - Potential to promote UK

S1O3, S3O3 - Improve the

manufacturing as an

attractiveness of website and

indication of quality

mobile site, develop mobile app for worldwide use, and

S1T4, S2T4 - Quickly innovate

offer alternative delivery

in-store environment and

options for other countries

present brand identity to

(e.g. premium delivery,

encourage more customers

nominated delivery)

to shop in mid-market

S2O1 - Organise product

department stores

assortments and sections nicely, easily to shop

S2T1, S3T1 - Be aware of setting the price of products

S2O3 - Frequently update

and offer promotions as

products online

needed

S3O1 - Replicate success

S2T2 - Research into the

with click-and-collect service

effects of Brexit on specific

and ordering service

product assortments to refine product mix (4Ps) strategy S3T2 - Adopt smarter and more international payment methods and change its strategy to highly engage overseas online shoppers

Weaknesses

W-O Strategies

W-T Strategies

1. Decrease in market share

W1O1 - Increase customer

W1T1, W1T4 - Reposition

and operating profits

value and satisfaction in

consumer perception to gain

2. No mobile app

terms of service, product,

more purchases and

3. Lack of store identity and

shopping experience, which

competitive advantage over

poor in-store environment

lead to an increase of sales

competitors, and boost

and performance

consumer confidence via more targeted engagement

W1O2 - Move more manufacturing to the UK

W1T2 - Reassess pricing strategy and assess

W1O3 - Improve

promotion as necessary

competitiveness by providing

W1T3 - Strengthen

a better online experience

relationships with UK suppliers in anticipation of

W2O1, W2O3 - Invest in app development by making it easy to navigate, able to

overseas price increases

49

50

scan barcode and check

W2T2 - Quickly develop the

stock of products while in

app to increase accessibility

store, well secured payment

and engage more overseas

options

mobile shoppers

W3O1 - Reinvest in stores

W2T4 - Create the app that

renovation and staff training

has connectivity with in-store facilities

W3O2 - Build a separate section for ‘made in Britain’

W3T2, W3T4 - Reinvest in-

clothes and promote it

store environment, facilities,

specially

brand USP and show more of brand identity through store decoration in order to gain more consumer awareness and competitiveness

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PART NINE STRATEGIC OBJECTIVES

52

Strategic Objectives

SMART Objectives (Doran, 1981) are clear goals that are capable of being monitored and achieved so are therefore more likely to succeed.

Increase sustainability throughout the supply chain of Debenhams Specific



Measurable

      

Achievable

 

Realistic

 

Time Scaled



The new strategy will be in place because of social pressures on retailers to have a transparent supply chain and to use sustainable practices.

Focus on sustainable design Partner with a clothing recycling scheme Partner up with more sustainable brands in their concessions Continue to cut carbon footprint by 10% each year Cut waste in the supply chain by 20% Measure the footfall and sales from the new sustainable concessions Throughout A/W 19/20 track weekly sales of the sustainable products.

Current competitor M&S has a sustainability strategy currently in place called “plan A” From market research the vast majority of people surveyed on Debenhams said that they would pay more if a product was based on sustainable ethics.

Streamline and eliminate unnecessary waste throughout the supply chain.

There is a demand for sustainable fashion showing a willingness of customers to pay.

Introduce the clothing and recycling scheme throughout the A/W 19/20 season.

(Figure 25, SMART Sustainability)

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To Improve the In-store Environment to Attract Millennial Shoppers (Social Chameleons) Specific  Create a more engaging atmosphere by improving interactivity in store e.g. through demonstrations or combining the use of the app in store to create a more seamless experience.

Measurable Achievable



Improve store displays/layout to make the store more aesthetically pleasing and modern therefore encouraging more in store sales.

  

Increase in store traffic by 20% by the end of the fiscal year 2019.

Improve in store sales by 7% each quarter Debenhams have recently invested in a redesigned strategy in 5 of their stores so they have already shown a willingness to embrace a change in layout as well as already having the necessary resources in place.

From competitor research Selfridges revamp increased sales up to 11.5%. (TheTimes, 2018c)



Realistic



Time Scaled

 

Debenhams have the resources to implement this strategy as they made a profit of £59,000,000 in the last year, therefore if they invest in improving the in-store environment this will not only improve sales but also the customer shopping experience.

(Appendix A) Grow visual merchandising and interior design teams in order to revamp all stores by 2021.

Release the new features on the mobile app in conjunction with the A/W 19/20 product range (Figure 26, SMART Instore)

54 Increase Millennial Transactions with a Targeted Product Range Specific



Measurable

  

Achievable

 

Realistic



Time Scaled

 

Refresh the womenswear product range for AW20 to appeal to a younger target audience The range will trend led to capture younger target audience Aiming to increase sales by 15% year on year as a new target audience is being captured Measure performance by looking at sales performance for AW20 season Buying and design teams will use inspiration to design new revamped product range Buying and design teams already have resources and supplier connections to produce a product range Increased sales will be driven and supported through a marketing campaign to appeal to millennials to make them aware of the new product range The range will be released in early August 2020 with a initial drop, supported by transitional drops to top up the product offering By the end of fiscal 2020 year, the entire product range will be available online and visible in stores (Figure 27, SMART Product Range)

55 To Target Younger Consumers through the Use of Social Media Specific

   

Measurable

  

Achievable

 

Realistic

 

Time Scaled

  

Reasons for the social media growth is to increase online sales Focus content for younger consumers.

To utilise their current social media accounts to increase interaction with consumers.

Integrate the “shop link” on their Instagram posts to promote products.

Work with bloggers who target the new market.

Increase their following base by 15% each month Increase engagement on all social media platforms House of Fraser Instagram account show they have twice the amount of followers than Debenhams and M&S have five times the amount.

Global online platforms have become increasingly more popular, with revenue increasing by 2 to 3 times between 2015 -2018 The social media teams will integrate this strategy targeting younger consumers.

The brand has an existing following on their social media accounts.

Use the products within the A/W 19/20 targeted towards younger consumers.

Attract social media engagement every week to ensure strategy is working Post 5 times daily on each platform to encourage engagement.

(Figure 28, SMART Social Media)

Key Performance Indicators

56

Debenhams can use Key Performance indicators (KPI) to measure how effectively they are achieving their strategic objectives. (Parmenter,2007) Success for Debenhams will be based on Footfall, Engagement in Store, Engagement in Social Media content and Financial Performance.

Key Performance Indicator

Measurement

Footfall

 

Track footfall in store Track the number of transactions made

Engagement in Store

 

Track how long customers spend in store Track the interactivity with digital interventions in store

Financial Performance

  

Engagement in Social Media Content



Monitor sales for new AW20 product range Compare AW20 sales to previous year’s performance Use Merchandising KPI’s such as sell through rate, stock turnover, sales per square foot, etc Gather statistics on amount of likes, shares, etc gained from social media posts Number of visits to site via social media



(Figure 29, Key Performance Indicator)

Gantt Chart The Gantt chart (Gantt, 1913) is a useful tool used in project management to demonstrate actions needed to achieve strategies against time. However it should only be used as an outline for Debenhams as requirements may change over time.

57

(Figure, 30, Gantt Chart)

58

PART TEN STRATEGIC CONCLUSION

59

Conclusion

Overview of Strategy Plan From the research across the report, there is a continuous theme that the department store industry is very competitive, and in order for Debenhams to survive they need to improve and adopt their current strategies.

Through extensive research it has been found that Debenhams are experiencing identity and consumer targeting issues which have resulted from a lack of consistent targeting strategies throughout the business. Below is the list of the recommended SMART strategies based on the report’s findings to achieve differential advantage.

SMART Strategies 

Increase sustainability throughout the supply chain of Debenhams



To Improve the In-store Environment to Attract Millennial Shoppers



Increase Millennial Transactions with a Targeted Product Range



To Target Younger Consumers through the Use of Social Media

The information within the report relating to Debenhams is limited because not all business information is made public. However, the report has used all available information and industry data in order to ensure the report is based on correct information and current business strategies. It is recommended that Debenhams continues to research the industry and competitors to survive in the competitive market.

To Target Younger Consumers through the Use of Social Media

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Appendices

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Appendix A – Financial Summary In September 2017 Debenhams pre-tax profits were £59,000,000 compared with September 2016 which was £105,800,000. Their last accounts filed were September 2017 and they show a drop in pre-tax profits of 44.2%

Appendix B – Debenhams Value Chain

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Appendix C- Competitor Sustainability Analysis M&S (Drapers, 2018) M&S has their ‘Plan A’ sustainability programme strategy in place. This includes strategies regarding product development, sustainable fabric and recycling clothes. 

Sourcing all cotton from sustainable sources by April 2019



Focus on sustainable design as part of its Plan A 2025 commitments



However, found only 10% of consumers would pay more for environmentally friendly products



‘Shwopping’ partnership with Oxfam to encourage customers to recycle clothing

John Lewis John Lewis’ strategy of sustainability includes reducing the carbon footprint of their delivery trucks and to encourage customers to recycle clothing. 

Delivery trucks will be switched to low-carbon bio methane-powered versions by 2028.



The fuel is solely from food waste and waste materials (Drapers, 2018)



‘Stuffstr’ recycling program to help reduce the 300,000 tonnes of fashion waste that goes to landfill (Vogue, 2018)

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Appendix D Primary Research Results

Which Age Group Do You Belong In?

What is your Gender?

2%

44%

18%

33- 55

41%

Male

26-32

Female

16-25

Prefer not to Say

80% 15%

When did you last visit a Debenhams Store?

When did you last use any of Debenhams online channels?

7% 27%

11%

Longer In the Past week

7%

10%

In the past year

22%

In the Past Month

In the past week

In the past six months

17%

38%

In the past year

Never

17% 44%

In the past month In the past 6 months

73 Drop Element Her

74

75

Are you more likely to purchase an item after receiving assistance In Store e.g. Fitting Advice or Demonstrations?

Yes

No

39%

61%

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Appendix E Market Research Results

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Opinions 1 Star

2 Stars

3 Stars

15%

4 Stars

5 Stars

23%

13% 22% 27%

Key Comments In Each Category 2 Star 3 Star 4 Star

1 Star “Bad Customer Service.”

“Unwelcoming atmosphere” “Rude Staff” “Poor quality” “Unreliable Pricing” “Just not modern enough” “shambolic online experience”

“D for Debenhams, D for Depressing” “Slow Delivery” “Poor attempt of doing online” “Too messy in store” “Poor Selection”

“Had a great experience at the jewellery counter” “Click and Collect Service is rubbish” “Quite Poor Service” “Bad after sales service” “Awful Packaging” “Terrible layout felt like a charity shop”

“Wouldn’t want to lose Debenhams ….

Lovely traditional store” “Good selection of beauty Products” “Good Black Friday Deals” “Love the company, but BAD Selection of clothes” “Day out with the family … all purchased something from Debenhams.”

(Based on the most recent 60 reviews at Trustpilot 2018)

5 Star “ Bra fitting service was excellent” “Wide range of categories” “Been a customer for over 20 years” “Love the designers at Debenhams” “Great Café” “Bough all my xmas gifts from Debenhams”