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Department Stores in Europe: The only way is up-market
European department stores are set to offer a more premium product range as they start to feel the pinch in their traditional middle market. Latest research from MINTEL finds that the mixed goods sector (which includes department stores) in the seven most sophisticated European department store markets* grew by less than 1% (0.6%) between 2001 and 2006, to reach 73.6 billion Euros. This slow growth has been the result of increasing competition from other types of retailers, such as grocery multiples, discounters and hypermarkets. But the future does look brighter. MINTEL forecasts that over the next five years retail sales in this sector could see some 12% growth, reaching 82.7 billion Euros by 2011, with a more up-market approach by key European department stores set to be instrumental in this improved growth. "A move up-market makes sense as it will mean that department stores will no longer be in direct competition with the highly profitable cheaper players, such Tesco, ASDA and Carrefour," explains Ben Perkins, senior retail analyst at MINTEL. "There is little doubt that moving up-market is a risk as the more value-led retailers are clearly very popular amongst European consumers. But ultimately if the department stores do not move out of the middle market and distance themselves from the competition, they will have no chance of improving their sales growth rates," he adds. UK sales are streets ahead
The UK mixed goods market is by far and away the largest of the seven European countries covered, worth some 27 billion Euros last year. Despite the relatively similar sizes of the total retail markets of the UK, Germany and France, mixed goods sales in the UK are five times the value of France (5 billion Euros in 2006) and almost twice that of Germany (14.9 billion Euros in 2006). "The impressive value of UK mixed goods retail sales when compared to France and Germany is a reflection of the importance of department store chains in the UK and conversely the strength of hypermarkets and discounters in France and Germany respectively," comments Ben Perkins. Germany slumps as Spain shines
For the future, MINTEL predicts that all markets, bar Germany, will see an upturn in sales through mixed goods retailers. Germany is seeing a marked downturn in sales through its department stores, as many stores continue to prune their property portfolios. With new store openings now a rarity, MINTEL predicts that the downward trend will continue. Indeed, sales through mixed goods retailers in Germany are set fall by around 13% by 2011. Meanwhile, Spain is expected to see the greatest rise in sales. With sales set to increase by no less than 31% over the same period to reach more than 16 billion Euros by 2011, Spain will become the second largest market after the UK. M&S tops the leaders board
Marks and Spencer held onto the top spot for Euro sales in 2005/2006, closely followed by El Corte Ingles in Spain and Galeries Lafayette Group in France. Of the Top 10, four are from the UK - M&S (poll position), John Lewis (6th position), Debenhams (7th position) and House of Fraser (9th position) join Marks and Spencer. About Mintel
Mintel is a worldwide leader of competitive media, product and consumer intelligence. For more than 35 years, Mintel has provided key insight into leading global trends. With offices in Chicago, London, Belfast and Sydney, Mintel's innovative product line provides unique data that has a direct impact on client success. For more information on Mintel, please visit their Web site at www.mintel.com.
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