Cash Chats ep68: The death of the department store?

Is this the end of Debenhams, House of Fraser and John Lewis? And what do their struggles mean for customers?

We’ve had all three major department stores hit the headlines over the last few weeks, so I’ve taken a look at what’s happened, including news that House of Fraser customers might not get their money back on cancelled orders and returned gift cards.

Listen here, or download at iTunes. If you’re over there, please do leave me a review and rating – it helps others find the podcast. Oh, you can subscribe too so you get every episode.

Show notes

I tried things a little differently this week. I wrote an article and then used it as a form of script. Of course I went off on tangents and added more detail, but for those of you who tell me you’d rather read than listen then you can get most of the detail below. You’ll also find the links I mention in the episode in the copy below.

House of Fraser customers losing out

House of Fraser has been troubled for a while, and last month it went into administration, only to be snapped up by Sports Direct’s Mike Ashley. I boycott Sports Direct, so it looks like I’ll be boycotting House of Fraser too.

But that doesn’t help customers who made orders in the days before the change of hands. All those orders were cancelled, with a promise of a refund. Now it turns out anyone owed money will have to apply to the administrators for their cash – which means there’s very little chance of getting much of it back.

Likewise anyone with unspent House of Fraser gift cards could lose out too. As I advised back on the podcast back in May, the risk with troubled retailers is gift cards become worthless if the shop goes under. And that’s what’s happened here. Existing card and vouchers are no longer accepted and customers with any that weren’t spent were asked to send them into Sports Direct. So far there’s been no news about what will be done with those which were returned, and following the announcement about refunds I imagine it’ll be a similar story here.

Which leads us to Debenhams

Debenhams under pressure

Debenhams is also in trouble – and there are rumours Ashley could have his eye on this department too.

Last week it was leaked that Debenhams management team brought in consultants to look at options. Then, since Sports Direct owns 30% of Debenhams, it was speculated that they’d try for a merger – or worse – hope to snap it up on the cheap if it enters administration too.

So even if it’s not on the verge of collapse, it’s certainly struggling.

So if you have any gift cards for Debenhams. Spend them now. And don’t get any or ask for any more.

Why are department stores suffering?

So why are these stalwarts of the high street not performing?

They aren’t particularly inspiring places to visit. I’ve been to Debenhams a few times recently as there’s one in my new hometown. It’s a ghost town. No one in there,

House of Fraser too. The one on Oxford Street in London was always deserted. Neither are enticing shopping experience.

That didn’t use to be the case – at least not that I remember

First to me a department store suggests that you were getting luxury. Now it’s all own brand tat or overpriced brands. And not very inspiring.

A big part of the romance was the window displays. The displays you get in the windows in New York, Paris can be fantastic. Apparently Andy Warhol started out designing window displays. You only really get something exciting here in London at Christmas. You simply can’t replicate that scale around the county.

Growing up, Christmas in particular was one of the special elements of a department store. That’s where you met Santa as a kid. Now you can do that in garden centres.

Another unique aspect should be the idea that you can visit all the departments in the same day. Now we’ve got big out of town retail parks with furniture, fashion and clothing next to each other on a scale few department stores can match.

And they were the main retailers to hit in the Boxing Day and New Year Sales. Now it’s just easier to shop online.

And online has got to be the biggest killer. And the department stores just can’t compete on price.

Ever since I started my blog in 2014 there have been “Brand Events” at House of Fraser and Blue Cross sales at Debenhams. These used to be once or twice a year sales. I think there’s been one every two months – at least.

These offered deep discounts across the stores in an attempt to get shoppers through the doors – or at least online.

But they’ve obviously not worked. In fact, they’ve had a knock on at the one department store you would have thought was impervious to the high street’s troubles.

John Lewis in trouble too

John Lewis – sorry John Lewis and Partners as it’s been renamed – announced last week that it had a drop of 99% in profits. It made just £1.2 million in the six months to 28th July.

The chairman says there are a few reasons behind this. First Brexit uncertainty and a weak pound as a result of Brexit.

But £40million pounds was lost on John Lewis’ “Never Knowingly Undersold” price match policy. A lot of that was matching the big, desperate sales at Debenhams and House of Fraser.

But I don’t think that’s the only problem. I’ve noticed a decline in what makes John Lewis so special – the customer service. That’s what it prides itself on, but it’s not as good as it was.

It’s small things. For example, harsher refund rules on electronics. My mum tried to return a phone that didn’t have a strong a signal as she hoped. The shop said she couldn’t return it as the box had been opened. Now I get that an opened box means it’s harder to sell again, but it’s a sign that they’re moving away from the friendly, supportive retailer you expect.

As it happens she was able to return it as she’d bought it online. But it’s one of the niggling things that I think is putting some customers off.

I don’t think we need to worry just yet about John Lewis. They’re in a better place than the other department stores. But it’s wasn’t that long ago the same was said about Marks and Spencers.

I’d love to know what you think about John Lewis. Has it got worse?

If you want to know more about the price matching, I’ve a video over on the blog. I’ll put the link with Be Clever With Yourcash.com/cashchats68.

Finally, while researching this week’s episode I found an interesting article in the FT on the history of the department store. If that’s something you want to know more about, I’ll also link to that on the same link.

Elsewhere on the blog this week

• How to rent movies for free, and by post
• Chip savings app review and how to get 3% interest
• John Lewis Price matching – how it works