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Executive summary This report uses various methods of analysis and frameworks to evaluate the current strategy of Debenhams within the UK fashion industry. The report begins by analysing the apparent issues within the business by using the framework of Porters Five Forces, and a elements of a PESTLE analysis. The internal strategy structure of Debenhams was then analysed to determine what is causing issues in the business. Throughout the report, recommendations are made which could be used to combat the issues that have been highlighted. Recommendations were made for Debenhams regarding the operation of their stores and online business. It was recommended that the half of the stores are shut, bringing the number of stores down from 182 to roughly 90. The remaining stores are do be downsized, leaving one large store in all main city centres. The stores that have ceased trading will be converted into residential spaces to be leased out, the extra space within the downsized stores will also be converted into residential space. With the additional funds Debenhams should introduce a rental service into a number of their remaining stores. Appealing to the newness obsessed yet environmentally conscious Millennial and Generation Z groups. The implementation of the recommendation is discusses and how the recommendation should combat the issues previously mentioned is analysed.

INTRO Founded in 1778 by William Clark in London, Debenhams is a British based department store chain that sells clothing, accessories and beauty products as well as furniture, electronics and toys. Debenhams also provides personal financial services such as car, home and travel insurance. Operating over 240 stores in 22 countries and selling online to 60 countries (with 182 stores in the UK alone), Debenhams has seen a steady decrease in profit margin of over _____% in the space of ____ years. The company saw their sales growth drop from -.03% to -2.5% as shown in TABLE 1. 2018 saw Debenhams announce their largest loss in their 206 year history.

Key issues within the business Market SEGMENTATION \\ Demographic segmentation Debenhams does not have a clear target market. Data has found that their main consumers are aged 35-54, with 39% of their customers in this group [ CITATION Sta15 \l 3081 ]. It would benefit the company if they were to target specific groups within the market, this would make marketing much easier and far more effective. As a department store, Debenhams stocks so many different items and brands which can appeal to a really wide market. Debenhams has a huge range of departments, the brand sells children wear, menswear, womenswear and home goods, the store has something for everyone in the family and has become a family friendly store to shop in. Geographic segmentation With so many stores around the UK and Europe, Debenhams is accessible to everyone. With stores in over 20 countries and online purchases being sent to over 65 countries, Debenhams truly is a global brand. While most of Debenhams stores are located in cites or large towns, 180 stores is a very large amount, with stores all over the country, most customers are within close proximity to a store. If customers are not near a stores Debenhams offers shipping of online purchases across the UK. Psychographic segmentation Debenhams is over 200 years old, with age comes a great amount of tradition and heritage. Customers who deeply value tradition become loyal to certain brands, this is of benefit to Debenhams as their 200 years of heritage hold a lot of value for so many customers. Behavioural segmentation

Customer loyalty is a very important element to have as a business, rewards programs can

be a great incentive for consumers to sign up to. This provides them with new information about the business and aims to retain the business of that customer in the future.

SWOT Strengths Debenhams operates as a multi-channel business selling to over 19 million customers every year. Debenhams currently holds the leading position in premium health and beauty and accessories with their website recognised as one of the top ten visited sites in the UK. With 182 stores in the UK alone, Debenhams is one of the most accessible stores in the UK. The company ships internationally online to over 60 and has stores in 22 countries around Europe and the rest of the world [ CITATION Glo19 \l 3081 ]. Weaknesses Weak financial performance has been reported from the company for the last few years disabling the company from providing high returns to its shareholders, reducing the likelihood of any further investments. Low liquidity is indicating a decrease in ease of day to day funding for the businesses operations, which limits its ability to capture opportunities within the market. The company has not yet tapped into all customer segments of the market and has struggled to specify their main target market. Opportunities The global luxury goods market is set to grow by US$357.4 billion 2022, being a luxury goods retailer, Debenhams could benefit from the growth in this sector. With an increase in limitless content and interactive methods, online retailing is growing at a faster rate. With an existing presence in over 22 countries, a franchise model could help the brand to continue spreading throughout Europe and beyond. Threats Operating in an oversaturated market, Debenhams has to deal with high competition from domestic players in the industry, the retail apparel industry has low entry barriers, making it easy for competitors to enter. While outsourcing agreements provide the company with flexibility regarding resource capabilities it causes risks associated with dependence on suppliers. The company has a strong dependence on suppliers, logistics, concession partners and franchises for products and with limited control over suppliers with respect to delivery schedules, manufacturing and quality control. Debenhams operates in and sources from many parts of the world and operates in several foreign currencies. Reporting in Euros, the company’s revenue is exposed to the volatility of the Euro against other major currencies including the American dollar and the Chinese Yuan. The 2018 financial year saw the company report a 2.8 million Euro loss from the translation of foreign currency.

PORTERS 5 FORCES Competitive rivalry There is intense competition within the retail industry, while there are only a few department store chains in the UK they are very large in size. The rivalry between firms is especially strong, this is because there are few firms that have a large amount of market share, they are all competing to gain the position of market leader. If Debenhams wishes to survive in the short term and thrive in the future, they will need to add value to their services to ensure that they can continue to compete with their rivals. Debenhams should consider introducing services in their stores that their competitors don’t offer, such as a garment/accessories rental service. Threat of new entrants The overhead and initial costs of opening a department stores are high, making it difficult for new firms to enter into the market. It is possible however, that department stores successfully operating in other markets around the world could that could make an entrance into the UK market. With online sales growing every year, it is easier for smaller businesses to grow and increase their market share, this also makes it easier for people to start online businesses. It is difficult however, to establish relationships with many of the brand that Debenhams stock, ensuring that new entrants to the market cannot become direct competitors immediately. Debenhams is at an advantage over any new entrants into the market. In order to continue operating competitively the company needs to focus on innovating new products and value adding projects to both their stores and online operations. Threat of substitution The availability of substitute products or exact products makes the already competitive environment difficult for Debenhams. As a department store the majority of stock sold is other brands, which can most often be bought in other department stores or directly from the brand. Customers can even find similar items from different brands, sold in stores like Primark. The company should consider collaborating with brands to make lines to be sold exclusively at Debenhams. With only small quantities produced and limited availability (only in Debenhams), items become more desirable, the item cannot be substituted because it cannot be found anywhere else. Debenhams should also consider implementing services that their competitors do not offer, such as a personalisation service or a repair/ tailoring service. Bargaining power of suppliers There are many suppliers supplying product to few buyers within the industry, suppliers are providing standardised product which have low switching costs. This means that suppliers have less control over prices because of the competitive market.

By developing close relationships with suppliers, Debenhams can ensure future efficiency within the supply chain. Bargaining power of buyers There are not many competitors operating in this market, rather a few large firms. Buyers do not have much choice if they are wanting to purchase from a department store, the brands stocked within the stores however are sold in many other places. Levi’s, Coach and Tommy Hilfiger for example are readily available both in store and online and can even be bought directly from the brand. To combat bargaining power of buyers, Debenhams needs to focus on product innovation and differentiation and adding value to their current offer.

2017 saw Debenhams introduce a new strategy called ‘Debenhams redesigned’, however the company is still making losses, it is clear that it is time for a new strategy. These huge losses made by the company indicate that there are issues deep within the core strategy of the company. CUSTOMER-DISSCONNECT According to Statista, only 29% of Debenhams customers are under the age of 35, with 20% of their customers between the age of 45 and 54. This means the company is not attracting the business of the huge Generation Z and Millennial market, which by 2030 will make up around half of the purchasing adult population [ CITATION Sta15 \l 3081 ]. In order to survive and stay relevant, Debenhams is going to have to change their strategy in order to attract this younger, growing market. This could include increasing their online retailing, the company could consider using omni-channel distribution to increase their online sales and customer engagement. Research has found that omni-channel retailing positively influences customer engagement, which is something that could benefit Debenhams greatly [ CITATION Lee \l 3081 ]. Unable to negotiate many voluntary CVA’s (Company voluntary agreement), Debenhams is having to close roughly 20 stores after Christmas in order to cut costs and survive in the short term. With rent prices continuously increasing, many stores on the high street are closing as they cannot afford stay open, even huge companies like Debenhams. Stores that are run purely online have much lower operating costs than that of a bricks and mortar store, if Debenhams wishes to survive, they will have to look at increasing their online sales and reduce the costs of running their stores [ CITATION Eva19 \l 3081 ]. Debenhams is operating in a highly competitive market with many stores offering similar product ranges at similar prices. Debenhams is no different to the other department stores

in the UK, similar product offering at comparable prices, the in store experience has no added value External environment that the business operates in and its internal dynamics Impacting not only on UK based Debenhams, the death of the high street has meant job loss for around 70,000 retail workers in 2016. Additionally, nearly 500,00 people within the retail sector will be vulnerable to job loss, 70% of those will be women, putting more families and children into poverty according to the British Retail consortium [ CITATION Phi19 \l 3081 ]. There is no surprise that the internet has dramatically changed the landscape of retail operations in the United Kingdom, recent reports even claiming that by 2028 roughly 58% of all retail sales will be made online. In ten years time, millennials and gen z will make up half of adult consumers and thanks to the huge advances made in technology in recent years this tech savvy group is constantly demanding faster and easier purchasing methods [CITATION Bet \l 3081 ]. Fast fashion has taken over the industry, however many are questioning the sustainability of this business model. Online retailers like Missguided and Boohoo are releasing numerous styles priced as low as £2. Highstreet stores like Zara and H&M are also putting out countless styles weekly on an extremely short lead time with the entire production process happening in weeks, from design to manufacture. While the business model has been extremely successful in recent times, it is both extremely damaging to the environment, and with items often produced unethically the sustainability of the model comes into question. The trend of slow fashion is showing promise with a recent shift in consumers mindsets with over 33% of consumers reporting that they have switched to brands that take a public stance on environmental issues. The main factor stopping this percentage from increasing is that sustainable brands need to price their products at a point which is often beyond the average consumers budget. This makes it difficult for those in younger generations to adopt sustainable fashion practices. While there are still issues within the industry, its seems that they market may be slowly shifting from the furious fast fashion focus and moving towards a slower more sustainable industry.

INTERNAL OPERATING STRUCTURE According to the 2018 Debenhams Business Model and Strategy report, the company is focusing on reducing operating costs by restructuring their management roles both in store and in the ‘support centre’, this meant cutting around 600 positions between both. While

this would save the company money in the short term, this is not sustainable in the medium or long term. As a business operating within the volatile retail market, Debenhams should operate on the basis of restructuring in response to what is happening in the market around them and the retail environment in general. Debenhams operates under a flat organisational structure, with the company headed by the CEO Sergio Bucher, employees are grouped together based on product categories. The division of employees into different departments allows for more efficiency as managers are responsible for a smaller number of employees resulting in better communication and higher levels of performance and productivity. There has been a significant amount of unrest within the leadership team of Debenhams, previous CEO Sergio Bucher was votes out by the board, Stefaan Vansteenkiste took over the position in April 2019.

Potential options and strategies open to the company Importance of strategy An effective business strategy should be able to distinctly identify the direction of the business and create a cohesive list of targets and goals of the business. The goals of the business should be specific, measurable, achievable, realistic and timely. Progress should be monitored and any necessary changes should be made along the way. While change is often met with objection, it is essential for businesses to embrace change if they wish to stay relevant within the constantly evolving market.

Recommendations of strategy to be implemented with consideration of medium and long term It is clear that Debenhams needs to make drastic changes if they wish to survive and prosper in the future. It is recommended that Debenhams makes radical changes to the way they operate their stores and online business. What they should do Debenhams currently has 182 stores in the United Kingdom alone, while its main competitors Selfridges has four stores and Harvey Nichols operates 7 stores. Even John Lewis only has 50 stores around the UK, it is clear that 182 stores is too many. As footfall continues to decrease in physical stores there is increased demand for retailers to further develop their omnichannel strategies. Digitisation and mobile technology has changed so many aspects of modern life, consumers are now impatient and are used to the efficiency and timeliness of companies like ASOS and Amazon. Introducing Omnichannel distribution is a necessary step for Debenhams to take if they wish to increase sales. Closing stores It is recommended that Debenhams ceases operation of a large portion of these stores, with seven stores operating in greater Manchester alone, it is clear there are too many stores. Debenhams should consider ceasing trade in at least half of their stores, operating with roughly 90 stores is still a large number and potentially more than necessary. By closing half their stores the company would save a considerable amount of money which can be invested into other areas of the business. A new strategy implemented by M&S is set to downsize roughly 20 of their largest stores in traditionally expensive city centre locations and repurpose the extra space into residential spaces[ CITATION Lea19 \l 3081 ]. By downsizing the stores M&S will be saving a considerable amount on both overhead and operating costs and will generate a steady cash flow from incoming rent. While this project will have initial costs, it is quite likely that M&S will have secured funding to help cover the costs of overhauling the spaces. While this strategy is yet to be implemented and there is no guarantee that it will be successful, closing the stores will as a minimum, save the company the running costs of the stores. It is recommended that Debenhams follow the lead of M&S by converting their closed stores into residential spaces, once up and running the project would be simpler to manage than a store and have lower operating costs. The remaining space in stores that have been downsized can be converted in a similar way, especially those in a traditionally expensive city centre area, many stores have ‘penthouse’ levels and these could generate a great amount of revenue for the company. Debenhams could partner with a property development

company to renovate the spaces into residential properties, the property development company may even allow Debenhams to have a line of credit which would be invaluable to the company. Alongside closing roughly half of their stores Debenhams should consider downsizing their remaining stores, leaving one large store in each major centre with a few smaller value added stores. HOW should they do it By closing down numerous stores, Debenhams is reducing the amount of positions that they can offer, while this is a cost effective move, it means job losses for so many employees. As part of the recommendation, Debenhams will be upscaling their online orders, in order to handle the increased number of online sales the company will have to open or upscale a current dispatch centre, creating countless new positions. While warehouse positions entail different skill sets, the training is easy and relatively cheap. To decrease the amount of staff the company will have to make redundant, Debenhams should consider offering the staff working in the stores that will be closed, jobs in the fulfilment centres. By closing roughly 90 stores Debenhams will have additional funds which will enable them to renovate the remaining stores to accommodate for the new value adding projects. Rental model In more categories than ever consumers are choosing to rent products rather than purchasing the goods outright, companies like Spotify and Netflix are dominating the market with their rental model. The trend of renting is driven by the younger generations desire for constant newness while still embracing sustainability. Rental, refurbishment and resale models increase the lifespan of products while offering the constant newness that consumers crave [ CITATION Ame18 \l 3081 ]. Introducing a rental prog...