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Liverpool John Moores University
5059BUSBM

External Factors Influencing Debenhams Plc

ID

Monday 4th March

Contents
1

EXECUTIVE SUMMARY
...
2

3

INDUSTRY / SECTOR REVIEW
...
1

UK DEPARTMENT STORE INDUSTRY
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2

CONSUMER SPENDING
...
2
...
3

3
...
2

CONSUMER SPENDING WITHIN DEBENHAMS
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3

PROFITABILITY
...
3
...
4

3
...
2

PROFITABILITY WITHIN DEBENHAMS
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4

SIGNIFICANT TECHNOLOGICAL CHANGES WITHIN THE LAST 5 YEARS
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4
...
5

MAJOR COMPETITORS
...
6

MARKET SHARE
...
6
...
5

3
...
2

DEBENHAMS MARKET SHARE
...
7

4

5

CHANGES WITHIN INDUSTRY
...
5

MACRO ECONOMIC ANALYSIS FOR DEBENHAMS
...
1

CONTROLLABLE AND UNCONTROLLABLE VARIABLES
...
2

COMPETITION
...
3

PESTEL ANALYSIS OF DEBENHAMS
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3
...
7

4
...
2

ECONOMIC FACTORS
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3
...
7

4
...
4

TECHNOLOGICAL FACTORS
...
3
...
8

4
...
6

LEGAL FACTORS
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9
5
...
10

7

APPENDICIES
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The report will undertake an external analysis which examines the
department store industry and looks at factors such as background into the industry,
major competitors and a macroeconomic analysis, which includes a PESTLE analysis
...


2

INTRODUCTION

According to Aydin (2013), retailing represents the entirety of activities that add value
to products and services sold to consumers for personal use and households
...
The UK based retailer offers clothing, shoes, accessories, cosmetics
home and furniture as well as other goods
...

Debenhams aim to make shopping confidence-boosting, sociable and fun for their
customers
...
1 UK Department Store Industry
A department store is a retail establishment that sells a wide range of consumer goods;
these products include clothing, cosmetics, toys, toiletries, food, electronics, books, home
appliances and stationary
...

Department stores were often seen as innovative (Independent, 2018), however they have
lost appeal, shopping online is a more convenient way and people want more specialized
shop
...

3
...
2
...

In 2017, retail sales in the UK were worth £395 billion
...
In December 2018, all sectors, other than food
shops and petrol stations experienced declines in spending (Financial Times, 2019)
...
” (Drapers, 2009)
...

3
...
2

Consumer spending within Debenhams

In 2018, data shown a drop-in footfall of 3% on 2017 – the third consecutive annual fall (The
Guardian, 2019)
...
Mid-market department stores in the UK are under pressure,
with GlobalData research showing that between 2007 and 2017, Marks and Spencer’s market
share dropped from 32
...
6% to 14
...
2% to 7
...
In December 2018, consumer spending
dropped by 1% which was unusual considering the run up to Christmas (Drapers, 2019)
...
3 Profitability
3
...
1

Profitability within industry

The retail industry is facing an environment where margins are increasingly under pressure from
rising costs, lower pricing power and the need to invest in digital transformation
...
The department stores market is forecasted to
reach £17
...

3
...
2

Profitability within Debenhams

Store space is considered to be a productive asset and the key to profitability
...


3
...
4
...

From online price comparison to reviews, department stores have had to adapt to succeed
...
The ability
to deliver unique, personalised customer experiences has become recently popular
...


3
...

Debenhams has a leading position in health and beauty and is the 11th largest online
retailer, however, Debenhams has defined their target market broadly which has prevented
it from positioning products more effectively
...
9% of their total sales
...
M&S sell mostly clothing and a range of food,
currently they have 1035 stores across the UK, which includes 615 that sell only food in the
M&S Food stores; UK turnover is split 61% food and 39% clothing and home
...
Marks and Spencer currently offer a ‘Sparks card’ as their loyalty
scheme
...

In 2018, House of Fraser announced they’re preparing to close 31 of their 59 branches in
an effort to keep going (Independent, 2018)
...
6 Market share
3
...
1

Market share in industry

The UK department store sector remains challenging, Department stores account for 8
...
In 2018 there were 319,000 retail businesses (Rhodes,
2018)
...
6
...
9% between 2013 and 2018 to reach 19
...

Consumer research found that 17% of UK consumers have bought something online at
Debenhams
...


3
...
The rise of social commerce will change how
consumers shop in retail stores; more than 80% of generation Z and 74% of millennials say
social media influences their purchases (Retail Dive, 2019)
...
The growth of internet shopping means in a few
years to come most sales are likely to be made online rather than in-store
...
(The North Face,
2018)
...


Page 5 of 13

4

MACRO ECONOMIC ANALYSIS FOR DEBENHAMS
4
...
Whilst
Debenhams cannot change trends, they can always do their best to keep up and
evolve with current and future trends
...

Another variable that Debenhams have no control over is climate; the performance of
retailers is often influenced by weather conditions
...
Bad weather however, is beneficial for shops as people avoid the high streets
and go inside, Debenhams take advantage of this by having a café situated in their
stores which makes it more inviting (Strutt & Parker, 2015)
Technological advancements; in the recent years the retail industry has experienced
rapid growth in sales through multi-channel and e-commerce
...
Debenhams are making use out of modern
technology for example their instore kiosks and the ability of consumers to check stock
before going to the store
...
Consumer demands and exclusive products increases
switching cost of suppliers
...
This was in an attempt to promote the growth
of small businesses, decrease bureaucracy and stimulate the economy (BBC, 2011)
...
2 Competition
For Debenhams to keep up with competition revamping stores and constantly refreshing
the brand line-up is a must
...


Page 6 of 13

Rivalry amongst existing competitors is high meaning it becomes difficult for players such
as Debenhams to earn sustainable profits
...

4
...
3
...
Factors like government policies and regulation of the
retail industry affect its revenue and profitability
...
Brexit has weakened the
sterling which affected the revenue from 2016-2018 due to consumer uncertainties
...
3
...

On the other hand, a slow-moving economy decreases consumer confidence and can cause
people to spend less
...
1 in 3 consumers in a recent NatWest and Retail Economics report said their main concern
about Brexit was the rising price in shop prices (The Telegraph, 2018)
Rising disposable income, increasing promotional activity and increasing consumer confidence
are some of the major driving force for the department store retailing market
...

In the face of poor wage growth and seismic shifts in the way people shop, Debenhams have not
been able to invest and adapt as it needed to (Independent, 2018) Fluctuation in inflation has
significant impact on liability calculations, material costs, sourcing decisions and pricing
decisions
...

4
...
3

Social / Demographics

Change in social values and trends impact the goods retailers sell and how they relate to
consumers; the clothing industry is often under pressure whether it being keeping up with trends
or developing and implement socially responsible business practices
...

In 2017, Debenhams unveiled its Debenhams Redesigned Strategy, which would see the retailer
continue to build its beauty business, revive in its in-house fashion brands and focus investment

Page 7 of 13

on digital and in store experience (Mintel, 2018), by doing so the store has a chance to become
more suited to a wider range of consumers and more stand out from their competitors
...
3
...
Online shopping is becoming popular among consumers due to the ease of shopping
wherever and whenever
...
Successful stores have
developed online services that are complimentary to their physical presence (Rhodes, 2018)
...
1% of total sales (ONS, 2019)
...

4
...
5

Environmental Factors

Sustainability is a new consumer focus
...

Debenhams use 100% recyclable bags for life, 100% recyclable e-commerce mail bags and the
e-commerce cartons are made from 75% recycled materials and are also 100% recyclable
(Debenhams Corporate Social Responsibility, 2019) environmentally friendly packaging which is
promoted will assist in their corporate social responsibility image
...
3
...
Ethics and worker rights are an important legal
area
...

Laws governing import and export duties and taxes such as VAT may have to change as they
were allowed for free trade within the EU (Sage, 2018) – whilst these changes may be minimal,
the effects they have on retail businesses could be large depending on the nature of Brexit
agreements
...
1 How Debenhams are dealing with the effects of external factors

Debenhams are embracing digital behaviours and social change to ensure they are
not only keeping regular consumers but gaining more, they invested in improving the
click and collect experience which represents 40% of online business (Marketing
Week, 2018)
...

For Debenhams to compete successfully they must have the ability to adapt to change;
the ability to effectively manage the supply chain; and the differentiation of products
...
Retailing Concepts, Strategy and Information
...
157
...
(2018)
...
Available:
https://www
...
co
...
html
...

BBC
...
Vince Cable Vows to Simplify Retail Rules
...
bbc
...
uk/news/business-14320470
...
, Evans, J
...
, and Chatterjee, P
...

Butler, S
...
, and Inman, P
...
Six reasons why Britain’s retailers can make
ends meet
...
theguardian
...
Last accessed 25th February 2019
...
(2015)
...
Available:
https://www
...
com/sc/technology-changing-the-in-store-retail-experience2015-10?r=US&IR=T
...

Business Wire
...
Technology Influences Eight of the Top 10 Retail Trends for
2016
...
businesswire
...
Last accessed 1st March 2019
...

(2019)
...
Available:
https://corporatefinanceinstitute
...

Last accessed 25th February 2019
...
(2018)
...
independent
...
uk/news/business/analysis-and-features/debenhams-whatwent-wrong-sales-down-share-price-department-store-chain-a8531726
...

Last
accessed 17th February 2019
...
What is really wrong with the UK retail sector and why is it in such trouble?
Available:
https://www
...
co
...
html
...

Cox, R
...
Retailing, An Introduction
...
Essex: Prentice Hall
...

(2019)
...
Available:
http://sustainability
...
com/energy/
...

Debenhams
...
Financial
Fundamentals
Ratios
...
debenhams
...
Last accessed 28th
February 2019
...
(2019)
...
Available:
https://www
...
com/business/2019/feb/07/bank-ofengland-holds-interest-rates-cuts-growth-forecast
...


Page 10 of 13

Fish,
I
...
Consumer
spending
falls
further
in
December
...
drapersonline
...
article
...

Gov UK
...
National minimum wage rates
...
gov
...
Last accessed: 27th February 2019
Howard, D
...
Salpini, C
...
, and Jensen, C
...
10 retail trends to
watch in 2019
...
retaildive
...
Last accessed 26th February 2019
...
Retailing Management
...
Singapore: McGraw-Hill
International Education
...
(2018)
...
Available:
http://www
...
co
...
pdf
...

Marciniak, R
...
Troubled Times for Department Stores Means They Need to Adapt –
Here’s
How
...
independent
...
uk/life-style/department-storeclosure-house-of-fraser-john-lewis-profit-warning-retail-shopping-a8432306
...

Last
accessed 24th February 2019
...
(2018)
...
Available:
https://www
...
com/2018/12/20/marketers-sainsburys-debenhams-kodakpredictions-for-2019/
...

Marks and Spencer
...
M&S Investors, Key Facts
...
marksandspencer
...
Last accessed 4th March
2019
Mintel
...
April (2018)
Morely, K
...
One in every five pounds spent with UK retailers is now online, figures
show
...
telegraph
...
uk/news/2018/08/16/one-every-five-poundsspent-uk-retailers-now-online-figures/
...

Office for National Statistics
...
Retail Sales, Great Britain: January 2019
...
ons
...
uk/businessindustryandtrade/retailindustry/bulletins/retailsales/jan
uary2019#whats-the-story-in-online-sales
...

Retail Insight Network
...
Three reasons why the future looks hopeful for
Debenhams
...
retail-insight-network
...
Last accessed 2nd March 2019
...
(2018)
...
Available:
https://www
...
com/2018/09/03/debenhams-comes-out-fighting-withnew-brand-identity/
...

Rhodes, C
...
Retail sector in the UK
...
Available
at: http://researchbriefings
...
parliament
...
pdf Last
accessed 25th February 2019

Page 11 of 13

Strutt
...

(2015)
...
Available:
https://www
...
com/knowledge-and-research/how-weather-affects-retailsales
...

Sullivan, C
...
Three Big Challenges for Debenhams' New Chief Executive
...
ft
...
Last accessed
26th February 2019
...
(2018)
...
Refurbished clothing remade to explore
...
thenorthface
...
html
...

The
Telegraph
...
The
Future
of
Retail
...
telegraph
...
uk/business/tips-for-the-future/future-of-retail/
...

Thomas-Bryant, K
...
How will Brexit affect Businesses? 12 things you need to
know
...
sage
...
Last accessed 3rd March 2019
...
(2018)
...
shopify
...
Last accessed 24th February 2019
...
(2017)
...
Available:
https://yougov
...
uk/topics/politics/articles-reports/2017/05/10/debenhams-strugglesstand-out
...


Page 12 of 13

7

APPENDICIES

Figure 1
TTM – Trailing twelve months; MRQ – Most Recent Quarter; FY – Fiscal Year

(Debenhams Investor Relations, 2019)

Page 13 of 13



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