Oracle Retail Week Awards: Double win for Debenhams

Last year was when Debenhams truly fired up some of the engines driving its international growth. Not only did the group open its first outlet in Russia, it laid plans for the coming years, ensuring it deserves the tag of Britain’s most international department store.

It has been a busy year for the retailer, as seven stores opened in five markets (the Philippines, Iran, India, Pakistan and Russia) and there were website launches in a range of markets. Debenhams operates online in Ireland and Germany and is planning more international websites, and the retailer is improving its fulfilment operations in foreign markets with the aim of cutting the time it takes for customers to receive their orders.

The new aspects of the retailer’s international expansion have gone well so far, with schedules met and profit forecasts exceeded. The retailer has also invested in its existing markets - including the Middle East, where it is already a key player. It has flagship stores in the Mall of the Emirates and Dubai Mall, and further store expansion is planned and prospects look strong in these markets.

One of the most interesting aspects of Debenhams’ international strategy is its willingness to stray off the beaten track. It is certainly targeting the key emerging economies such as Russia and China, but it is trying other places too. In 2010 and 2012, for instance, it opened in Armenia and neighbouring Georgia respectively.

The success it has achieved in these markets is testament to Debenhams’ ability to sniff out sustainable economic growth.

The judges pay tribute to an ability to deliver results. “It has over-delivered in its new territories and the rate of turnaround has been very impressive. Everything seems very positive,” says one.

The company now has 71 franchised stores across 26 countries, and the plan is to open 150 franchise stores within five years. The retailer manages to maintain a common thread between them by ensuring that the marketing messages remain the same across the estate. The network of international stores uses Debenhams’ UK marketing calendar, although each can adapt it to their own needs, using local language and pricing, and taking account of cultural differences such as Ramadan in Muslim countries.

Yet while expansion has been aggressive, the retailer is careful about how it approaches new markets. A full investigation into logistics is carried out before each new entry, making sure that the Debenhams business model suits the environment and that import taxes won’t eat away at profitability. It also checks other logistical considerations such as quotas and legal requirements; expanding internationally is a process-heavy business.

The coming few years will see this successful strategy develop further. There are planned store openings in countries including Libya as well as more stores in existing markets. Over the next two to three years, Debenhams will concentrate particularly hard on markets with burgeoning middle classes - Brazil, China, India and Russia will be central to the retailer’s plans. The judges say: “The performance of the overseas business has been solid and the execution has been great.”

Debenhams has also worked hard on developing its IT infrastructure in the past year, winning it the ReThink Retail Technology Initiative of the Year.

Every retailer is seeking the holy grail of excellent fulfilment in 2013 - that heady position where customers are rarely presented with an ‘out of stock’ message. It’s a challenge that all kinds of online retailers have found themselves tackling. Getting the right product to the right person at the moment that they want it is one of the biggest challenges of the multichannel world.

Debenhams is ahead of many retailers. Its Endless Aisle project, launched in September 2011, has revolutionised the way that online orders are fulfilled. The retailer says that it has had a significant impact on sales since then.

Debenhams decided to take action after noticing that too many online customers were unable to buy items due to lack of distribution centre stock. As with all the best ideas, the solution was simple: fulfil the orders from the store network. But as with many simple ideas, it’s harder than it sounds.

The first step involved creating a stock visibility system, enabling stores to see stock levels in distribution centres. The retailer says this helped stores differentiate between sales floor and distribution centre stock, which helped improve replenishment planning.

Product is scanned in and out of the distribution centre, which helps to ensure that the system is accurate. In-store staff can order the stock to replenish their shops, unless a certain product has been ordered by an online shopper, in which case the product is marked as ‘reserved’ on the system.

And if the distribution centre is out of stock on a certain product, the system will fulfil an online order from the nearest store.

This project was expanded to include more stores in October 2012, and dedicated staff now choose the stock needed for online orders from the sales floor. Stock availability has greatly improved, allowing Debenhams to fulfil nearly all of its online orders. The retailer plans to keep improving the project and will eventually roll it out to all of its stores.

The project has helped to reduce customer disappointment, increased sales and enabled each item of stock to be fulfilled through more than one customer touchpoint, whether it’s in-store, online or via the Debenhams’ smartphone app. It means that more stock is sold at full price and more customers can access what they want -in short, demand is matching supply.

The judges believe this project stands out as an example of a technology initiative changing the way that a business operates. Not only is it more efficient, but sales and profits have been boosted. The judges say: “The improvement in Debenhams’ stock availability was huge. It’s amazing you could improve it so much. What this does in terms of clearance rates and markdowns is very impressive. A large online range has to now become the norm, and this stood out because it provides the customer with so much choice.”

Debenhams has provided the perfect example of why technology infrastructure investment is so crucial - as a strategic tool, IT can make all the difference for retailers in a multichannel world.