The Economist.com writes about two new emerging models:
The first is what Joshua Chernoff of A.T. Kearney, a firm of consultants, describes as the strong retail brand approach. This is a store in which in-house brands feature strongly and managers take an active role in choosing inventory. Such a store is far more interested in promoting itself as a brand than any individual brand within it. In Britain, Marks & Spencer is the classic example of this approach; in America, Kohl’s fits the bill. Such stores tend to have high operating costs, but they can command high margins, assuming that their in-house brands are both fashionable and popular. Marks & Spencer is still struggling to recover after getting that part of its equation wrong.
The second model for success is the showcase. This sort of department store not only sells other people’s brands, but often gets the vendors of those brands to take responsibility for stock, staff and even selling-space, handing over a percentage of their sales to the department-store owner in return for their concession. For a store-owner, this can mean lower gross margins overall. But the compensation should be low operating costs.
The trick for a showcase, typically a flagship store in a big city centre, is to keep the customers rolling in. That means being an attraction in its own right, and a place where interesting things are always happening.
