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Introduction and Company History
Debenhams is a UK-based department store chain with operations in a number of countries around the world. The company operates 153 stores across the UK and Ireland, and has online delivery to 66 countries around the world through Debenhams Direct, including many where Debenhams does not have its own store (Debenhams.com, 2012). The company traces its roots to 1778 in London, where the company remains headquartered to this day. The expansion of Debenhams to become an international brand in retailing has been done primarily through franchising, while the store in the UK and Ireland tend to be company-owned. According to the company's annual report, Debenhams earned £2.2 billion in revenue and £117.2 million in profit.
The growth of the Debenhams name only took place in the latter part of the 20th century. Prior to that point, the Debenhams name was not used on most of the company's stores, but instead regional names were used. The move towards a national (and now international) brand with a high level of operational consistency has guided the development of Debenhams in the modern era. The stores are positioned in the mid-range of the market both domestically and internationally. The company positions itself primarily in malls outside of the UK, for example prestigious locations like the Dubai Mall, Phoenix Marketcity in Mumbai and the Cevahir Mall in Istanbul. The company competes against other international department store brands, which will tend to vary from country to country. Debenhams is not a discounter, and therefore relies on having good value clothing that is appropriate to the local culture and season in order to win business.
Positioning of Products
Within Debenhams, there are both own-branded clothing and other-branded clothing. As a general rule the company has been working to shift its positioning to the higher end for the better part of the last fifteen years (Koenig, 1997). This move has corresponded with several changes to the merchandising approach. Debenhams has sought to bring in outside brands that have a higher quality than the store was associated with in the past and it has also sought to increase the fashionability of the house brands as well. Generally, the house brands are positioned as value brands within the scheme of the store, offering similar quality and style to the name brands with a slightly lower price. The name brands attract buyers to the store, and the house brands give them the value that they want. The same approach is used online when Debenhams wants to sell on the internet.
One branded product that Debenham's carries is bluezoo, which has children's bedding products. A Debenham's own brand is Chino by Debenhams, making chino-style pants and casual clothing. In the store, the positioning of these different products tends to be segregated, where many third-party brands are given specific allocations of real estate, and the same is said for the own branded items. This approach differs from the online approach that Debenhams uses, which emphasizes that the different brands are mixed in together so that they are easy to compare. Customers see all of the brands in a similar product category when they shop online. Debenhams does this because it believes that customers when shopping online think about the product category they want, and might only then want to single out individual brands for searching. In store, customers are more likely browse among the different brands, moving from one section of the store to another section of the store, viewing the different offerings in each area. Thus, the importance of branding as a means of segregating goods is more important in the physical store than in the online store.
The supply train has a number of drivers. Debenhams relies on the fashion supply train that starts with designs made about six months before the season. This allows its designers to prepare the designs, have them approved and then have the goods produced and shipped to Debenhams for the front end of a given season. The company would, for example, be working on the spring collection in the fall. This is roughly the same time frame that other companies in the industry operate on, and Debenhams uses this approach to ensure that its spring collection has been produced and is in the store by the late winter.
There are a number of critical external forces in the fashion industry. The first is the general state of the economy. As the company mentions in the Chief Executive's Review, the supply chain is affected by the expectations for the state of the economy. Because the fashions must be produced ahead of the season, the company bases production rates not only on the anticipated fashions that will be popular next season, but also on the expected overall demand in the economy. If it produces too much, it will be forced to employ deep discounts to move the merchandise within the season; produce too little and the company will experience stockouts of the most popular items. When the aggregate demand in the economy is expected to be weak, that will reflect in the company's production levels and therefore reverberate around the supply chain (Templeman, 2010).
Another external force is the third-party suppliers. In a sense, the branded items and the own-brand items are complementary products within the overall scheme of the Debenhams lineup. This means that Debenhams must gauge demand for the two not only based on what it expects to sell, but what it expects to receive from its third parties. Doubtless there are contracts in place with key suppliers that give those suppliers certainty in how much they are going to sell to Debenhams in a given season. Debenhams must then match up their commitments with the expected to demand to estimate how much own-branded goods it should order.
Wholesaler relations are critical to Debenhams because the company needs to ensure that it gets the best clothes from the third-party suppliers, and that it gets them at a price that allows Debenhams to be competitive. It is a challenge for Debenhams if it needs to charge more for a branded item than competitors are charging for that same item. Distributors are also critical to the supply chain, because the company needs to ensure that it has the right amount of stock at the right time. This necessitates deliveries throughout the season so that the company is not sitting on too much inventory. In addition. Debenhams benefits from having high-demand items replenished quickly and needs to resist pressure to take on more of the low-demand goods that the distributor is trying to unload.
The online strategy is different from the in-store strategy. Debenhams is now one of the largest online retailers in the United Kingdom (Annesley, 2012). The company has been able to build its online retailing business because of its supply chain management. Unlike with stores, the online business cannot have too much inventory on hand due to warehouse constraints. Debenhams needs to ensure that goods are there when the consumers want them, but that it also must receive more frequent deliveries to its warehouse in order to maintain lower inventory levels.
One interesting initiative for Debenhams is the Endless Aisle strategy. This strategy blends procurement for the website from both the fulfillment centres and the stores as well. Thus, if an item is not available at the fulfillment centre, the order will then be routed to the store and the customer will receive the item from the store rather than the fulfillment centre. This initiative not only helps to avoid the occasional stockouts that happen with the Internet site and the low inventory strategy at the fulfillment centres, but it will also help to clear out inventory that it sitting in the stores.
The merchandising mix for each product is governed by two factors. The first is the demand from the previous seasons. This information is used as an estimate for the approximate mix of branded, own-brand and online sales that the company expects. Working with this breakdown, Debenhams is able to make a determination of how much to order. Within that breakdown, however, there are individual product items that the buyers must decide on. This is the more complicated aspect of buying fashions. With household items, it is easier because there is not as much seasonal fluctuation in trends, but with fashions there can be significant changes from one year to the next as to what items are going to be popular. This is an imprecise science, and the buyers have to know the Debenhams target market well and make good determinations about the hottest products so that the right quantities of each good are ordered. The company must also therefore understand the demographics of the in-store and online shoppers, which may be significantly different. The buyers also use information such as estimates of how many of a particular item will be sold as branded and how many will be own-brands. For example, branded T-shirts may perform…[continue]
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