We saw a decline in global department store expenditure growth in 2013 caused by a slower European recovery and weak Japanese currency rates. However, we forecast that the market will recover in 2014, growing by 3.5% as department stores invest in improving their instore services and multichannel offer to drive shopper expenditure. Learn more with sample pages from our Global Department Store Retailing report.

2. February 2014
Global Department Store Retailing | Verdict Channel Report page 2
Mature markets North America and Europe suffer and lose share…
While North America and Europe combined accounted for over half of the market, at 53.5%, in
2009, they have suffered significantly in recent years, with sales weakening due to saturation in the
market, lack of growth opportunities and department store players needing to steal market share
away from rivals rather than being able to generate organic market growth. Market share is
expected to decline for North America and Europe by 4.9 percentage points and 3.5 percentage
points, respectively, in the five years to 2014, causing their combined share to fall to 45.1%.
…while China and Latin America continue to achieve strong growth
The dominance of North America and Europe is weakening, and the focus is now shifting toward
the developing markets of China, South East Asia and Latin America, as they have continued to
achieve strong growth and gain interest from international players. Department store operators can
achieve growth more easily in these regions due to there being fewer local players and therefore
less competition, while growing populations, increasing affluence and consumer willingness to
purchase discretionary items will drive consumer spend.
Figure 1: Share of department store expenditure by region (%), 2009 and 2014e
31.3% 26.4%
North America
22.2% 18.7%
Europe
18.1% 26.9%
China
17.3% 13.5%
Japan
1.2% 1.4%
Middle East
& Africa
6.9% 8.6%
Asia Pacific ex
Japan & China
2009 2014e
Share of
global sales
3.0% 4.5%
Latin America
Source: Verdict V E R D I C T

3. February 2014
Global Department Store Retailing | Verdict Channel Report page 3
Private label should be central to the department store proposition
Private label ranges drive footfall and loyalty
Offering consumers unique ranges and brands is necessary for department stores to differentiate
from competitors and sector specialists. While providing private label ranges is a logical way to
achieve this, they are not vital for all department store operators, as the likes of Selfridges can
attest to, instead focussing on branded product exclusives and investing in services and the store
environment to distinguish itself from rivals.
We do, however, expect more retailers to invest in their private label proposition over the next five
years as markets become more saturated and competition increases. These ranges can act as
major drivers of footfall for stores and online, as it is unique to that retailer, and if retailers
successfully build the profile of their own brands, like Debenhams and Kohl’s have achieved, they
can also help the department store to garner customer loyalty, ensuring return visits and repeat
purchases.
Figure 2: Benefits of private label in department stores, 2014
Benefits of private label
Drives footfall
Can help to
appeal to a
new customer
base
Garners loyalty
Quality and
design must be
on par with
branded offer
Build margins
Differentiates
product offer
Designer
ranges add
clout
Source: Verdict V E R D I C T

4. February 2014
Global Department Store Retailing | Verdict Channel Report page 4
Chinese players need to invest in private label
We expect private label to become a key battleground for department store operators in China,
which have previously relied on a concession-based business model, with little focus on developing
their own ranges due to the investment involved and shoppers’ demand for branded goods.
Players must set themselves apart from competitors, so alongside brand exclusives and limited
edition branded ranges, private label development would be a local solution to the homogeneous
market. Department store operators in China should therefore introduce private label ranges by
international designers, providing exclusivity to their proposition, as long as products are of high
quality and showcase their design credentials.
Sears and JC Penney are the greatest losers
Macy's holds 1.7 percentage point lead over nearest rival Sears
US player Macy's is forecast to maintain its leading market share in 2014, achieving 0.3
percentage point growth in the five years since 2009. Macy's has not been without its challenges in
its 2013/14 financial year, recording underperformance in Q2 – with sales down 0.8% on the year,
and comparable sales also down 0.8% – but its investment in promotional activities and marketing,
as well as widening its price architecture at the lower end of its proposition to better appeal to cash-
strapped domestic shoppers, has paid off.

5. February 2014
Global Department Store Retailing | Verdict Channel Report page 5
In contrast to Q2, for the nine weeks ended January 4, 2014 – incorporating the core Christmas
trading period – comparable store sales were up by 3.6% on the year. Macy's turnaround in trading
performance is impressive, and in a mature market such as North America, Macy's has been able
to achieve organic share growth by attracting shoppers away from competitors by ensuring its store
environment and product offer are appealing. We do not anticipate any competitive threats to
Macy's leading position in 2014, as its closest rival Sears is now some way behind – despite being
in pole position prior to 2010.
Nordstrom to seize additional market share in 2014 as investments pay off
We expect Nordstrom's focus on customer service with its Fashion Rewards loyalty scheme, and
its investment in multichannel activities and integrating its online and offline operations, will help
the retailer to grow its market share by 0.1 percentage point to 2.9% in 2014. Nordstrom is one of
just two players that have grown share in the past five years, posing a real threat to its rivals in the
US such as Macy's, Saks and Barneys. The announcement in January 2014 of plans to open a
third distribution centre in the US in summer 2015 will ensure that the retailer can meet consumer
demand for fast delivery of online orders and support future growth of its e-commerce business.
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