Department Stores: Luxury Temples Facing Market Changes

The evolution of European department stores from the mid-19th century to the present reflects major societal transformations. Built over multiple levels, these vast spaces emerged in the 50s as consumer havens, showcasing products in grand architectural settings. For the luxury sector, they became an ideal way to attract an international clientele eager for the latest trends. However, the century-old model that has withstood historical upheavals now faces a period of significant change.

The success of department stores was initially driven by the advent of transportation, boulevards, and industry, with Aristide Boucicaut—considered the father of modern retail—leading the charge. In 1825, he founded Paris's first department store, Le Bon Marché, at the corner of Rue de Sèvres and Rue du Bac. With his wife’s support, he introduced unprecedented concepts such as fixed prices, reduced margins, home delivery, sales events, and even private concerts. The couple later enlisted architects, including Gustav Eiffel, to expand the store with large glass windows, colorful domes, and industrial-style architecture.

The success of Le Bon Marché spurred the creation of other iconic stores, such as La Samaritaine (1870) near the Pont Neuf, Milan's Rinascente (1865) on Piazza del Duomo, Harrods (1892) in London’s upscale Knightsbridge district, and Galeries Lafayette (1893) on Boulevard Haussmann. Selfridges (1909) followed, becoming London’s second-largest department store and the first to feature beauty and fragrance products on the ground floor.

From the 1930s to the 1980s, department stores had to reinvent themselves in response to the rise of supermarkets and hypermarkets, prompting the development of the first marketing strategies. Traditional Christmas window displays featuring children’s toys gave way to luxury products, and many stores began expanding internationally, particularly in Asia. The luxury sector saw promise in the model: in Paris, LVMH acquired Le Bon Marché in 1985 and La Samaritaine in 2000, while François Pinault purchased Printemps in 1992 through his company PPR (now Kering). Galeries Lafayette, the only major French department store to remain family-owned, is controlled by the Moulin family through their holding company Motier.

Leading the French market in terms of sales, with €3.645 billion in 2023 for all networks combined, the Galeries Lafayette group, which celebrates its 130th anniversary this year, is challenging its neighbour and main competitor, Printemps. Nicolas Houzé, its CEO, told the press last June that ‘the overall sales volume of the Galeries Lafayette networks in France and around the world could return to the level achieved in 2019’ and forecast 8% growth compared with 2022, as well as ‘an encouraging start to 2024’.

Despite numerous crises, the department store model has always managed to reinvent itself and remains an iconic part of luxury shopping. In Europe, an IBIS World study estimates the market at 181.9 billion euros in 2024, led by France, with a market valued at 19.4 billion euros, followed by Spain (14.9 billion euros). In the United States, another study by Statista considers that the market has been in crisis for several years, with sales dropping to $132.7 billion in 2023, the lowest level since 1992. Macy's, the largest department stores' in the US, has announced that it will close 30% of its outlets, i.e. 150 shops, by 2026, while Neimann Marcus was bought by Saks with the help of Amazon for 2.65 billion dollars last July.

Overall, the situation is not looking good: In France, 26 Galeries Lafayette stores franchised by Michel Ohayon, employing 950 people, narrowly avoided closure this year. Switzerland's Globus chain was bought by Thailand's Central Group in September 2024 after its previous co-owner, Signa, went bankrupt. A few days later, Central Group sold a 40% stake in London's Selfridges to a Saudi public investment fund.