Harvey Nicks deal hints at department stores’ hidden potential
Services won’t restore the golden age but could give young shoppers a reason to return
In retail, the department store has become a synonym for a slow death. Saks, Sears, Barneys, JCPenney and many others have all fallen over the past decade, and the survivors look fragile. But not everyone is ready to write them off. This week, Mike Ashley, the serial buyer of struggling high street brands, acquired luxury Knightsbridge department store Harvey Nichols.
Harvey Nicks, as it is known, has suffered similar problems to other department stores: costs went up a tenth between 2019 and 2025, according to Companies House filings, while sales fell 20 per cent. Harvey Nichols hasn’t turned a profit since 2019. But Ashley is betting that he can strip out costs and fill its stores with his own brands, helped by his existing relationships with luxury suppliers and stakes in names such as Burberry and Hugo Boss.
Ashley’s deal also hints at a broader point. Perhaps department stores have a better shot at reinvention than it might seem. Being an everything shop is hard in the era of Amazon, direct-to-consumer channels and big luxury brands that want to control their own distribution networks, but they are well placed to surf two new retail trends.
The first is that they can offer space to smaller brands squeezed out of the increasingly expensive world of bricks and mortar: in the US, Kim Kardashian’s brand Skims first moved into physical retail through Nordstrom stores. And the second is that all those square feet can be used to host services that people can’t get online such as tailoring, personal styling, cooking schools, repair workshops and restaurants. That’s an extra revenue source and an opportunity to upsell and cross-sell: think flogging treadmills as well as trainers when you offer gait analyses.
Big brand retailers have already made a success out of the service economy. Apple turned its shops into tech support centres; a third of Pets at Home’s consumer revenue now comes from vet services; Ikea proves that you can sell furniture as well as meatballs under one roof. And some department stores are now giving this strategy a go.
John Lewis — whose managing director stepped down this week amid talk of “really tough” trading conditions — says appointments for its personal styling and nursery services both rose about a fifth last year. Cafés and restaurants account for more than one in five of its in-store transactions. Revenue at the department store, excluding Waitrose, returned to growth last year for the first time since 2021, although it still only managed a threadbare 1.6 per cent operating margin.
Services are unlikely to return department stores to their golden age: John Lewis’s cash from operations has fallen 20 per cent in a decade. But with younger generations reviving a whole host of nineties trends, these grand old institutions may well find a new reason to get shoppers through the door.