By Dr. Rudolf Tjandra

Over the weekend, I enjoyed leisurely walks and explored different places, taking the opportunity to browse through the interiors of some of the previously well-regarded department stores. It was immediately clear that more than a decade had passed since my last visit, and I was faced with significant changes. These changes were not just about the physical surroundings, product offerings, or lighting; they were most noticeable in the quiet atmosphere within these establishments. This subdued atmosphere reflects the evolving demographic landscape in Indonesia, where the younger generation, who make up the majority of the population, has, in the past decade seen a significant increase in their income and purchasing power. Consequently, these long-standing department stores are grappling with the challenge of connecting with this emerging segment of society, who now have different aspirations and preferences as part of the contemporary middle class.

The retail industry has certainly been undergoing a transformation in recent years, primarily driven by the widespread impact of e-commerce. Department stores, once leaders in shopping and fashion, are facing difficulties in regaining their former status. Addressing this challenge requires a strategic approach that covers various aspects, including increasing revenue, improving margins, innovating and achieving operational excellence. To revive the department store sector in the face of this digital upheaval, this reflection aims to draw on my experience in revitalizing companies and reinvigorating well-known brands, positioning them for success once again.

I. Understanding the current challenges

The rise of e-commerce platforms has presented a significant obstacle for traditional department stores. Consumers now appreciate the convenience of online shopping, which has led to a decrease in physical store visits. Additionally, e-commerce platforms offer a wide range of products and often provide competitive pricing, further diverting customers from traditional bricks-and-mortar stores.

1.2 Declining foot traffic

Department stores have witnessed a drop in foot traffic, impacting their sales and overall position. Shoppers have turned to alternative retail formats like shopping malls and specialty stores, resulting in a noticeable reduction in department store visits.

1.3 Image and relevance

The image and relevance of department stores have diminished as they struggle to adapt to the changing preferences of modern consumers. The traditional department store model, with its traditional messaging and offerings, is increasingly seen as outdated, creating a perception challenge among consumers.

It is clear that a significant adjustment is necessary for many department stores to reposition their brands and make them relevant to today's society. To enhance the department store's image and increase foot traffic, an improved customer experience is of paramount importance. Indonesian department stores should consider the following strategies:

a. Brand positioning: Reposition the department store as more than just a retail destination but as a hub for lifestyle, culture and community engagement, offering experiences, events and exclusive merchandise.

b. In-store events: Organize events, workshops and exhibitions within the store to engage customers and create a sense of community. Enhancing the customer experience is crucial in a highly competitive retail landscape. Department stores can focus on providing exceptional customer service, optimizing store layout and improving the overall atmosphere to create a memorable shopping experience.

c. Technology integration: Implement cutting-edge technologies such as augmented reality, virtual reality and interactive displays to make the shopping experience more immersive and innovative. For example, department stores in Korea and China have effectively integrated augmented reality and virtual reality experiences into their establishments, allowing customers to virtually try on clothes and interact with products in a unique way.

To compete with e-commerce platforms, department stores must offer a compelling range of products and services:

a. Exclusive collaborations: Partner with exclusive brands and designers to offer products that are not readily available online.

b. Local and cultural elements: Include locally sourced products and cultural elements in the store's offerings to create an authentic atmosphere.

c. Multi-channel sales: Allow customers to seamlessly switch between online and offline shopping, giving them the flexibility to make purchases in their preferred way. I observed that Takashimaya in Japan has gained recognition for its meticulous selection of high-quality products and collaborations with renowned Japanese designers, making it a preferred destination for shoppers seeking unique items.

Regarding brand transformation, as is the case with any endeavor, maintaining a youthful, vibrant and contemporary brand image plays a central role in any revival strategy. For department stores, revitalizing the brand's image is essential to attract customers and restore its prestige. Several considerations come to mind:

a. Rebranding: Consider a fresh brand identity that aligns with the evolving market dynamics and contemporary consumer preferences, establishing a strong connection between the department store and favorable attributes like quality, style or value.

b. Articulating the brand's voice: Create distinctive and memorable brand messages that resonate with the target audience. Notable examples include taglines like "Create the New" or "Beauty Favors the Bold," which convey a commitment to innovation and style. Launch campaigns that emphasize the new brand image and the department store's dedication to innovation, customer-centricity and community engagement. The goal is to nurture a strong bond between customers and the brand.

c. Marketing campaigns: Launch marketing campaigns that highlight the revamped brand image and the department store's commitment to innovation and customer-centric experiences. Present the store as a provider of a lifestyle that aligns with the aspirations of the target market. Become a brand that customers can proudly associate with. Create a compelling and consistent brand image through marketing, store design and customer interactions.

d. Social responsibility: Engage in philanthropic initiatives and sustainable practices to demonstrate social responsibility and cultivate a favorable brand image. Community engagement through events, workshops and exclusive gatherings can also effectively enhance the brand, based on my experience.

Revitalizing department store chains in Indonesia is a multifaceted challenge, but a well-structured strategy can lead to success. Drawing inspiration from the success stories of previously struggling iconic Indonesian FMCG brands provides a promising starting point. Whether dealing with products, services or platforms, customers and consumers alike seek entities that empower them to express themselves with pride and joy.

The potential to enhance traffic, sales and the overall image of department stores exists, but a comprehensive reassessment is required. Success stories from the region demonstrate how diverse strategies can be effectively implemented to navigate the challenges of the modern retail landscape. By implementing the proposed strategies and drawing inspiration from these successful case studies, department stores can improve their traffic, sales and brand image, securing a promising future in the ever-evolving retail industry.

I wish our friends in the industry well.

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