IADS White Paper: “Smarter department store organisations”
Department stores’ human organisations: their historical and constant capability to adapt to an increasingly complex world might only partially answer the need of their radical reinvention
In its “Smarter department store organisations” White Paper, the IADS offers an unprecedented review of department stores’ internal organisation evolution from 1928 to the current digital age.
This structural dissection aims to look at how these complex business models have adapted to successive market evolutions. At a moment when department store organisations are in the midst of digital transformation, and already anticipating the adaptation to a more sustainable world, this study suggests that continuous structural re-engineering is intrinsically at the core of their model. Department stores answer to an increasingly complex world by an increased C-suite specialization and organisational inflation.
However, recent evolutions, both theoretical and implied by new digital business models suggest that more radical changes might be needed in the mid-range to stay competitive.
Organic reinvention has been an organisational feature central to department stores from their inception, helping them to deal with an increasingly complex world
“Department stores are decathletes”. This sentence encapsulates the challenges embedded at the core of any department store in the world: their model concentrates a vast array of complex activities, and, in these days of omnichannel competition and digital unbundling, they have to be good at every one of them. This permanent necessity has translated into constant adaptation and the acquisition or generation of new and appropriate competencies. While such transformations have been relatively invisible from the customers’ point of view, each new iteration has left its mark on companies’ organisations.
While organisation charts are not an exact reflection of how companies work, they provide insight into a company’s perception of itself, as well as its formal internal power structures. They also allow comparisons, and the tracking of change over time. This is why the IADS has put together snapshots of store organisations during 4 key dates: 1928, 1994, 2015 and 2021.
In 1928, when the IADS was created, department store structures were already extraordinarily complex, in order to address the number of categories and products sold. In addition, all stakeholders were taken into consideration (customers, employees, partners, shareholders), leading to the juxtaposition of many activities and competencies. This created a fertile ground for a subsequent complexification: with time, the C-suite progressively increased according to managerial evolutions and technological progress, without significantly altering a template that became increasingly anachronistic. With time, organisations became costly, complicated and difficult to transform.
This became particularly visible after 1994, the year when Amazon was created. While a few companies foresaw the danger and followed suit by launching e-commerce ventures (Macy’s in 1997, Nordstrom in 1998 and John Lewis in 2001), the rest of the department stores were still trying to solve the space productivity equation through a highly centralised organisation at the buying level. Even though a few IADS members looked for other approaches, this struggle persists today, and partly explains why adapting to a digital, highly-fragmented and individualised world has taken so long for department stores.