Business

Department Stores: Galeries Lafayette Invests While Fondaco dei Tedeschi Closes

By Eva Morletto26 novembre 2024

After going through ‘several profound crises’, the famous Galeries Lafayette is getting a new lease of life. The investment, a quarter of which will be allocated to Paris Haussmann, will be used to remodel outlets and expand on other continents. The department stores' model needs to be able to reinvent itself, even if some of them, like the Fondaco dei Tedeschi in Venice, have not withstood the crises.

Faced with the critical situation facing travel retail, Venice's Fondaco dei Tedeschi department store has announced its closure in November 2024 (Shutterstock)

The mood is one of renewal for Europe's luxury department stores, most of which have unveiled their most beautiful Christmas windows. According to Nicolas Houzé, Chairman of the Galeries Lafayette Management Board, in an interview with the business weekly La Tribune, the French group, which celebrates its 130th anniversary this year, will be investing a further €400 million to make its stores more modern and attractive. One hundred million euros will be devoted exclusively to work on the iconic address on Boulevard Haussmann in Paris.

The investment will be spread over the next five years. Among the intentions expressed by the management is the desire to increase the digital offering, as well as developing the company's presence abroad. India, China, Indonesia and the Middle East are among the new targets. Next year, the city of Mumbai will see the inauguration of a new Galeries Lafayette department stores', and the operation will be repeated in New Delhi the following year.

In 2023, Galeries Lafayette recorded sales of €3.65 billion, while the Paris Haussmann shop, considered the ‘flagship’, alone recorded sales of €1.9 billion. This is rather good news, given the current economic climate and the difficult years we have seen in the past, with social unrest in France and a global health crisis.

Recently, the world of retail, from hypermarkets to luxury department stores, has been undergoing a profound rethink. Sales strategies are having to be rethought in the face of a host of factors that are jeopardising the survival of these models. These include the difficulty of returning to growth after the global pandemic, the decline in travel retail and the rise of e-commerce.

Others have not weathered the storm, such as Fondaco dei Tedeschi, a multi-brand store managed by DFS (a subsidiary of the LVMH group that also manages La Samaritaine in Paris). The department stores' opened in Venice in 2016, but has announced that it will not be renewing its lease, which expires in September 2025. This temple to luxury shopping, which housed 750 top-of-the-range brands, will close its doors for good in the first half of next year, and plans to make around 220 employees redundant. The directors cited ‘the critical situation facing travel retail worldwide’.

However, others have shown themselves to be more resilient. One example is the legendary Harrod's department stores' in London. Last year, its turnover was close to 900 million pounds, or around 1 billion euros, benefiting from a strong comeback by international shoppers, despite the fact that they cannot take advantage of tax-free shopping.

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