The Department Store Rises Again Wild stunts and clever designs have transformed the stuffy Selfridges chain into a collection of hip and happening spaces.
By Matthew Maier

(Business 2.0) – To steer traffic to its flagship store in London, Selfridges sought divine intervention--that is, a 50-foot statue of Jesus. The small-scale replica of Rio de Janeiro's famous monument gazed down on shoppers during a monthlong Brazilian-themed promotion in May. The store's ground floor was also overhauled to resemble an open-air market, and a giant movie screen played a smattering of Brazilian films, including Madame Satan, touted as a cinematic "night out with whores, cut-throats and artists, in dark bars and brothels."

Combined with a radical redesign of the retail space that makes each of Selfridges's four outlets feel more like a collection of quirky boutiques than one gargantuan marketplace, stunts like the Brazil 40º celebration have transformed the once-staid 95-year-old British retail chain into a premier arbiter of hip. Indeed, the overall metamorphosis is so dramatic--and profitable--that it has spurred retailers worldwide to take a closer look. "A department store chief who has not made his way to Selfridges to study its operation," says Arnold Aronson, former CEO of Saks Fifth Avenue, "is an executive not doing his job."

It's astonishing that no more than a decade ago, Selfridges, founded in 1909, was in danger of becoming a footnote in retail history, its sales dragged down by unfashionably stuffy merchandise. Then along came Vittorio Radice, a young Italian retail guru hired as managing director in 1996 (he was promoted to CEO two years later) and charged with resuscitating the wheezing chain. Cashing in on his cachet, he persuaded hot designers like Ghost and Miu Miu to set up shop in his stores. As revenue climbed, Selfridges opened two new stores in Manchester in 1998 and 2002, then another last year in Birmingham that's a piece of architectural haute couture featuring a futuristic dome covered in aluminum disks.

Radice moved on to Marks & Spencer last year, but not before leading Selfridges through five straight years of increased sales. Profits in 2002 hit $51.5 million, up 7.6 percent from the previous year. That jump caught the eye of billionaire retail mogul Galen Weston, who already owned department stores in Canada and Ireland. He bought the publicly traded corporation for roughly $1 billion last summer and took it private.

While Selfridges is thriving, its once-proud U.S. counterparts are losing market share to Wal-Mart, Target, and other major discounters. Discount chains' combined sales last year were more than $300 billion, while department stores reaped little more than a third of that and attracted about half as many shoppers as they did a decade ago. It's no wonder the U.S. giants are looking to Selfridges for clues on how to reinvent themselves. Marshall Field's recently overhauled its flagship in Chicago, adding boutiques that highlight designers like Thomas Pink. And Federated, whose holdings include Macy's and Bloomingdale's, began upgrading nearly 100 of its stores using concepts reminiscent of the British retailer's. Here are key lessons that stores can shoplift from the school of Selfridges.

1. Let Vendors Take Charge

Typically, department stores develop their own merchandising strategies, resulting in a retail space crowded with Tommy Hilfiger, Ralph Lauren, and other predictable names arranged in displays that rarely vary from one chain to the next. "Once you go beyond the apparel, there really isn't much to look at," say Britt Beemer, chairman of America's Research Group. Selfridges, however, operates on the theory that no one understands a product better than the designer or vendor that created it. So individual designers are allotted space in Selfridges and asked to create in-store displays that highlight their work. It's a unique environment that Selfridges calls its "house of brands." "No one has done this as well as Selfridges," Aronson says. "That's the real genius of its stores."

2. Lead Buyers to More Stuff

In the updated Selfridges model, traditional "departments" such as shoes, cosmetics, and men's businesswear have been organized by lifestyle--think youth, sports, or women's contemporary. This helps expose customers to merchandise they might not otherwise see. For instance, while shopping for gear from trendy designers like Julien Macdonald and Max Mara, women might also run across the Tabooboo boutique selling sex toys and risqué lingerie. Last June, Selfridges asked a tattoo and body-piercing parlor called Metal Morphosis to set up shop next to some women's fashion vendors. Metal Morphosis was such a huge hit with shoppers en route to the clothing racks that it will soon expand to other Selfridges outlets.

3. Razzle-Dazzle 'Em

In part by heavily promoting its gala happenings, the retailer has been able to cycle more than 10 million browsers through its stores each year. Marketing director James Bidwell, former head of U.K. and European marketing for Disneyland Paris and Walt Disney World, turns stores into retail theme parks annually and stages smaller events in between. Last year, during a promotion called Body Craze, Selfridges had hundreds of folks in its London store pose in the buff as part of an exhibit by New York photographer Spencer Tunick. Past events also included a tribute to India's popular Bollywood movie scene. Though each event was unique, they were all designed with the same goal: to attract more shoppers with the promise of a memorable experience and keep them coming back.

Matthew Maier (matt@business2.com) is a writer-reporter at Business 2.0.