Department Stores in Portugal

PROSPECTS

Stronger potential of department stores restricted by popularity of shopping centres

After several years of strong current value growth, department stores experienced a slowdown in sales in 2019 in addition to a decline in the number of stores as Marques Soares closed one of its outlets. The concept of department stores has always struggled to gain favour amongst many local consumers compared to the channel’s presence in other European countries, because of competition from specialist stores and the ongoing popularity of shopping centres in Portugal.

Luxury brands important area of sales development as consumers gain confidence in spending due to positive economic outlook

As local consumers become increasingly confident in their spending due to a more positive economic outlook, they are upgrading and searching for more luxury items. This niche is an important area of development for department stores despite strong competition from online retailers such as Farfetch and Showrommprive which offer lower prices on luxury goods.

Increasing tourism to Portugal offers further strong source of growth

The expected increase in both touristic flows and the population of foreign residents is likely to be a strong opportunity for department stores, as Portugal is a popular tourist destination with cities such as Porto, Lisbon and Braga attracting visitors from other European countries such as the UK, France and Germany in addition to further afield including Russia and China. Therefore, El Corte Inglés and Marques Soares department stores are located in busy tourist cities, which encourages the retailers to adapt their strategies to attract both foreign tourists and the migratory wave of mid- to high-income consumers.

COMPETITIVE LANDSCAPE

El Corte Inglés strengthens domination of value sales despite small network

El Corte Inglês - Grandes Armazéns SA strengthened its dominance of department stores in value share terms in 2019 as its only competitor Marques Soares closed one store. The retailer’s strong position is due to its larger selling space, strong marketing campaigns including specific discounting periods, in addition to the positioning of its two stores in popular tourist destinations, Vila Nova de Gaia and Lisbon.

Potential remains for third El Corte Inglés store

There may still be potential for a third El Corte Inglés store to be built in Portugal in the future. The retailer initially purchased land in the strategic location of Boavista, Porto where it had intended to launch a store in 2003.

Despite larger outlet network, Marques Soares unable to challenge leadership of El Corte Inglés

Whilst owning a higher number of outlets than its competitor El Corte Inglés (14 in 2019 after closing one store), Marques Soares continued to hold marginal value share. The retailer has mainly focused on physical stores and has invested in refurbishing its outlets to add a more contemporary feel in addition to expanding its product portfolio, while still attracting customers through tradition and brand heritage.

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