Articles

The Department Store Shakeout.

While the ownership situation with David Jones appears to be settled, the structural reform needed right across the sector to ensure a more productive market context emerges is only just beginning. In large part because it will be forced upon the sector through the contest it faces.

The current oversupply of stores (relative to our market size and appetite) will be further swelled by a number of high profile international department stores currently in the final stages of market analysis. Add to this the moves afoot in discount department stores and the need for landlords to redefine their footprints and traffic drivers – not to mention returns per metre – and the whole sector will be under redevelopment, not just one chain.

Rumors may be unsubstantiated but most observers expect a change of shareholding at Myer as well as David Jones. Harvey Nichols, John Lewis, Debenhams and Marks & Spencer are all expected to play an increasingly active role in this market and several of the American department stores are also sniffing.

Online pushed to one side, the current physical retail offering offers customers very little real differentiation and an over-reliance on concession retailing and rolling discounting. That model pretty much ensures that all fashion related retail in this country underperforms international benchmarks both in terms of investment returns and customer experience.

But the emerging market conditions will force a rationalization of the number of stores, the footprint of stores, the operating model and the product range in a manner that could liberate the entire market for the better.

If you add the influence of online back into the discussion, consumers in this country already have an oversupply of options to access product and to play the price trade-off.

Eventually department stores will be forced to return to their historical reason for being – the ultimate comparative shopping zone.

Clever product selection fueled by great advice based service, wrapped in an aspirational environment that entertains and invigorates as much as it delivers functional capability will see well positioned, clearly differentiated offerings re-instating a more vibrant commercial climate for all.

If you are in the fashion game, now is the time to be preparing for life after the department store revolution. For, while it will create a better opportunity for value added trading, the context will change dramatically rendering a lot of the current competitive levers useless. If you have an over-reliance on concessions and are caught up in the rolling discount promotional cycle, reinvent fast.

Better times are coming. But only if you are ready for them.