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Is this the end of the department store?

Aimee Shaw

Department stores as we know them could be set to become a thing of the past. Retail analysts say the arrival of the internet, making it easy to access international designer goods, and big brands establishing shops in New Zealand, have made department stores less exclusive than they once were.

Department stores all over the world have been closing and downsizing their operations in recent years.

New Zealand has seen a string of homegrown department stores close. Global operator David Jones was forced to downsize its operations as a result of falling sales, closing its Wellington branch on Lambton Quay that was once NZX-listed Kirkcaldie & Stains department store.

Last week 120-year-old H&J Smith confirmed it would be close its remaining department shops in Invercargill, Gore and Queenstown by November.

The historic South Island retailer that established its store network in the 1900s had already shut its Dunedin, Mosgiel, Balclutha and Te Anau stores during the height of the pandemic due to supply chain constraints.

The decision to close the remaining stores, including the group’s flagship Invercargill outlet, came in part due to building standards and the cost and impact necessary seismic and interior improvements would have had on the business’s overall sustainability.

However, Jason Smith, H & J Smith Group managing director, acknowledged the department store model was in decline here and around the world.

The Covid-19 pandemic had changed the market and people were moving away from shopping in department stores.

H&J Smith had faced significant changes in its supply chain brought about by the Covid-19 pandemic, and increased operating costs.

Those were issues that were also challenging other traditional, independent department stores everywhere, said Chris Wilkinson, managing director of First Retail Group.

‘‘H&J’s main store was one of the biggest retail spaces in Australasia, which, serving a catchment of 80,000 people would have been challenging in itself,’’ said Wilkinson.

‘‘Other department stores – such as Ballantynes and Smith & Caughey’s – have much larger domestic catchments and are in cities with strong tourism audiences, providing a degree more of resilience, however, those challenges of changes in supply chain will have an impact.’’

Wilkinson said there were two ways department stores could ensure their models were sustainable: Bringing in more exclusive products that could not be found elsewhere, or developing their own brand range.

But he said bringing in more exclusive products only worked for so long.

‘‘Bringing in products that are exclusive to the store – such as Ballantynes have done with Pottery Barn and Barbour, or licensing areas within the store for brands to set up their own stores – such as the fragrance, cosmetics and clothing labels... works for a period, but ultimately the trends around brands developing their own standalone presence will challenge these strategies.’’

Brands that were once exclusive to department stores had become mainstream, such as Chanel which now has its own shop in downtown Auckland.

The outlook for department stores worldwide has looked bleak for some time, and the category’s demise was accelerating.

Across the Tasman, David Jones had faced challenges in its home market of Australia and had been exiting its larger, multi-storey locations where possible.

Myer had also had some closures, recently announcing it would leave Brisbane CBD, but remained relatively resilient compared to its competitors, Wilkinson said.

He said Myer had helped anchor cities and centres.

‘‘Its model has helped it sustain performance, however it won’t be immune from the challenges of rising operational costs and those changes in supply chain.’’

In Britain, Debenhams shut all of its department stores and industry poster-child John Lewis had shuttered 16 outlets. In Canada, North American department Nordstrom has closed all its branches, and the brand recently announced its iconic San Francisco store would also close. Across Europe, the trends in the department store sector are much the same. Germany’s last major department store, Galeria Karstadt Kaufhof, announced this year it planned to shut another 52 stores. AUT University retail and marketing professor Amy Errmann said it was likely that the overall size of the department store sector would decline and just a couple of key players would dominate.

She said Smith & Caughey’s for example, had seen relatively strong success from its digitalisation strategy in 2020 when it evolved with its ecommerce offering through Covid-19.

‘‘I think this emphasis on multichannel retailing may set up some remaining department stores to be resilient through future changes,’’ said Errmann.

‘‘Department stores originated to sell imported goods from Britain. In the early days, department stores gave women employment and many were family businesses.

‘‘However, these days it is easy for consumers to access imported or specialised goods directly from the businesses themselves, in theory making the concept of a department store redundant.’’

Errmann said the competitive advantage of a department store in modern times was to provide a diverse assortment of products and product categories under one roof, but this same strategy was being used by other retailers, further reducing the appeal of department stores.

She said that the New Zealand shopper was generally not partial to department stores unlike those in Britain, ultimately spelling more bad news for the retail category.

‘‘We have evolving demographics in Aotearoa, both in urban and rural areas, which do not bode well for department stores.

‘‘The ageing New Zealander may feel nostalgia for department stores, whereas emerging demographics from international countries, and also our younger cohorts, may not feel the same and prefer to buy either online or from speciality retailers.’’

NEWS

en-nz

2023-05-28T07:00:00.0000000Z

2023-05-28T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/282578792417750

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