History says department stores will struggle in the future

Explanations for the poor performance of Australian department stores vary broadly. They have focused on the challenges of online competition, weak consumer sentiment and the influx of international retailers.

A few years ago, it was poor service, botched online strategies, and a host of other operational and marketing issues. These critiques are valid, but they are also part of a much longer story.

Department stores began as retail innovators. They arose within a changing consumer environment distributing mass produced goods. The scale of their operations, and the breadth of their product ranges helped establish retail dominance. Bit by bit, their competitive advantage has eroded.

The latest results from Myer and David Jones don’t inspire confidence. Myer experienced an 80% drop in profits over the past year, while for David Jones it was 25%.

Myer chief executive Richard Umbers pointed to “heightened competition, subdued consumer sentiment and discount fatigue”.

David Jones chief executive John Dixon blamed the costs involved in turning around a business that he said had been “in a form of managed decline” prior to being acquired by the South African Woolworths company in 2014. Read more

Matthew Bailey - The Conversation - 30 Oct 2017