Experts say more Aussie department store closures likely as retail apocalypse continues

The shock closure of a new David Jones store has been described as a “wake up call”. But experts say it’s only the start of a looming bloodbath.

When David Jones opened a shiny new store in Brisbane’s “growing and vibrant” Fortitude Valley precinct less than three years ago, there were high hopes for its success.

It was virtually a stand-alone store compared with DJs usual location within sprawling shopping centres, and at 1400sq m, was also much smaller than the usual offering, marketing itself to the “local customer”.

Today, it’s a very different and much sadder story, with the department store juggernaut announcing the gamble had been a flop, and that the outlet would close its doors within months.

When the branch shuts up shop in June, it will become the first Queensland David Jones to shutter – and while the company insists there’s nothing to see here, Australia’s retail experts are convinced it is bad news for the struggling retailer.

So what is really going on?

RETAIL APOCALYPSE

The shock announcement came hot on the heels of a string of recent high-profile retail collapses that have rocked the industry this month.

Within the first fortnight of 2020, it was revealed that at least 161 bricks-and-mortar stores were earmarked for closure across the nation, with department store Harris Scarfe, fashion chains Bardot and Jeanswest, educational retailer Curious Planet and tech favourites EB Games and Bose just some of the household names pulling stores.

Australian Retailers Association executive director Russell Zimmerman told news.com.au it was shaping up to be a “tough year in retail” for many brands including David Jones.

“It’s certainly very, very hard. It’s easy to sit back and say different decisions should have been made three years ago but retailers don’t open and close stores willy-nilly – as a general rule, they try and keep them open long term,” he told news.com.au.

David Jones on James St, Fortitude Valley. Picture: Google Maps

He said there were “a number of reasons” why retailers were doing it tough across the board at the moment, including environmental factors like the bushfires and the drought, the popularity of online shopping, changing consumer behaviours and skittishness about the economy.

Meanwhile a David Jones spokesman told news.com.au earlier that all team members had been offered redeployment to nearby stores including Queens Plaza.

“The optimisation of our retail network through investment in flagship stores, right-sizing and, where necessary, consolidation of our footprint, together with our enhanced online offering, is critical to meeting the changing needs and preferences of our customer,” the spokesman said.

“We look forward to welcoming Brisbane customers to our QueensPlaza CBD flagship, our new-concept Carindale store and other surrounding David Jones stores as well as to davidjones.com.”

WHAT WENT WRONG?

DGC Advisory retail analyst Geoff Dart said while he expected David Jones to close more stores and foccus on reducing the size of others in future, he believed the smaller James St outlet was the victim of a number of specific mistakes, especially “branding and demographics”.

He said that specific location was not the right match for David Jones, which generally attracted an older and more traditional clientele, and that the store itself was bland.

“Firstly, the location in Fortitude Valley has a younger demographic, and overlaid with that, it’s a boring store – it has no colour or movement or anything to say ‘come in and buy things’,” he told news.com.au.

“If you go to a DJs in Sydney or Melbourne it’s a totally different experience but in that particular store the visual merchandising is terrible – it just doesn’t have the quality of fittings or ambience you would expect.

“The demographic there is also young and upwardly-mobile, while DJs’ market is usually older, and it’s also virtually a stand-alone store and not in a shopping centre.”

Mr Dart said he “can’t imagine” why a David Jones was opened in that location in the first place, as it “just doesn’t fit the DJs mould”.

“When you have a struggling model that’s lost a significant amount of consumer appeal you might do something out of the ordinary but it doesn’t seem like they’ve done research in appealing to a younger demographic so I can’t imagine what they were thinking,” he said, adding David Jones and rival Myer would likely close more stores and downsize others in future.

“Sales are declining, their demographic is not as mobile as they once were and on top of that, you’ve got probably the worst levels of discretionary spending in the last few decades,” he said.

Experts say more department store closures are almost certain. Picture: iStock

“I think there has to be more closures … they’ve got to make a decision whether they cut their losses and go or sweat it out.”

But he said simply closing stores wouldn’t work, and that David Jones needed to overhaul its entire business model and increase its online offer.

“Closing stores is a downward spiral and you’ll get to the point where the model is still wrong and just cutting costs won’t work when it’s in line with a loss of revenue,” Mr Dart explained.

“It’s groundhog day for them – in the short term they might make savings but in the long term it’s not going to stop. The market has gone past them and they’ve not kept up.

“Just look at Sephora and Mecca – cosmetics is one of the department stores’ biggest categories but just those two brands alone have eaten their lunch. When you go into those stores you can try things on, it’s easy to shop there, there’s a great range and people want to go there – but when you go to the cosmetics section at Myer and DJs it’s like walking into the 1960s.

“This is a wake up call for Myer and David Jones.”

ON BORROWED TIME

But retail expert Brian Walker from the Retail Doctor Group went one step further, predicting it was only a matter of time before Myer and David Jones merged.

“This country is not large enough to house two department store channels in Myer and David Jones and over time I’m sure a merger or acquisition will take place,” he said.

EB Games, Harris Scarfe, Bardot and Curious Planet – formerly known as Australian Geographic – are all closing stores within weeks.

“Whether both brands or one survives is yet to be seen but you just have to look at the sales performance of both in the last few years to see the market won’t be able to house both.”

Mr Walker said he believed the two brands would merge in the medium term of between five and 10 years and that the concept had been discussed for some time, indicating there was “too much competition, not enough demand and too high a cost model”.

But the chance of a merger has been shot down by both retailers in the past, with David Jones’ owner Woolworths Holdings saying “rumours” of a merger “have no basis” in 2018.

“We are not considering an acquisition of Myer and there have been no discussions regarding an acquisition with advisers or between the two companies,” a spokesperson told AAP at the time.

News.com.au contacted Myer for comment.

Originally published as Experts say more Aussie department store closures likely as retail apocalypse continues