Big change that could save Australia’s department stores

STRUGGLING department stores are already putting out the winter sales signs. There’s one big change they need to make if they want to survive.

Get ready for what really could be Australia’s biggest ever stocktake sale.

WINTER sales are upon us — despite the fact it’s technically still autumn.

Months of unseasonably warm weather have led to stockpiling at department stores David Jones and Myer, meaning they’ve had no choice but to launch straight into reductions at the first hint of a cold snap.

First off the bat is David Jones, where clothing, electronics, bedding, homewares, furniture and beauty products are marked down by up to 70 per cent from today.

Myer’s winter sale starts tomorrow, where $300 million worth of stock must be cleared across all categories, with discounts of up to 50 per cent.

While it’s good news for bargain hunters, early clearance sales could damage the turnaround efforts of the struggling department stores. Myer and David Jones have both posted encouraging results in recent months.

But there’s one mistake that all Australian departments stores have made, and fixing it could deliver a shopping experience that gives customers what they actually want. Imagine that!

“Never pay retail.” Picture: Jerad Williams

GUY RUSSO’S SECRET FORMULA

Wesfarmers’ chief executive of department stores Guy Russo — the retail dynamo who turned Kmart’s fortunes around, and is now tasked with saving Target — revealed one of the keys to his success during a media conference last week.

Australian retailers needed to realise that “winter doesn’t run for three months”, Mr Russo said.

And behaving like it did, in a market now serviced by fast fashion retailers Zara, H&M and Uniqlo, was a guaranteed way to cut into margins.

“Selling apparel and general merchandise is not easy,” he said. “There are many things that can go wrong. Weather is one of them, because you’re buying products and you’re second guessing six to nine months out whether the temperature is going to be at the point that your products will really sell through at the highest rate that you think they can.”

“Guess what? Winter does not last for three months.” Common sense brilliance by Wesfarmers’ Guy Russo. Picture: Steve Tanner

It might sound obvious, but this common sense approach flies in the face of how Australian department stores have operated for decades.

Mr Russo said it was only five years after taking the top job at Kmart in 2008, after a long career at McDonald’s Australia, that he worked out that treating our winter like its European equivalent was a huge mistake.

He has now slowed down stock at Kmart so that winter apparel arrives in April and May, instead of February like Myer, David Jones and Target — where he plans to make the same change over the next two years.

“What we’ve got is too much stock coming in the back door, and not enough going out the front door. That’s it in a nutshell,” Mr Russo said.

“This next 12 months will be about reducing stock inventory, and getting it down to a level where we can be selling more of the fully-priced stock, whereas at the moment too much is being sold at clearance, which is hurting our margins.”

But, first, Target has to clear its own winter stockpile, with $200 million worth of goods it needs to clear, purchased as far back as last September.

If David Jones’ new chief executive John Dixon and Myer boss Richard Umbers take heed of Mr Russo’s comments, the days of year-round sales could soon be over — so get out and enjoy the bargains while they last.

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