“The end of the Department Store as we know it

Myer and David Jones Good bye!!!

“………Reducing property costs is obviously crucial when you are fighting, like Paul Zahra and Bernie Brookes” for survival.

“But is it enough? Making department stores smaller and cheaper won’t solve the question of whether the model of being all things to all people (or at least lots of things to lots of people) works in a world where being specialised and cheap is everything.”

How many times have we read articles similar to this one by James Thomson from Business Spectator 20 September 2012? To a degree they are all true but perhaps we should consider that not only have retailers not kept up with consumer shopping requirements for lower prices but that they may also not have kept up with the shoppers understanding of and expectations for the shopping environments that the shoppers have been presented with.

Perhaps today’s shopper wants more than just a place to shop that is cheap. Yes they can get that on-line and delivered to their door! Perhaps they want to gain more of an experience from shopping and that they don’t just want merchandise continually shoved down their throats. Perhaps they want to be able to enjoy the architecture and the environments that many retail outlets are housed in and, dare I suggest it, they may even want to look out the windows of some of these buildings. The retailers love to cover up the windows in fear that the shopper may see something other than what they want to sell. Perhaps if the environments created were more conducive for shoppers to stay then perhaps they would spend more money?

Many shopping centre developers have embraced this and gained an understanding of the importance of creating an environment that is enjoyable to be in, environmentally friendly, spacious, light filled and sometimes even open to the sky. It is now time for the Department Store retailers to look outside the box and to be a little more flexible and brave so that they can create the impression that they are giving something back to the shopper other than just cheap prices, or expensive prices for that matter. Lets face it a retail rent will always be a lot higher than a warehouse in an industrial estate or in a third world country. Encourage shoppers to come to your stores or indeed you may find it difficult to remain a player in the retail world.

PPP’s exist to provide the Private Partners with a Profit and the Public with infrastructure they presumably can not afford (Footing the bill for public-private partnerships, August 15). A fully documented response to a fully defined brief that can then be tendered for a fixed lump sum in the traditional manner has to be the cheapest way of achieving a defined outcome. For this method though the Government has to have the money in the bank or the means of borrowing the money. Words like “sharing the risk” are simply an excuse for not taking the time to establish a proper brief in the first place or being prepared or able to actually put the money on the table and pay for Independent Consultants or the Public Service to prepare adequate documentation for a competitive tender. If there is no public money available for such projects then we have to expect that the projects will cost more as we factor in the profit and financing costs for the Private Partners. If the Projects do not cost more we then have to expect that someone is doing something for below cost or for no profit and if that is the case we have to also expect something to give. That may mean the collapse of a Contractor or a claim on the Public coffers to reverse the situation.

There are valid reasons for adopting different delivery methods but we must all understand at the outset that there is no such thing as a free lunch and that no system will provide anything for nothing.

In Sydney and in Melbourne we are seeing massive vacancies in Retail Shopping strips like Oxford Street – Paddington and Bridge Road – Richmond. Vacancies up to 22% have been reported in Oxford Street alone. Yesterday I was traveling on a tram down Bridge Road in Richmond (Melbourne). I was staggered to see the number of shops that were either empty, for lease or had signs advertising “Closing Down Sale”. I was so taken by the number that I started counting them. From when I started counting, I counted 19 on one side of the street alone.

Whilst I always try to be positive and to look for opportunities in this time of rapid change in the Retail Industry it certainly is concerning when we are told “how well the Australian Economy is performing”!!

BUT not everyone is going backwards! Apple is growing! Zara is expanding! Is it the “e-shopping revolution” or is there something that all these failed retailers are doing wrong?

You don’t have to look far to see that many of these shops and a lot of those that haven’t yet failed all basically look the same, have very similar products or services and have very little to differentiate them from the shop next door.  In Bridge Road, predominantly an “Outlet Strip”, the retailers are forced to compete on the basis of price. This creates a downward spiral and, when you factor in the e-retailer who doesn’t have the same overheads, is a battle that can not be won.

The exciting challenge facing Retailers and their designers is to create an environment and in store experience that not only presents unique products in such a way that they can’t be resisted but that also creates an experience that leaves the shopper wanting to return for more.

• The first issue is that Woolworth’s have expressed a desire to increase their “home brand” offerings in store as Coles have done. This I believe is clearly a mistake from the Consumer’s point of view although, in the short term at least, I am sure it has been one of the contributing factors that has lead to Coles’ improved financial performance. I am sensing though that the resultant “choice reduction” is leading to an increased discontent amongst shoppers. Whilst I have some empathy with the concerns that an increase in home brands is likely to result in lower prices being paid to suppliers and that it is likely that more products will be sourced off shore as a result. My major concern though is that Consumer’s choice will be eroded and that there will be less transparency and control over what we are buying and where it is coming from. The choices that I am offered at our local 1000 sq m IGA far surpass what is on offer at our local 3,500 sq m Coles. How can this be??
• The second issue relates to the less-than-impressive performance recently reported for Dick Smith Electronics. I must say I have been wondering for some time what Dick Smith is really trying to be. It is no longer an Electronics store! I believe that it has lost direction. Is it a Computer Retailer? Is it an Electrical Store? Is it a phone shop? Is it a Camera Shop? Where is the point of difference?

I urge Woolworths to continue to be true to their reputation of being a leader not a follower.

I agree whole heartily with the sentiments of this blog. There is nothing more frustrating than an individual who displays arrogance, a reluctance to be innovative and a belief that they always know best. There is no better, or worse, example of this trait than from the “old school” retailer. However those retailers and Retail Developers who do not display this trait are the ones that continue to succeed. Whilst it is critical that one learns from their experiences in the past and that one doesn’t just do something different for the sake of being different, without justification, one must always be open to new ideas or ultimately you will not progress.

We all must change to enable our businesses to evolve with the times.

Reports such as this and news that work has commenced on Pacific Development’s latest $385m retail development in Adelaide’s Rundel Mall are welcome positive signs amid the current spate of pessimistic headlines.