The outlook for department stores in Australia is poor, with current value sales and outlet numbers projected to decline throughout the forecast period. This channel is particularly exposed to several trends causing significant disruption across the wider retailing market.
International experience shows reinvention is possible for department stores, and Australian operators are attempting to absorb the lessons of overseas counterparts. For example, taking inspiration from the UK-based Marks & Spencer, during the review period David Jones began opening new gourmet-oriented “food halls” in its flagship stores to increase footfall.
Myer and David Jones have long employed local celebrities as “store mascots” – essentially brand ambassadors – and this area has traditionally been a notable point of competition between the two chains. However, in 2018 Myer announced it was retiring the high-profile “Face of Myer” role.
Myer remained the leading chain in department stores in value terms in 2018. While its value share was unchanged on 2017, this was an improvement on the substantial declines recorded earlier in the review period.
As they attempt to create new points of difference from direct challengers and resist competition from other types of retailers, securing exclusive partnerships with well-known brands has recently become a priority for leading department stores. While 2018 saw Myer sign an agreement with luxury skincare brand Aesop, this was eclipsed by David Jones’s announcement of exclusive deals with global fashion powerhouses Louis Vuitton, Chanel and Gucci.
With Amazon now present in Australia, the pressure on department stores to improve their online offers will only intensify over the forecast period. Moreover, efforts by leading chains to cultivate more exclusive assortments could be undermined by the fact that Amazon now has strong global relationships with several high-end brand names.
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