Debenham’s to Close + the Demise of the Department Store

The Department store used to be the pinnacle of retail, a place to seek inspiration. They gave access to brands not otherwise available across general retail. They had edited departments with a point of view and provided an important service as a one stop shop for fashion and homewares as their main drawcards.

However, the impact globalisation has had in widening our access to online stores. Plus, the level of technology adoption that we have reached in Australia with peak saturation of smart phones at 89% of the population in 2018, means, the world is now at everyone’s fingertips. We no longer need to head into our local department store for ideas on what to wear to our next event or how to style our home. Our Instagram and Pinterest feeds do this for us. And we’re only a few clicks away from acquiring the exact items we’re viewing in our social media feeds from most parts of the globe.

To compound this effect, department stores have been the last in line of traditional bricks and mortar retailers to put together their online retail offers. This has meant that younger generations have not been exposed to their brand across their digital platforms.

We can see the impact of these changes in the data from the Roy Morgan data to Jun 2019. It shows a decline in shopping at department stores from 5 years ago to today (Fig.1). Each generation has dropped in their figures, with the exception of Gen Z, who 5 years ago were still at school with the average age of 15. Gen Z has hence increased over this time frame as they come into paid work.

The proportion of each generation who shops department stores is another interesting factor (Fig.2). The second graph shows total population by generation against department store shopping in the last 4 weeks. Even with the increase in Gen Z’s shopping at department stores their penetration is lower than Gen’s Y & X and will most likely never increase to their levels

With this huge shift in how we shop and how we seek inspiration it’s not hard to see why our department stores are in the trouble that they are. Not to mention the new entrant Debenhams who 3 years ago thought they would roll out 10 stores across Australia, and now will have their single store close by early next year.

Debenhams original point of view was to entice shoppers to their St Collins Lane store with a prestigious shopping experience and exclusive UK brands. But in reality, they have a middle market offering that isn’t meeting the needs of our globally woke market. Similar to our local department stores, there is no longer a calling to visit their stores to be inspired.

Debenhams have obviously pointed to the external as the main driver for the decision to cease the franchise agreement – the UK Debenhams move to close 22 stores and go into administration. But reports show sales have been slow for some time at the Melbourne store, and the lack of expansion given their original rollout plans cements the lack of success for the local experiment.

Another factor to take into consideration would have to be the parent company Greenlit Brands (previously Pepkor) who own a group of vastly different retailers sitting at the lower end of the market including Best & Less, Harris Scarfe and Fantastic Furniture. Without the expertise in higher end retail, the reliance on price and value which for traditional retailers has been an easy lever to success is not actually what the department store customer is driven by. Without inspiration aka creating an elevated store experience there is no excitement or loyalty for the brand. I doubt that a company whose expertise in the value end of the market were the right choice for establishing a new department store in our already difficult market.

Unfortunately for Debenhams and their Melbourne team the department store is set to close early in the new year. And we wait with baited breath for the impact the changing face of retail will continue to have on our local department stores Myer & David Jones.