CAROLYN CUMMINS July 21, 2012
Shops struggle ... department stores need to update to survive. Photo: Getty Images
THE decision by Myer to shed 100 staff and David Jones's move to offer in-store style advisers indicates how department stores are having to change to meet a challenging environment.
Like many sectors, retailing is undergoing a simultaneous cultural and structural change to the way it operates.
Consumers are cautious, while the internet is carving its way through shopping habits.
As a result, the stores must adapt or perish. But experts warn the speed of change is not fast enough.
While the death of department stores is not imminent, they are certainly shrinking. As centres are redeveloped the footprints offered to department stores are going to get smaller.
Space will be used instead for innovations such as mega technology sites or larger food courts.
The publisher of Shopping Centre News magazine, Michael Lloyd, said while the landlords of the large shopping centres had maintained their innovation and expansion, the department stores continued to be in the doldrums.
While he said there was still huge potential for speciality and niche shops to continue growing their businesses, such as the Smiggle stationery and T2 tea chains, it was not being matched by some of the big chains and department stores, which he said had lost their way in developing product categories.
''Many retailers are rising to the current challenges as are the major centre owners and managers; in these tough times the major centres are very definitely holding their own,'' he said.
''But our department stores have lost the plot. They are still living in the past and they seem to be oblivious of the changing demands of the consumer.''
Mr Lloyd said this was because service levels were ''atrocious, product display is amateurish and anachronistic and all they seem to be focusing on is cutting costs''.
''If they do not change dramatically … they will be irrelevant,'' he said.
He said the fittest didn't simply survive, they picked up the spoils left by the fallen and actually strengthened their position.
''This is what's happening in the major centres; they have the facilities, the infrastructure, the convenience, the cutting-edge retail operations along with the expertise to manage it all,'' he said.
''I believe that the large-centre owners continue to represent the best case for investment in the property sector, as they continue to show consistent and sustained long-term growth.''
An economist with Paterson Securities, Tony Farnham, said retail property groups remained a ''no-go zone''.
He said the slippage in a retailer's profit performance must continue to squeeze the ability of a landlord to instigate rent increases every time the lease was renewed.
''There have been multiple reports alluding to retailer groups' disquiet about rent increases as trading conditions remain tough,'' he said.
''As we have noted for some time, something has to give here.''