“Department stores in their current form have had their day,” explained Deakin University retail academic Steve Ogden. “The kudos attached to the department store shopping experience for consumers has slipped.”
This “slip” ultimately reflects a change in consumer behaviour, caused largely by advances in technology, according to Adobe Digital Insights.
How can retailers address—and evolve with—this tech-driven customer journey? The paths to success vary, both online to offline and offline to online.
Online Leads To Offline
British retailer Debenhams provides an example of how early technology adoption leads to an expansion as a bricks-and-mortar outfit.
After developing a global e-commerce offering based on its U.K.-based department store, Debenhams discovered a significant fan base in Australia. The company leapt at the opportunity to lay bricks Down Under. Its first Australian store opened in the Melbourne CBD in October.
Debenhams believes its “small-format layout” of 3,600 square metres across two storeys represents “a notable shift away from the traditional department store format in Australia.”
“The store opening is an evolution of our success in the Australian market,” according to Graham Dean, managing director of Debenhams Australia. “Online sales to Australia are the largest outside of the United Kingdom.”
It would appear the potential for Debenhams to engage a large chunk of the Australian audience is quite real, with Aussies generally preferring to shop in an actual store. Granted, their appetite for omnichannel experiences is growing—they spent $23.4 billion on online retail in the 12 months to September—yet this figure is only the equivalent of 7.6% of traditional brick-and-mortar retail sales, according to the National Australia Bank’s Online Retail Sales Index (PDF).
Offline Leads To Online
The success of Debenhams and the Dec. 5 launch of e-retail behemoth Amazon Marketplace in Australia is putting serious pressure on the country’s two domestic department store darlings, Myer and David Jones.
Myer, whose retail journey has been in the public eye for decades, is stepping up to the plate. For many years, its primary concern was competing against David Jones, so it was easy enough to rest on its digital laurels. But following the announcement of Amazon’s launch in Australia last year, Myer responded with a change in strategy two years into its five-year digital transformation plan.
The result: The December beta launch of online marketplace Myer Market, an initiative that appears similar both in title and business model to Amazon Marketplace. However, its differentiating factor will be its allegiance to higher-end brands on its e-commerce platform.
“Customers are increasingly shopping online, and traffic to shopping centres and physical stores is declining,” Myer boss Richard Umbers told Business Insider last month. “[We have] signalled a heightened focus on the growth of our very successful omnichannel business as well as experiential retail to create inspiring destinations.”
These omnichannel efforts will afford Myer the chance to capitalise on data and meaningfully understand its customers’ buying habits.
The challenge with being an evolving department giant in Australia, however, is that overall success still depends on the performance of the physical store—at least for now. In Myer’s case, sales have been down.
Online sales offer a glimmer of hope, though it will take time. “Myer’s online business continues to deliver strong growth, but it is not yet of sufficient scale to compensate for the subdued performance of some stores,” Umberto stated in a press release. “We take confidence from this performance as indicating that we are investing in the right areas.”