Former Myer chief executive Bernie Brookes says department stores need to “stand for something” to thrive in Australia’s increasingly competitive retail sector.
Speaking to SmartCompany on the sidelines of a CXI Research Group seminar in Melbourne today, the retail veteran said Myer and David Jones have lost sight of what make them unique.
“At the moment they’re all fighting in the same space, but none of them have a point of difference,” he says.
“Finish the sentence: David Jones is —
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“… is it a premium department store? But they sell private labels now.”
Brookes, who served as Myer’s chief executive from 2006-2015, recently returned to Australia after spending several years working as the boss of South African retailer Edcon.
He’s taken up a new role as an adjunct industry fellow at Swinburne University of Technology, providing him with a platform to say exactly what he thinks about the state of Australian retail.
“You still walk into department stores and discount department stores … [in Australia] and they’re as boring as batshit, they really are,” he told attendees at the industry gathering.
Australia’s department stores have come under unprecedented pressure in recent years, with leaders such as Myer, David Jones and Wesfarmers-owned Target reporting declining profits.
Most recently Myer, which listed on the ASX under Brookes at $4.10 a share in 2009, posted a $486 million full-year loss, while earnings fell 48% to $55.4 million. Myer shares currently trade at just 56 cents.
Waning customer interest, high rents and fast-fashion competitors have been commonly cited by analysts as issues plaguing the businesses.
Brookes believes local retailers need to take a page out of the books of international department stores, such as Macy’s and Selfridges, which he regards as leaders in the realm of experiential retail.
Not the first disruption for retail
Myer’s woes reflect a broader struggle in the Australian retail sector, as traders small and large grapple with subdued consumer demand, an influx of international competitors such as H&M, Zara and Uniqlo, as well as the disruption of online shopping.
Brookes said retailers are probably about halfway through the cycle of digital disruption that’s already devastated operators in other industries such as the media, but cautioned business owners not to dive blindly into emerging technology.
“The problem is digital is the same in newspapers as it is in digital,” he said.
“As sales move from bricks-and-mortar in retail to online the growth in online is not compensating for the decreasing sales in bricks-and-mortar retail.”
Brookes is of the view the growth story currently playing out in the world of e-commerce is bound to slow down, and Australian retailers could probably expect to find online settle at somewhere between 5-8% of total turnover.
“People say the future is online shopping, but the future is still bricks-and-mortar, [while] being agnostic to online shopping.”
Retailers looking for guidance for the future can look to the past for lessons, Brookes said, particularly to past instances of disruption, such as the introduction of barcodes or self-service supermarket shopping.
“Continue to invest in [omnichannel] but don’t overinvest,” he advised.
“We see retailers muck things up because they forget the basics of bricks-and-mortar.”
“You still have to compete on price, you have to build loyalty … you have to manage your employees and costs as well.”
For Myer, which earlier this year hired UK department store veteran John King to lead a new turnaround plan for its business, Brookes says it will be paramount for the business to understand who it is actually serving in the modern world.
“I’ve met him [King], he’s got the right strategy, I hope the market gives him the time to introduce that strategy,” Brookes says.