Department stores focus on service in battle against online and outlets

Tuesday, 24 December 2019

Department stores are a long way from their glory days but the surviving stores are reinventing themselves for the 21st Century.

Department stores around the world are struggling, retail expert Juanita Neville-Te Rito says.

In the glory days of department stores, in the first half of the 20th century, it was all about the experience, she says.

'I grew up in Australia and my nanna would take me into David Jones once every school holidays and I still have an incredible memory of the dude who was playing the grand piano.'

Staff would know her grandmother by name, even though she lived an hour away.

'It was the bastion of service and curation and it was something special.'

She says department stores had been slow to adapt to online retail and discount stores.

And the giants of retail are facing strong headwinds from online shopping, there's no doubt about that.

About 8 per cent of shopping is done now done over the internet, and coupled with the entry of stand-alone luxury stores and aggressive discounting from both homegrown and international foes, the traditional department store is battling to hold ground with consumers.

* David Jones to 'aggressively' close stores as profit plunges

* Auckland's first David Jones will face 'challenging' retail market, expert says

* Giving the shoppers what they want: David Jones opens in Wellington

* David Jones, what Kirkcaldie & Stains wished it could be**

In the US, some have already succumbed. Barneys, the famous New York retailer, filed for bankruptcy protection in August before closing stores. Sears filed for bankruptcy in 2018.

Customer service and little bit of something special was what set the now-closed Kirkcaldie & Stains apart in a crowded retail pack.

But the numbers also show the big retailers still appeal to Kiwis across the spectrum, from discount retailer The Warehouse to David Jones, department stores have performed better than most other retail categories this year.

Department stores had their second largest increase in sales in the September quarter, up 3.5 per cent, according to Stats NZ.

In the quarter, New Zealanders spent $56 million more in department stores than the previous three months, significantly behind the increase in spending on electronics, at $83m but ahead of spending increases at supermarkets ($51m) and restaurants ($35m).

However, if you look a bit further back to year-on-year spending the data paints less of a rosy picture; department store spending was down $30m than the September quarter last year.

The key for survival, Neville-Te Rito says, is high-end department stores offering an experience and service that surpasses what customers can find elsewhere.

The fallen

Neville Wellbourn, the former Kirks' doorman, continued as doorman for David Jones.

That customer service and little bit of something special was what set the now-closed Kirkcaldie & Stains apart in a crowded retail pack.

Where The Warehouse had settled on an 'everyday low prices' discount strategy, and Farmers is firmly entrenched in more of an upmarket model, with its new format store in Auckland boasting a men's grooming island and a mini lego store typified by Farmers' chief executive David Collins as 'an honest, true department store'.

But there is no doorman to smooth your retail journey. A doorman in top hat, gloves and tails famously welcomed customers to New Zealand's oldest department store.

Wellingtonian Jo Glantschnig says walking into the former 'grand dame of retail', Kirkaldie & Stains, was an experience in of itself.

Retail expert Juanita Neville-Te Rito says department stores have been slow to adapt to changes in the retail environment.

'There was just something special about the store,' Glantschnig says.

The staff had an old-world style of service, personalised but a little formal and always close by if you needed help, she says.

But after 153 years, the store, also known as Kirks, was sold to Australian retailer David Jones.

Kirkcaldie & Stains' closed in January, 2016, before the first David Jones stored opened in its place later that year after an estimated $20 million overhaul.

But for Glantschnig, David Jones is just not the same.

Anna Reynolds bought her first bra at Smith and Caughey's on Auckland's Queen Street in the 1960s. For the last 20 years, she has been the one fitting bras in the heritage department store.

It feels sparse and impersonal, she says.

'At Kirks there were always extra special details to your experience. But when I look at David Jones, it's just like a high-end big box store,' she says.

The stayers

Still retaining its original name and presence in Auckland is Smith & Caughey.

Anna Reynolds had her first bra fitting at Smith & Caughey's in central Auckland in the 1960s.

The Ballantynes annual sale continued to be hugely popular.

She's now the one that fits the bras at the historic department store.

Over almost two decades Reynolds has seen different trends come and go but the key to Smith & Caughey's success has remained the same.

'Within Smith & Caughey's, people expect exceptional service. If they go to Farmers, people don't mind so much if the service isn't that good but they mind if it is bad here,' she says.

'The expectation is much greater.'

David Jones chief executive Ian Moir says there is a strong future in department stores both here in New Zealand.

High-end department stores in New Zealand have experienced mixed fortunes over the last decade.

Kirkcaldie & Stains is gone and Arthur Barnett in Dunedin was taken over by H & J Smith.

Smith & Caugheys, Ballantynes in Christchurch and Thomas's in Blenheim are all holding on.

David Jones is betting on an appetite for luxury with it's new Auckland department store.

Neville-Te Rito says she wonders whether the older names in department stores, like Smith & Caughey, will be agile enough to survive the pressure from the larger competitors.

'If you look at the Newmarket store compared to it's city store, its not great. It's really a poor execution of the womens' section. The only place where they have amplified experience is in makeup but now they are competing against Mecca.'

Delivering on exclusivity and experience was where department stores could build their success, she says.

Tim Thomas and Hamish Thomas are the latest generation of the Thomas family to run Thomas's department store in Marlborough.

'There is a special talent pool that sits in department stores and that is visual merchandising. You walk into a department store and it gives you that sense of wow,' she says.

Ballantynes, in Christchurch, is an outlier and has done well to keep up with local demands, Neville-Te Rito says.

The company surveyed customers about what they wanted to find instore and were quick to change to market demands, she says.

'So it's not about whether there is room for a premium department store but what does a premium department store mean and are they willing to change their behaviour to deliver that.'

The outsider

Australian retail giant David Jones has just opened a new, two-level store inside Auckland's newly expanded Westfield Mall.

It's growing presence in New Zealand flies in the face of the dire predictions from retail experts across the Tasman, who said both it and Myer were in a 'death spiral' earlier in 2019.

These predictions didn't come from nowhere, with soft retail performance for the retail giants and a write-down of the David Jones business of a stonking $437 million falling in the months prior.

But David Jones chief executive Ian Moir says despite the company's recent financial issues and closing of stores, there is a strong future in department stores in New Zealand and across the ditch.

Moir is betting on the enduring appeal of the department store format; multiple products all under one roof.

Moir says Auckland's David Jones has opened at the right time and at the right location, with services that will appeal to customers looking for luxury.

'We're not trying to be all things to all people. We understand our customer and are clear on what they are looking for.'

The family shop

In Marlborough, Thomas' celebrated 107 years in business.

The department store is still in family hands.

Tim Thomas, who runs the business with his brother Hamish, says the beauty of a department store is the 'shops within shops', offering a variety of products in the one store.

'I think, for a lot of our customers, particularly in Marlborough, we have been here a long time. We have built up a lot of loyalty over that time,' he says.

While the Thomas's markets itself as a luxury destination, the size of region and potential customer pool meant the product range included high and mid range products, Thomas says.

The store stocked Karen Walker through to Icebreaker, Super Dry and Huffer.

Thomas believes changes to online shopping rules and GST could even out the playing field for department stores, particularly in the regions.

But he says even being small in size has been good for this business — Marlborough also means many residents want to support their local business, he says.

'There has been World Wars, there has been depression, the global financial crisis, the rise of internet shopping. There have been a lot of things and we have been able to adapt and change and that is why we are still here.'

Correction: a previous version of this story listed $56m in department stores as total spending. The figures were spending increases in comparison to the previous quarter.