Is this the beginning of the end for Kiwi-owned department stores?

  • News
  • June 29, 2015
  • Bridget Grace
Is this the beginning of the end for Kiwi-owned department stores?

Last month historic Dunedin store Arthur Barnett announced it had been sold to competitor H & J Smith, after 112 years of operation. 

Weeks later, 152-year-old Wellington store Kirkcaldie & Stains revealed it will be closing in a takeover by South African-owned retailer David Jones.

It may appear that things do not bode well for independent New Zealand department stores. However, RCG executive chairman Paul Keane says recent changes reflect a loss of consumer interest in particular brands, rather than changes in the market as a whole.

He says for both brands, sales were declining, and the companies were not able to entice repeat customers back into the store.

"People were just going off them, they didn't have any more to offer, other than a traditional brand."

Keane highlights that both Arthur Barnett and Kirks had only singular remote stores, so they lacked the infrastructure to compete with larger brands. He says the Dunedin location of Arthur Barnett also proved a difficulty, as being away from a major city meant fewer people and less spending power.

In the case of Kirkcaldie & Stains, Keane says a lack of renovations hampered the store, with its low ceiling and confined environment: "They never moved beyond what they had."

Retail New Zealand CEO Mark Johnston agrees the brand was floundering.

"It has been well-documented that Kirks has struggled over recent years, in terms of its level of sales but also investment in the business."

Kirkcaldie & Stains has not posted a profit in seven years.

Johnston says David Jones brings the buying power of a much bigger business, which Kirks "just can't compete with".

How retailers adapt, anticipate the need for change and look forward to where their customers are heading is vital, he says.

"You've got some brands who've adapted really well and you've got some perhaps older, more traditional brands that maybe haven't been quite as quick to get to grips with the changing marketplace."

Auckland-based Smith & Caughey's was founded in 1808, but says it is unconcerned about the recent closures.

CFO Jason Copus says the company has "every confidence" and is pleased with its current performance: "We've very happy with how the retail business is trading."

He says Smith & Caughey's is looking to expand and enhance its current offering, and is well advanced in planning.

In Christchurch, heritage department store Ballantynes remains one of the few permanent retailers in the city's CBD. CEO Maria O'Halloran told NZ Retail magazine in April that she was comfortable with how Ballantynes was tracking.

The outlook for New Zealand's heritage stores seems to be mixed, then.

RCG executive chairman Paul Keane says individual department stores must be finding it very hard to continue to trade profitably. 

"I don't think it's a demise across the board, but certainly the finger might be on the trigger of long-term longevity for some of those individual department stores."

Retail New Zealand CEO Mark Johnston says adapting to the changing market and anticipating customer demands is the way to move forward.

"I don't think just because Kirks is going to disappear... it's the end for those long-established brands at all."

Paymark reported in March that spending at department stores was up 6.2 percent year on year. Johnson says retail sales were trending up across most categories in the first quarter.

David Jones is likely to invest 15-20 million dollars in the former Kirkcaldie & Stains store, he says.

"So, I think there's a lot of development going on with international brands entering the New Zealand market, and I think that's definitely a vote of confidence in the New Zealand retail sector. And it's going to bring new investment and new brands that we don't necessarily see here currently."

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