A business that started in 1863 and finally falters in 2015 – that’s 152 years – can be seen as a success story or a declining failure, depending on your point of view. Kirkcaldie & Stains in Wellington is such a story. An icon of Wellington retail history, located in a premium CBD retail location as Wellington’s premium department store. Most Wellington families, and most visitors to Wellington, will remember their experience of this department store. So what went wrong?
Kirkcaldie & Stains was never reinvented
What does reinvention mean? Well, it hadn’t moved with the times. It was always of the same physical image that it had been a century ago.We discussed this earlier last year; commenting that the store had dreadfully low ceilings and was claustrophobic. Had the retailer refurbished the store 20 years ago and bought its retail statement into the 21st century, it could well have still been trading profitably today. Recognising change and adapting to that change is essential for all retailers, and Kirks is no different.
Closure was inevitable given sales
Does this mean the closure of an iconic store and a final farewell? Of course, and there will be customers together with past and present employees who will be loath to bid it farewell, as they were many years ago when James Smith closed. However, closure was inevitable given the sales and profit performance. It’s been a long time since the store was making $40 million a year in sales, and the current sales of less than $35 million (including concessions) are simply not enough in this location given the overheads.
Closure and reopening as a David Jones is the best possible result. In bidding farewell to an iconic brand, most Wellingtonians will be delighted with the brand replacement.
What David Jones will bring
David Jones is owned by the South African company Woolworths Holdings who also own Witchery, Country Road and Trenery (as opposed to Woolworths Australia who own progressive New Zealand). David Jones is a fresh international department store for New Zealand. It comes with a high level of retail skill out of its Australian experience and we would expect that it will bring significant fanfare to its New Zealand statement. This will include both a new retail image and layout, together with a major range of merchandise as per traditional department store offerings.
So is it considered a sound entry for both retail and property reasons? Absolutely. We have commented previously as to the lack of international branded department stores in this country. It was 20 years ago when David Jones looked hard at occupying department store space in Auckland, but the goal was never achieved.
The opportunity in Wellington must have been seen as a no-brainer. How often is a key site offered at a cheap entry rate? That’s what it was. Kirks would have been keen to exit and the challenge would have been to find a quality replacement, to satisfy lease conditions.
David Jones would have answered all the questions and is likely to meet the building owner’s requirements (Sir Bob Jones still needs to indicate that he approves of the transaction). It’s not easy opening a department store. They are seen as “anchors” and the cost of operating and running such a store is a major both operationally and financially. Given that effort, one would assume that they will be here for the long haul.
David Jones will be eyeing Auckland
So what next in New Zealand for David Jones? Regardless of comments from the executive, it is very apparent that the company will have eyed up Auckland as a next step. Property owners in Auckland who have the vision and the space availability in the right location will be licking their lips at the possibility of acquiring this key brand. A long lease with a quality international brand can add volumes to any lease and building valuation. Further, David Jones will want exposure to New Zealand’s major city with a large population.
The year of the department stores
The move is hot on the heels of H&J Smith’s takeover of the Arthur Barnett store in Dunedin, and the news that Farmers will shift into the old Whitcoulls premises in Auckland’s Queen St. 2015 may be remembered as “The year of the department stores."
So let’s get ready for a major retail statement in 2016. David Jones are coming and they will bring a much needed shot in the arm, not only for Wellington retailing but the country as a whole.
Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils.
This post originally appeared on RCG's blog.