Retail runs a new race

COLES Myer’s sensationally bad year and the collapse of HarrisScarfe may represent more than just a tough retail market in Australia.

Is this the end of department stores or is the market just readjusting to allow space for a new specialsed player?

The launch of Megamart by Myer in the city this year signals a change in the way Australians are shopping and is a real threat to department stores and speciality outlets.

A strong housing sector, propped up by the first home owners’ grant, is driving consumers to buy furniture and electrical goods.

However, these consumers are not flocking to department stores to furnish their homes, they’re shopping at warehouse-style superstores where buying power can deliver savings.

Marketing analysts claim a number of factors are at work when a consumer is choosing a product, including brand, especially for white and electrical goods, service and price.

Marketing Centre’s Michael Smith said department stores developed as a one-stop alternative to the high street specialty stores, such as the draper and haberdasher.

The first regional shopping centres followed the department stores in the city. Then came the discount stores – K Mart, Target and Big W.

The discount stores have gained the trust of consumers and now exactly the same product is available across a number of different outlets, including supermarkets, department stores and the traditional discount outlets.

“When people have multiple choices, all of which they trust, they are more interested in cost and less interested in service,” Mr Smith said.

“There is the emergence of a new sector in exactly the same way Big W and K Mart developed.

“This coincides with a period of economic decline, where buyers are more price sensitive so they delay purchases … and shop in places where they can get better price offerings.”

Megamart, Myer’s answer to Harvey Nor-man, Freedom and Ikea are eroding Myer’s share of the market.

“The department stores need to defend themselves against the Harvey Norman format, which they are particularly sensitive to, and Harvey Norman has done very well,” Mr Smith said.

Instead of updating the existing Myer city store in Perth, Myer has invested in the Megamart by Myer, but they’ve got a lot of ground to cover to catch Harvey Norman.

Paterson Ord Minnett Head of Research Greg Galton said a soft economy and consumer uncertainty has put pressure on large household purchases.

“Consumer discresionaries have to be under pressure. When you’re buying a fridge, or furniture items – non consumables – you buy when you’re feeling confident and know you’re going to have a job,” Mr Galton said. “I guess people in uncertain times are much more focused on price or delaying buying at all.

“We’ve come out of a eight-year bull market with a very strong economy that weathered the Asian financial crisis and now it’s set for slowing growth and recession, which we haven’t seen since the 90s.”

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