How the decline of the department store could shape the future of shopping

analysis How the decline of department stores could shape the future of shopping In his 1949 play Death of a Salesman, Arthur Miller succinctly described the life of a door-to-door salesman: "He's a man way out there in the blue, riding on a smile and a shoeshine. And when they start not smiling back—that's an earthquake." There was a time when Australian households would look forward to a visit from the milkman, Avon Lady or a red-tie sporting Mr Jolly, which was the name adopted by all door-to-door salesmen of Electrolux products. And then, sometime in the middle of last century, we started not smiling back. Instead, we walked out the front door of our suburban homes, jumped in our brand new cars and drove to one of the proliferating number of Australian department stores. But if department stores helped kill door-to-door sales, today it is department stores feeling the knife from online retailing. Now that knock on the door is far more likely to be an Amazon or other courier. David Jones is only the latest in a string of such disappearances, from Mark Foy's to Winns to Grace Brothers. Meanwhile, rising interest rates, oil price shocks and declining consumer sentiment all point to difficult times ahead for Australian retailers. Retail headwinds blowing a gale The early days of the COVID-19 pandemic saw dark predictions of an economic recession of a magnitude not seen since the Great Depression, prompting a sharp dive in Australians' perceptions of their personal finances, which were rescued by billions of dollars of government stimulus. But consumer sentiment about personal finances has sunk back to those dark days, according to a Reserve Bank measure that averages two private sector surveys. After a brief rally in spirits last year, five interest rate hikes and falling home values have knocked the stuffing out of consumer sentiment again. While spending on basics, like food, is holding up, more discretionary retailing is taking a hit, the RBA noted recently. "Contacts generally expect that current softer conditions for consumer discretionary spending will continue into 2027," it predicts. David Jones in a league of its own But according Craig Woolford, a retail analyst at investment research house MST Marquee, the troubles dogging David Jones pre-date this latest economic squeeze. "The David Jones administration is not necessarily a reflection of the broader retail backdrop," Woolford told the ABC's The Business program this week. "David Jones had high levels of debt and shrinking sales, which is obviously a nasty combination." Loading...Woolford says the picture is mixed for other Australian retailers. "We're seeing great sales trends in health and beauty. We see very weak sales trends in categories like footwear or liquor," he says. "Broadly, it's slowing. But overall, retail sales trends have held up better than feared." A long goodbye to department stores Still, the trend away from department store shopping is clear. "The department stores are and were the anchors of great shopping centres and have lost that status over the last 10, 20 years," Woolford says. Bureau of Statistics data shows the share of retail sales run through tills in department stores has fallen steadily since the early 1980s, from 14 per cent to about 5 per cent today. Increasingly, discount stores such as Kmart, Target and Big W have become the anchor tenants in suburban shopping malls. "Bricks and mortar retail isn't dying, but it is changing," SGS Economics and Planning associate and partner Yilong Shi says. "Luxury brands like Louis Vuitton and Prada now run their own stores for the affluent shoppers who once went to David Jones for aspirational purchases. For younger shoppers, it's make-up, athleisure and tech brands." Is the future of retail online? The rapid rise of foreign online retailers like Amazon have clearly posed a challenge for Australian stores, physically and online. Australian online spending has risen steeply and accounts for about 13 per cent of all retail spending today, according to the Bureau of Statistics. While a rapid rise, this is still considerably lower than online sales penetration in both the US and UK, which make up 16 per cent and 27 per cent respectively of total retail sales in those countries, according to the ABS. But it will be some time yet before online retailing overtakes in-store purchases, according to Macquarie University Professor and Australian retail history author Matthew Bailey. "It will be a while. Online is convenient but can also be inconvenient," he says. "It's also not social. People are social beings — they like being around other people. Markets have historically been at the heart of our cities." Get ready for a new type of shopping mall Bailey and Shi agree shopping centres will need to adapt to fill the hole left by department stores and to meet the twin challenges of cautious consumers and online shopping. Shi says shopping malls by 2050 will likely be more about lifestyle than pure retail. "The physical experience needs to be strong enough, otherwise people just shop on their devices," he says. "Entertainment, dining, sense of community and wellness/exercise are what people spend their time on, instead of walking up and down department store aisles." "I think those activities can be better for people's wellbeing and social cohesion than traditional 'retail therapy', and both brands and governments have an opportunity to make the most of that." LoadingTime for a main-street comeback? Changing retail spending habits are already reshaping Australian cities, including both industrial and suburban spaces, according to Shi. "Delivery has had its own effect. Online shopping has created enormous demand for freight and distribution, which has driven big investment in well-connected industrial land," he says. "Main streets now have a great opportunity to be competitive, provided they get their mix right. "Small businesses also have new opportunities. Without the department store acting as gatekeeper over what gets sold, retail space is more open to different businesses and products, as long as they can pay the lease." Bailey says the only certainty in retail in the years to come will be more change. "A dystopian view would see shopping centres turned into enormous, gated, private cities," he says. "More optimistically, we'll embrace democratic spaces that thrive on human interaction and foster entrepreneurial commercial activity. "Governments have a big role to play here. What would we like our cities to look like?"