Australia / Press Releases
Myer & David Jones To Prioritise Private Labels
by Kim Do
Mar 26 2019

The Department Stores industry’s revenue is expected to fall at an annualised 0.2% over the five years through 2018-19, to $18.8 billion. This is expected to be due to uncertain economic conditions, including a cooling housing market, low wage growth and intensifying external online competition.

IBISWorld forecasts Myer and David Jones to focus on their respective private-label brands in the coming years, hoping to boost their appeal to shoppers and compete with specialty stores and international fast-fashion giants.

 

The struggles of the Department Stores industry

The Department Stores industry is highly concentrated, with the top four players expected to account for almost 95% of industry revenue.

As market share concentration is high, industry competition is intense. Two types of retailers operate in the industry: up-market department stores such as Myer and David Jones, and mid-market and discount department stores such as Target, Kmart and Big W.

‘Department stores tend to compete with one another based on their market positioning. Myer and David Jones are two of Australia’s most iconic fashion department stores. However, both have been trying to reshape their businesses over the past five years, as they have fallen out of favour with shoppers. Consumers have increasingly shifted to online shopping, where there is unprecedented choice and lower prices. Department stores have also had to compete with specialty stores and international fast-fashion giants such as Zara and Uniqlo,” said IBISWorld Senior Industry Analyst, Kim Do.

‘Myer currently holds an estimated 16.1% market share in the Department Stores industry, while David Jones falls behind at 11.7%. Despite a smaller market share, David Jones has outperformed Myer and the overall Department Stores industry in revenue growth over the past five years.’ 

 

Department Store

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

Myer
(Year end July)

$3.143

$3.195

$3.246

$3.202

$3.101

$3.020*

David Jones

(Year end December)

$1.890

$1.884

$2.207

$2.214

$2.212

$2.194*

* Estimate

 

A shift towards private-label brands

One of the key industry changes over the next five years, according to IBISWorld, will be both department stores’ focus on private-label products.

‘In 2014, after its takeover by Woolworths Holdings, David Jones launched its strategy to lift private-label sales, moving away from its “House of Brands” strategy. Despite some mishaps, which dampened profit performance, the department store is expected to continue pursuing this strategy,’ said Ms Do.

‘Over the next five years, Woolworths plans to continue boosting sales of private-label and exclusive brands to differentiate David Jones from Myer. This includes Woolworths' Country Road Group brands,’ said Ms Do.

IBISWorld expects Myer to undertake a similar strategy, shifting from unprofitable products such as furniture and bedding to focus on apparel, beauty and private-label collections.

‘Myer’s 2019 half-year results saw sales of Myer Exclusive Brands (MEBs) rise by 3.7% to $292.2 million, which also assisted the company’s profit margins. On the other hand, concession store sales fell by 5.7%. As a result, the company is planning to extend its private-label range to include footwear and accessories to complement its clothing range,’ said Ms Do.

There has been a string of collapses in the fashion retail sector over the past year, with Marcs, David Lawrence, Herringbone, Oroton, Rhodes & Beckett and Payless Shoes all going under.

‘Consumers have become increasingly comfortable with purchasing products online, and have embraced the convenience of shopping from home or work. On top of this, largely negative consumer sentiment and weak discretionary income growth over the past five years have prompted many consumers to look for cheaper alternatives,’ said Ms Do. 

‘Focusing on private and exclusive labels is likely to help Myer and David Jones differentiate themselves from online stores, as consumers will only be able purchase certain brands from one store. This is likely to minimise the risk of excess inventory for retailers. Having exclusive and well-designed private-label brands reduces the need to discount products. It also helps drive foot traffic, which can boost cross-sales,’ said Ms Do.

 

IBISWorld industry reports mentioned in this release:

Department Stores in Australia

Online Shopping in Australia

Discount Department Stores in Australia

Fast Fashion in Australia

Clothing Retailing in Australia

 

For more information, to obtain industry reports or arrange an interview with an analyst, please contact:
McKenna Moroz 
IBISWorld Media Relations Representatives – Anne Wild & Associates Pty Ltd
Tel: (02) 9440 0414 Mobile: 0431 781 445
Email: mmoroz@awassociates.com.au