Department stores require far more agile brand management

In Australia the department store sector has surrendered almost one third of its market share since peaking in the mid 1980’s (Herald Sun November 8, 2011). They are between a rock and hard place, with online and specialty retailers earnestly chipping away at their customer base. For the financial year just past Myer suffered a 5.5% decline in sales and David Jones a 3.2% contraction. Interestingly during the same period many luxury brands reported growth, so it is not all being driven by the new cautionary consumer mindset so prevalent in Australia.

From David Jones we have heard very little about how new CEO Paul Zahra is going to tackle the problem. But in the other camp Myer’s chief executive Bernie Brookes is taking an approach that has some merit. Firstly, Myer is lifting its aspirations in the online space, seeking to generate as much as 10% of its sales revenue online. It has always been such a huge puzzle as to why Myer has been so slow to staking its claim in the online world. If you reflect on one of the advantages Myer has over specialty store online offers, it is its diverse array of brands and product. The fact that it has a wider choice is something they  need to leverage. Likewise they have a reputation for accepting product returns with an absolute minimum, a service dimension that they should duly transfer to any online transactions.

But it is Bernie Brooke’s stated approach to customer service that I think has real merit. He is suggesting that Myer will adopt a far more strategic mindset. Myer is going to concentrate on putting additional people in the high traffic areas of its stores eg women’s fashion, shoes, cosmetics – any place where individual attention is needed to convert customer interest into sales. Myer is in a superb position to know where it should place its additional customer service resources, as it over 5 million shoppers with a Myer store card in their hands, and therefore has the richest shopping behaviour data of any retailer in Australia. But it needs to be used intelligently.

Myer will only succeed if it can truly transform its customer service experience into a great one. Being selective about where those more magical personal experiences should play out, is an important enabling step. Myer is beginning move away from a one size fits all and is adopt a more agile and considered brand management approach. The proof will be in the Christmas pudding, but a big tick for intent.

Peter Singline
Brand Scientist

2 Comments

  1. I think the point here is that the retail brands compete with the product brands.

    There is no way to escape that. Retailers have held the power in relationships with brands in recent years, but the trend with online is now giving power back to the manufacturer of the product or brand, because now it’s far easier for the brand to have a relationship with the consumer.

    “If you reflect on one of the advantages Myer has over specialty store online offers, it is its diverse array of brands and product” – while this may be seen as advantage for some, I think the reality in an online world, is that this is a distinct disadvantage.

    With online shopping a consumer can find and buy the best brand in any category, globally. Consumers don’t need Dept Stores or retailers to “curate” what can be bought. That was useful in the 20th century when consumer had little information about the source of products and it was impossible to buy offshore.

    Products that need service wrapped around them such as footwear, where the consumer wants to try on, have a chance with department stores. Bespoke (probably unbranded) products have a chance too. I think therefore department stores in the future will need to embrace service oriented products and eventually drop high volume branded goods altogether.

    For example, I would but a pair of expensive italian leather shoes at a local shoe store or upscale department store, but a pair of Converse All Stars, in my size (43), I’d happily buy online in an array of colors (that the local store probably doesn’t stock), in the knowledge that they’ll turn up and they’ll fit.

    Ditto, for an Apple iPod, online is better. iPhone where I need a local operator for connectivity, I’ll need a local phone company.

    We’re not far away from this reality now.

    Retailers, if seriously contemplating a new strategy, need to really think about where they fit in the consumer-brand relationship.

    To date I don’t think any of them have it right yet.

  2. David, great thoughts and yes there will lots of circumstances where the choice of a dept store offers nothing over a specialty store that you value. But still scope for Myer to ramp up their service levels in the right categories and leverage a more integrated offering the weaves the store footprint into the online offer eg for returns. The other element that the dept stroes need to get their head around is what they stand for, what their brand character represents. Today both Myer and DJ’s are rather
    bland and faceless personalities. They need to add up to something more than the products and services they offer. Having said all that I probably do some of my Christmas shopping in both their stores, because the family members that I buy for will be able to exchange my poorly chosen gifts for something they truly desire….with minimum fuss!

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