Myer cuts head office jobs: Smaller retailers stand to gain from tough department store conditions

The winds of change continue to blow through department store retail aisles, with Myer announcing a downsizing of its head office as challenging retail conditions continue to plague the traditional store sector. 

“As a result of a number of departures across the support office, a further floor will be exited bringing the total vacated area to 4.5 floors or over 40% of the space since September 2015,” a statement to the ASX read yesterday.

Fairfax reports the move will result in 50 job cuts, with the company’s chief executive Richard Umbers saying yesterday he did not want to “dwell on the departures”.

The decision follows a somber trading update put out in December warning its recent sales and profit had “deteriorated”. 

It also comes as experts warn 2018 will see no improvement in conditions for traditional retailers, with the first well-known retail brand of the year entering administration announcing this in the first week of January.

Elsewhere in the department store space, David Jones is also feeling the challenging conditions, with the ABC reporting this week its South African parent company announcing it has flagged a write-down of its investment in the business.

Product knowledge key to future retail success

Retail expert and associate professor at Queensland University of Technology business school Dr Gary Mortimer says the headwinds facing the sector are a sign of the changing times, with niche product knowledge now a key strength in retail. 

Local department stores have lost some of that strength over the decades, he says.

“The department stores of the 1970s and early 1980s – shoppers went there to buy school shoes for their kids, whitegoods, sporting equipment, you name it.  They were the go-to stores, with great range, service, staff.” 

“But then as we moved through the 1980s and 1990s, we saw the development of specialty retailers in their own categories such as Freedom Furniture, Amart Sports and JB Hi-Fi.”

Mortimer says it’s these kind of retailers that have been able to outmaneuver the department stores in terms of specific product knowledge.

“We no longer get that with the big department store. A staff member who works in ladieswear might be shifted to cosmetics the next minute and then they’re moved to footwear. By moving staff around and reducing headcount, you tend to lose the expertise that shoppers are looking for,” he explains.

The retailers that stand to gain from this shift are those taking that specialty to the next level, offering customer experiences tailored to what their shoppers want.

“Sporting and leisure goods company LuLulemon offers things like yoga classes in the morning before opening and also a once-a-week running club,” he says.

“They know their customers are focused on fitness, so by focusing on their customer values they know their customers will be more likely to go there.”

Mortimer believes it’s this focus on customisation that presents small business with some big opportunity in the sector.

“It’s all about the growth of ‘brand me.’  Small businesses can use these types of personalisations to give customers more value,” he says.

Swinburne Business School associate professor Sean Sands also sees the struggles of the department store as a chance for smaller retailers to shine.

“Retails’s not dead. What we’re seeing is just a realignment of where the dollars are being spent,” Sands says.

And as competitive pressures from the likes of Amazon continue to emerge, it’s stores at a lower price point that could have the best fighting chance.

“In the US in the past 12 months, the largest number of store openings have been from Dollar Saver outlets,” he says.

“So if you look to our local market, there’s probably an opportunity for smaller retailers to focus on that.  Find unique products in that lower price point.”

SmartCompany contacted Myer for comment on its head office restructure and was referred to ASX statements on the decision.

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