David Jones promises more for Kiwis, despite Wellington closure
Australian retail giant David Jones has signalled that its physical presence will shrink in New Zealand — so where does that leave its Auckland store?
The department store retailer last week confirmed that it would close its Wellington shop in the Lambton Quay building which once housed Kirkcaldie & Stains.
It will shut in June 2022, about six years after David Jones opened the store, its first in New Zealand.
David Jones remains adamant that the decision to close has nothing to do with its trading performance or its Wellington offering.
But retail analyst Chris Wilkinson said tens of millions of dollars was spent on the store, and David Jones’ future in New Zealand was uncertain.
David Jones has long been criticised for not having an e-commerce presence in the New Zealand market, after more than four years.
“The fact that they are not online is a serious and fundamental disadvantage,” said Wilkinson.
“So many [shopping] journeys start online. Wellington is a big shopping destination for groups that are away for the weekend, for example, people from the provinces, and if they can’t see what the store has got then it is either not on the radar or less on their radar.”
He said he had seen the closure coming. “The reality is, these types of stores do struggle, and they are struggling globally.”
In recent years department stores had become filled with luxury brands. But in their heyday, said Wilkinson, they were frequented by people from all walks of life who would visit for many reasons — maybe just to pick up a pair of stockings or for services such as getting a key cut.
They had since become out of reach for everyday shoppers, he said.
Many department stores were surviving by renting out space to big international brands, attracting wealthy spenders, and “instead of going for volume, they are going for margin”, he said.
David Jones’ glitzy Auckland store opened in November 2019. Wilkinson said it was an anchor tenant for Westfield Newmarket, and other tenants’ leases were probably dependent on the department store’s presence within the shopping centre.
Given the relatively new lease at the Auckland store, it was not likely that David Jones would close it soon. He said David Jones would be looking forward to Westfield Newmarket’s luxury retail precinct opening, which would attract more shoppers. To survive long term, it would need to switch on its e-commerce arm urgently, and change its in-store offering. The group would also need to steer clear of pushing its own portfolio brands — Country Road, Trenery and Witchery — Wilkinson said.
While it might not be logistically and financially ideal for David Jones to be left with just one New Zealand location, Wilkinson said it was highly likely its commitments to landlord Scentre Group would override a potential exit from the market.
In May last year the retailer said there was no truth to rumours that it would close its New Zealand stores for good.
Last week, a spokeswoman for David Jones said: “The decision to close our Wellington store has not been made lightly.
“As the retail sector continues to transform, including the accelerated shift to online, the optimisation of our retail network — through investment in our digital and physical channels, a focus on right-sizing and where necessary, consolidation of our physical footprint — is critical to meeting the changing needs of our customers.
“In addition to our Newmarket store in Auckland, we look forward to introducing David Jones online to all our New Zealand customers in the second half of 2022.”
In recent years David Jones — owned by Woolworth Holdings — has announced a string of shop closures and downsizing plans as it looks to reduce its store footprint across the Tasman amid falling profitability.
The Melbourne-based retailer’s profit of A$37 million in 2019 slumped to a A$33m loss in 2020, a good chunk of that due to the pandemic.
Retail NZ chief executive Greg Harford said David Jones’ exit from the capital would be felt throughout the local retail sector. Retailing in the Wellington, Auckland and Christchurch central business districts was already challenged as businesses grappled with reduced foot traffic thanks to many office workers choosing flexible work arrangements, he said.
“What we’re hearing from businesses right along the [Wellington] Golden Mile is that it is really tough,” Harford said.
“Foot traffic is down, part of that is because not everyone has come back to the office full-time after Covid, there’s still lots of people working from home, and some of [the problem] is because it’s really hard to get into central Wellington and find a car park if you’re a shopper, and the malls are benefiting from that.”
Councils’ drive to cut motor traffic in CBDs throughout the country was having a dire impact on high street retailing, he said.