Most major players have undergone structural changes in an attempt to tackle growing competition and reinvigorate retail spending
Melbourne, Australia (PRWEB) March 23, 2015
The Department Stores industry has struggled over the past five years, due to a weak retail environment and low consumer confidence following instability in global financial markets. Consumers have become increasingly price-conscious and reluctant to spend their discretionary income, preferring to pay down debt and increase savings. Over the five years through 2014-15, industry revenue is forecast to contract at an annualised 2.7% to $18.0 billion. Despite record low interest rates, consumers are expected to remain frugal in 2014-15, with industry revenue forecast to decline by 1.1%. The Department Stores industry is characterised by a very high level of concentration, with the top four enterprises accounting for the majority of industry revenue. As concentration is high, competition is intense. According to IBISWorld industry analyst Lauren Magner, “discounting is prevalent across many stores and product lines, particularly among the low- to mid-market department stores.” Major players have launched online platforms as a new avenue for revenue growth. Multichannel retailing activities are expected to become more prevalent over the next five years, as players attempt to ride the wave of growth from the online segment.
Restructuring activities have been rampant during the past five years. “Most major players have undergone structural changes in an attempt to tackle growing competition and reinvigorate retail spending,” says Magner. Wesfarmers has been successful in restructuring both of its department store brands, with Kmart streamlining its operations to focus solely on value products and Target strengthening its position in the mid-range market. David Jones has restructured its operations by tightening its grip on the premium market, and was acquired by South Africa's Woolworths Holdings Limited in 2014. The industry will face increased competition from online retailers and international fashion giants over the next five years, which will constrain revenue growth. Furthermore, falling capital expenditure by mining companies and concerns regarding the competitiveness of Australian businesses will weigh heavily on household purchasing decisions. Consequently, over the five years through 2019-20, industry revenue is forecast to fall.
The Department Stores industry is highly concentrated. The top four major players are Wesfarmers Limited, Woolworths Ltd, Myer Holdings Limited and David Jones Limited. Major players in the industry have numerous retail outlets throughout Australia, both in metropolitan and regional areas. Considerably high barriers to entry ensure that industry concentration remains strong, as major players use economies of scale to achieve and maintain profitability. Department stores require large amounts of retail space in a number of locations to compete effectively in the Australian market. Such retail space is extremely rare and keeps competitors out of the industry. The industry in the mature stage of its life cycle, and there has been some merger and acquisition activity over the past five years.
For more information, visit IBISWorld’s Department Stores industry in Australia report page.
Department stores retail fabrics, soft goods, clothing, chinaware, glassware, housewares, perfumes, cosmetics, toiletries, furniture and household appliances. Goods are normally sold through separate instore departments. Department stores purchase products from wholesalers and manufacturers and sell them to consumers, generally without changing the products. They also undertake activities like customer service, product merchandising, advertising, inventory control and cash handling.
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Products & Markets
Products & Services
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Basis of Competition
Barriers to Entry
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