If there’s one thing upscale department stores are known for it’s big-name brands.
You can head into Myer and David Jones and come out smelling of Chanel, tottering on Louboutins and piled high with Polo by Ralph Lauren.
But with growth in department stores basically non-existent, margins and profits shrinking and wary consumers closing their wallets, the two venerable companies are taking drastic action.
In the future there will be less brands you know and more brands you’ve never heard of. Private label is set to play a far bigger role in the Myer and David Jones stores of the future.
You might go to DJs for Superdry and head home with Studio W. The question is, will consumers care?
A retail analyst has said department stores are well and truly feeling the “Aldi effect” whereby consumers are demanding better quality and lower prices and are willing to trade in big-name brands for the privilege.
But while fashion might be ripe for a department store own-brand takeover, there are several categories where brands reign supreme — and likely will do for some time.
An analysis by market researchers IBISWorld said revenue at department stores was likely to remain stagnant, which has turbocharged the push by David Jones and Myer into private label.
IBISWorld’s senior analyst Kim Do said the stores had “fallen out of favour” with shoppers opting for online, where prices are lower and choice almost limitless, and fast fashion giants Zara and H&M.
Brands the department stores either owned or controlled themselves could help stem the tide.
“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,” said Ms Do.
“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.”
‘N O ONE’S GOING TO BUY A MYER-BRAND SUIT’
Myer’s half-year result to the end of January showed private and exclusive labels accounted for $292.2 million worth of revenue, or around 17 per cent of sales. While Myer’s private-label brands grew by 3.7 per cent, sales of its branded ranges fell by a similar amount.
The store has said “exclusive brands” is one of its focus areas, and in 23 stores it has experimented with making the products more prominent with “encouraging results” on sales.
But QUT retail guru Gary Mortimer told news.com.au that while private label could be easy to spot in supermarkets — just look for the Coles or Woolies brands — in department stores it was far tricker.
“No one’s going to buy a Myer suit, but they might buy a Blaq suit which is the same thing,” he said.
In Myer, own brands include Basque, Milkshake and Vue. In David Jones, Studio W and Re: are brands owned by the firm’s ultimate owner, South Africa’s Woolworths Holdings.
However, what is considered a private label is becoming a grey area. Few people would see Country Road or Witchery as an own brand, yet they too are owned by Woolworths, and the company is ripping the names out of Myer so DJs can say it’s the only department store hosting the fashion names. Equally, Sass and Bide has gone from upstart independent to wholly owned Myer brand.
Myer and David Jones are also busily signing up “exclusive” brands. These are brands owned by a separate company but only distributed in Australia through one of the big two.
Mr Mortimer said there was only upside for retailers with private label: “By owning the intellectual property of the brand and not dealing with the manufacturer or distributor you can generate more margin or, alternatively, lower prices. You can also tailor your product to fit the market.”
While own brand is not new in department stores, they have taken longer to double down on private label compared with supermarkets.
“It’s the Aldi effect. When Aldi entered the market, supermarkets thought Aussie shoppers wouldn’t accept private label because it was the cheap generic version of the real deal. What Aldi has demonstrated is that private label products can be as good as the national brand product — they’ve legitimised private label,” said Mr Mortimer.
AN EXPENSIVE TARGET
The head-first dive into own brand is being steered by another factor — the weakening control department stores have over big international names.
“Once you could only buy Chanel at Myer and DJs; now they are setting up flagship stores in Australia, and that’s a problem,” said Mr Mortimer.
“If you are going to spend $400 on Ted Baker clothes, for instance, you’re better off going to a Ted Baker store and getting excellent service and knowledge rather than a department store where the staff are selling lots of different brands.”
Private label is a way to ensure shoppers have to walk through the door — or head to your website — to buy the product.
Both chains have insisted big names will still play a critical role in their stores. But Mr Mortimer said David Jones was likely to need less own brand than Myer as it had a clearly-defined customer demographic at the top end of the market.
Indeed, DJ’s fancy new “shoe heaven” floor at its Sydney CBD flagship store boasts Jimmy Choo, Louboutin and Balenciaga.
Nonetheless, IBISWorld’s Ms Do said since taking over DJs in 2014, Woolworths had moved away from the previous “house of brands” strategy.
“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,” she said.
The danger, said Mr Mortimer, was that in an effort to boost own brands, DJs and particularly Myer could end up looking like a more expensive version of Target, while Zara and H&M’s ability to spot a trend and see it on shelves within weeks would also be hard to replicate.
Menswear, womenswear and particularly kidswear were ripe for private label, he said, as was Manchester. But other categories, well, he wasn’t so sure.
“You can’t touch cosmetics and not electronics either. I want a Samsung TV, not a Myer TV,” said Mr Mortimer.