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Retail Industry Needs To 'Shake Up', Or Die A Slow Death: Experts

By all accounts, it has been a tough year for the retail sector. So, what does the future look like -- and how will we be shopping? 

The full-year corporate reporting season is wrapping up, and has revealed some of the country's big-box retailers are struggling to make ends meet -- and retail analysts saw it coming.

"I don't think anybody would honestly say they're shocked to learn a lot of our retailers are struggling," retail expert Dr Jason Pallant told 10 daily.

"It would have been more surprising if they had come out and said, 'We're doing really well'".

David Jones will be shutting some of its stores.

Faced with difficult economic conditions -- such as sluggish wage growth  and a slump in consumer spending -- plus competition from overseas, Australian companies are still managing to make money.

But this is being offset by little or no wage growth, and implementing cost-saving strategies such as store closures and job cuts.

“Retail has experienced a challenging last 12 months across all parts of the sector. This has led to some chain stores being forced to make difficult decisions in response to the tough economic climate," National Retail Association CEO Dominique Lamb told 10 daily. 

And department stores are feeling the heat.

READ MORE: David Jones To Shrink Stores As Profits Fall

READ MORE: Big W To Shut 30 Stores Across Australia In Market Shake-Up

Just this week, the parent company of David Jones, Woolworths Holdings, announced it will be closing stores to reduce floor space, as profits dropped 42 percent.

Woolworths will also be proceeding with its closure of 30 Big W stores, as announced in April, while parent company Wesfarmers will shut stores at discount chain Target to boost its online sales.

Dr Marian Makkar, Marketing Professor at RMIT University, is also not surprised.

"Shutting down stores comes at a cost, and means more job loses, but it was coming," she told 10 daily.

"At the moment, I think what we're seeing is a shake up in the retail industry, and this is a real wake up call."

So, how will this actually change things? Both Pallant and Makkar point to another pressure retailers must respond to if they wish to remain afloat: the all-important consumer.

Woolowrths will proceed with closing 30 of its stores. Photo: AAP
'The Consumer is In Control'

Walk into a department store today, and you'll be hard-pressed not to find the branded white shirt you have your eye on also hanging in another store window.

Pallant questioned which option is a more "compelling" buy for the consumer.

"For me, the role of the department store is going in and looking for lots of different things at once. But if all they're offering me is a subset of the range that I could get from a store in the same centre, it's not really a compelling reason to go to one or the other," he said.

"It's that question mark around what is a unique reason for us to go into a department store compared to shopping online, or wandering along a high street strip."

According to the latest figures from the Australian Bureau of Statistic, the overall retail industry grew in June -- both on the previous month and year -- while department stores fell.

Sales in department stores accounted for roughly 5.7 percent of the retail sector (about $1.5 billion out of $26.3 billion). Interestingly, online shopping accounted for only 6.1 percent of sales -- up from 5.7 percent.

Online shopping accounted for 6.1 percent of retail sale in June. Photo: Getty

"When we talk about department stores, it's easy to jump to the conclusion it has been overtaken by online shopping -- but this is still less than ten percent of the retail market," Pallant said.

"People are still shopping in physical stores; they're just being so much more selective about where, how and when."

READ MORE: 'Unprofitable': Myer To Stop Selling Apple Products

Makkar also believes brick and mortar stores still "have their place" but said they need to adapt to consumer needs.

"I’m not saying these stores are going to disappear, but they need to start offering consumers an experience," she said. 

"Consumers are in control; they're less impacted than the industry and are still getting what they want in the end.

"But they're expecting retailers to respond to their needs ... that's just marketing 101."

The Future is ... Online AND Experiential

The downturn facing Aussie retail empires is not new; overseas, companies have responded by adopting an "omni-channel" experiences to shoppers, Makkar said.

"This is all about the customer having a seamless experience with all the touchpoints of a brand -- online, on social and in physical [stores]. That's where retailers should be going," she said, adding online services such as 'click and collect' were key.

She said Australian chains are -- slowly -- taking similar steps.

"If we look at Woolworth's financial results, WooliesX (their digital arm) is actually doing really well," she said.

Photo: AAP

"That is the future. We just need to catch up quicker than we are. The slower retailers are in doing that, the more they are going to lose their customers who will look for alternative markets."

Pallant too would like to see big chains encouraging "experiential" shopping -- from supporting local designers to rotating products -- saying it's the only way forward.

"I think it will have to happen; these financial results point to the current models as not being sustainable," he said. 

"It's not sustainable to be focused just on just selling products if they’re not unique or amazingly desirable."

Contact the author ebrancatisano@networkten.com.au