eat, and intervention is no longer possible or practical. In April this year, after more than 240 years in business, the British department store chain Debenhams fell into administration and was promptly taken over by its lenders. The news did not come as a complete surprise: the company’s share price had been falling for several years off the back of disappointing sales, and in October last year, then-CEO Sergio Bucher announced the closure of up to 50 stores in a last ditch bid to right the ship.  But it was still somehow a startling reminder that department stores do not have unlimited time to find their footing in this rapidly changing retail landscape. In Australia, department store industry revenue is expected to fall at an annualised 0.2 per cent over the five years through 2018-19 to $18.8 billion, according to a February report by IBISWorld. Revenue is expected to fall even faster this year, by 0.5 per cent, due to uncertain economic conditions and intensifying pressure from online players. But while the likes of Myer and David Jones face many challenges – including the rising cost of rent, increased competition and, in some cases, unappealing stock that leads to too much inventory and the need to discount – the biggest challenge may be an existential one. If you can’t beat specialty players on range, if you can’t beat online players on one-stop-shop convenience, and you’re not offering customers the lowest price or the best experience, what is your reason for being? Stuck in a catch-22 “Why would you go to David Jones, when you can walk across Pitt Street Mall and go to Westfield Sydney?” asks Pippa Kulmar, co-director of Retail Oasis. “It potentially has a better offer [than the department store], whether you’re looking for designer goods or youth clothing or handbags. The shopping mall has replaced the department store and that’s a piece of the puzzle that we don’t often acknowledge.”  Competition from shopping centres, specialty players and online retailers is just one reason Kulmar thinks David Jones and Myer need to radically redefine their offers. She also believes they have become stranded in the no-man’s land of the middle market. “They are treated a lot like discount department stores,” she says. “They’ve scaled to such a point that they can’t go too far upmarket because they need to be everything to everyone. It’s a catch-22. How do you get scale, but also be different?” To be fair, both Myer and David Jones have laid out plans to shrink their store network, reduce discounting and bring in more premium brands, but it’s unclear whether they’re willing to go far enough to model themselves on the department stores that are actually doing well – like Selfridges in the UK, Le Bon Marche in France, KaDeWe in Germany and Bergdorf Goodman and Nordstrom in the US. One thing all these retailers have in common, except for Nordstrom, which Kulmar calls an outlier due to its early investment in online, is their single-digit store networks, premium positioning and specific target customer. “They have one or two flagships – their online store supports the volume – and they know exactly who they are,” she says. “That’s what you need to pull off the department store game today.” This allows them to invest in highly inspirational – and aspirational – fit-outs and services that make their stores must-see destinations for locals and tourists alike. Kulmar believes Myer and David Jones could drastically reduce their store count, grow online and move fully into the premium market. They just need the courage to do so. “It’s going to require total cultural change. They’ll need to change their KPIs and business model,” she says. “And the big question is how do you redefine yourself as a business, especially when you’re publicly traded and need to ensure returns to shareholders?” Where to next? That is the question on everyone’s mind. Myer and David Jones each have put forward a turnaround strategy (or strategies) in recent years that speak to many of the points Kulmar makes. In September 2015, then-CEO Richard Umbers unveiled a “New Myer” strategy to reinvigorate the business by shrinking the store network to focus on more profitable locations, getting rid of some 100 brands to make way for more new ones, investing in the website, improving delivery times and launching click-and-collect, making in-store rostering more flexible and updating lighting and fitting rooms, among other changes. But by February 2018, with sales and profit still eroding, he was out. At the end, Umbers was roundly criticised for his use of discount floors, but much of the original plan still holds up.  And it’s worth pointing out that King, his successor, is similarly focused on building a smaller but more profitable store network, bringing in new brands and growing the online business. King calls it his “customerfirst plan”, but does it go far enough? David Jones has been more aggressive in its decision to go after the premium market, as reflected by the $400 million refurbishment of its Sydney flagship, which includes a “shoe heaven” stocked with luxury brands, such as Chanel, Louis Vuitton, Gucci, Valentino and Christian Louboutin. Both retailers have also talked about the need to provide better customer service and more experiences in-stores. To a certain degree, the success of these strategies is reliant on customers being willing to see them in a new light. And changing the consumer mindset around what a department store is will be hard. But it will be even harder for department stores to figure out their new, improved identities this year and beyond.