Department stores need to evolve as the rise of online shopping makes it harder to hold onto shoppers, says one retail expert.

Plexure Group chief executive Craig Herbison believes the continued adoption of online shopping will put margins and foot traffic under pressure for traditional retailers, with department stores forced to change their formats.

"Traditional department stores seem to be under pressure," Herbison said.

"The pressure of online retailing is seeing the big department stores needing to find new price points to combat online retail and keep shoppers in store."

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American department store Macy's announced last year it would be morphing into a discount store - tripling the number of stores that offer its discount concept, to 145 locations across the US this year.

Herbison said Macy's changing the way it operated could signal what's to come for the sector.

"With Macy's announcing their intention to move into a discount format, you have to wonder if the demise of department stores in their current format is looming."

However, Retail NZ general manager of public affairs Greg Harford said the current format had served department stores well over a long period of time "but I think they will absolutely continue evolve".

"One of the interesting trends in retail is that similar businesses are clustering together in particular areas, and a department store is essentially a cluster of brands under one roof."

A department store could operate a discount model on one of its levels, similarly to Macy's, Harford said.

"What will drive success in future department store retailers is customer experience, and providing the sorts of services you can't get online," he said.

"People want to be entertained while they're out and about - not just to go shopping in a transactional way."

David Jones was responding well to the changing retail market, a retail consultant says. Photo / Norrie Montgomery
David Jones was responding well to the changing retail market, a retail consultant says. Photo / Norrie Montgomery

David Jones entering the New Zealand market showed there were still opportunities in this country for department stores, Harford said.

Australian department store Myer has been facing trouble for some time. Last year it closed a string of unprofitable stores across the Tasman.

The retailer last month said sales in the first half of its financial year were down 3.6 per cent to A$1.7 billion ($1.8b) and as a result of the further deterioration in trading it expected profit to be between A$37 million and A$41m, before implementation costs and individually significant items.

Myer chief executive Richard Umbers at that time said: "The significant deterioration in trading reflects ongoing challenging retail conditions with widespread industry discounting, a subdued performance of Myer's stocktake sale and a continued shift in consumer behaviour characterised by reduced foot traffic and an increase in online shopping."

Retail consultant Chris Wilkinson said department stores were "finding challenging times", but that the US retail market could not be compared to New Zealand.

"Stores most in danger are those with undifferentiated offers - store environments that fail to inspire, products that are the same as you'd find elsewhere and lackluster customer experiences no one talks fondly about," Wilkinson said.

"Macy's is one of the blandest, most generic shopping environments one could imagine. It's been unable to adapt in culture or appeal to a market that has changed significantly in recent years.

"Myer is better, however, their stores have no occasion, vitality or inspiration, which has meant consumers have increasingly looked elsewhere."

In New Zealand, Wilkinson said departments stores were doing well, such as Farmers which provided a successful, relevant offering.

"In the South Island, regional brands such as Ballantyne's and H & J Smith are going from strength to strength buoyed by generations of goodwill and successfully adapting to trends," Wilkinson said.

"David Jones is still finding its feet in New Zealand, but [it is] a good example of how they're changing in Australia to focus on daily destination value, with their smart new espresso bars, the transformation of their food halls, smaller 'curated' stores - such as Bangaroo, and dedicated food shops they are planning to launch in the coming years."