Australian retail giant David Jones has signalled it will downsize its physical presence in New Zealand - but where does that leave the future for its Auckland store?
The department store retailer last week confirmed it would close its Wellington store located in the iconic Lambton Quay building, which once housed Kirkcaldie & Stains.
It will shut in June 2022, around six years after the Woolworths Holdings-owned retail chain first expanded into the market with the store in July 2016.
David Jones remains adamant that the decision to close the store has nothing to do with its trading performance or the Wellington offering.
Retail analyst Chris Wilkinson said tens of millions of dollars were spent on the store, and the future for the retailer in the market following the closure was uncertain.
David Jones has long been criticised for not having an e-commerce presence in the market more than four years after it launched in New Zealand.
Wilkinson said he believed part of its downfall had been not having an online presence.
"The fact that they are not online is a serious and fundamental disadvantage," Wilkinson told the Herald.
"So many [shopping] journeys start online. Wellington is a big shopping destination for groups that are away for the weekend, for example, people from the provinces, and if they can't see what the store has got then it is either not on the radar or less on their radar.
"The challenges for David Jones is it has very strong customer clubs in Australia, but they haven't got it here in New Zealand, so they are marketing to people but not able to deliver that relationship, connection and tap into those loyalty programmes."
He said he had foreseen the store closure coming before it was announced.
"The reality is these types of stores do struggle, and they are struggling globally."
Department stores in recent years have become populated with luxury high-end brands. Back in their heyday, however, these multi-storey sites were frequented by people from all walks of life who would visit for all sorts of reasons such as to pick up a pair of stockings or for a service such as a key cut, Wilkinson said.
They had since become out of reach for everyday shoppers, he said.
Many department stores were merely surviving because they were renting out portions of their spaces to big international brands and retailers, attracting high-net-worth spenders, and "instead of going for volume, they are going for margin", he said.
David Jones' glitzy Auckland store opened in November 2019. Wilkinson said it was an anchor tenant for Westfield Newmarket, and other tenant leases were likely dependent on the department store's presence within the shopping centre.
Given the relatively new lease for the Auckland store it was not likely that David Jones would close that store any time soon. He said David Jones would be looking forward to Westfield Newmarket's luxury retailing precinct opening, which would attract more shoppers and high-net-worth spenders to the centre.
Key to survival
To survive long term, it would need to switch on its e-commerce arm urgently, and change its in-store brand offering. The group would also need to steer clear of pushing its own portfolio brands Country Road, Trenery and Witchery, Wilkinson said.
"The big challenge in Wellington was the fact that they had all of that stable in the block right next door so people would kind of get perplexed; a replication of what people were seeing immediately adjacent.
"As a retailer they would be tempted to put in their vertical products, but in actual fact it is doing them a disadvantage."
While it may not be ideal for David Jones to be left with just one location in New Zealand, logistically and financially, Wilkinson said it was highly likely its commitments to landlord Scentre Group would override a potential exit from the market.
In May last year the retailer said there was no truth to rumours that it would close its New Zealand stores for good.
Last week, a spokesperson for David Jones said the move to close the Wellington store was in line with its retail network strategy.
"The decision to close our Wellington store has not been made lightly," the David Jones spokeswoman said.
"As the retail sector continues to transform, including the accelerated shift to online, the optimisation of our retail network – through investment in our digital and physical channels, a focus on right-sizing and where necessary, consolidation of our physical footprint – is critical to meeting the changing needs of our customers.
"David Jones remains committed to serving our customers in New Zealand and, in addition to our Newmarket store in Auckland, we look forward to introducing David Jones online to all our New Zealand customers in the second half of 2022."
In recent years David Jones has announced a string of store closures and store downsizing plans as it drastically looks to reduce its store footprint across the Tasman as profitability continues to fall.
Store closures have been exacerbated by the ravages of Covid-19.
The Melbourne-based business' profit of A$37 million in 2019 slumped to a A$33m loss in 2020, a good chunk of that due to the pandemic.
Dwindling high street retail
Retail NZ chief executive Greg Harford said David Jones' exit from the capital would be felt throughout the local retail sector.
Retail in Wellington, Auckland and Christchurch CBDs was already challenged as businesses grappled with reduced foot traffic as many office workers opted for flexi-working arrangements, he said.
"What we're hearing from businesses right along the Golden Mile [in Wellington] is that it is really tough," Harford said.
"Foot traffic is down, part of that is because not everyone has come back to the office full-time after Covid, there's still lots of people working from home, and some of [the problem] is because it's really hard to get into central Wellington and find a car park if you're a shopper, and the malls are benefiting from that."
Councils' drive to cut motor traffic in CBDs throughout the country was having a dire impact on high street retailing and was forcing shoppers to take their dollars elsewhere, he said.