End of the ‘middle of the road’: Australia’s retail sector under pressure

The government has acknowledged a "softer" economy, but says it will pick up in the latter half of the year.

The government has acknowledged a "softer" economy, but says it will pick up in the latter half of the year. Photo: AAP

Roger David’s shock closure is the latest indicator that Australia’s retail sector is in the midst of metamorphosis, and more businesses will face the chopping block if they fail to innovate.

The veteran Australian clothing retailer entered administration on Thursday after more than 75 years in operation, announcing the closure of its 57 stores.

Craig Shepard, one of the KordaMentha staff appointed as voluntary administrator for the business, said Roger David “has been buffeted by global competition, stagnant sales and rising fixed costs” in the last few years.

“The company has been exploring all options, including a sale of the business, but has been unable to find an alternative to administration,” he said.

As such, Roger David has launched a closing down sale in an effort to raise money for creditors and the business’s estimated 300 staff.

The announcement comes only a day after discount department store The Reject Shop announced a $10 million to $11 million reduction in its expected profits for the first half of the 2018-2019 year, and only weeks after Myer reported its first ever full year loss, and experts told The New Daily this is all part of a broader trend.

Changing tastes

Australians are steadily moving away from ‘mid-tier’ businesses such as Myer, towards either high-end retailers or value merchants, such as David Jones or Kmart respectively.

Queensland University of Technology business school associate professor Dr Gary Mortimer put this down in part to increased competition and a corporate identity crisis, in that Myer, The Reject Shop, and others often struggle to identify their market and offer them what customers want.

Retailer The Reject Shop reduced its expected profit.

Retailer The Reject Shop reduced its profit expectations by $10 million. Photo: AAP

In the case of The Reject Shop, businesses like Kmart and Aldi have successfully provided alternative discount offers to consumers and undercut The Reject Shop’s business.

“The Reject Shop’s offer is no longer different, and if you can’t differentiate a business’s offer, consumers will just go to a competitor with a better range,” he said.

The same is true for Roger David, which in recent years has been forced to compete with other fashion retailers, including Tarocash, Zara, Uniqlo, and even Big W.

“If you’re stuck in the middle, it’s a dangerous place to be,” he said.

People need a clear reason to enter a store, and businesses like The Reject Shop have struggled to communicate what that reason is to potential shoppers, according to University of Tasmania marketing lecturer Dr Louise Grimmer.

“The Reject Shop is suffering a similar fate to a number of other struggling retailers who have not effectively communicated their value proposition to consumers,” she said.

“I think their product offering has been confused, with not enough emphasis on providing real value on everyday brands for customers –with many shoppers really not sure what The Reject Shop brand stands for.”

Still hope for some

While the writing is well and truly on the wall for Roger David, other struggling brands still have scope to claw back their profitability.

Already, Myer’s chief executive John King has announced changes to the business, which Mr Mortimer said looked promising. But the result will be a business that looks very different to the one it is today.

This is the key, Mr Mortimer said, and businesses in this middle tier will need to innovate or risk going the way of Roger David.

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