Pepkor confirms Debenhams launch for Australia

StCollinslane1Pepkor South East Asia, an Australian private company and wholly owned subsidiary of the South African retail investment company, Pepkor Holdings Limited, has confirmed that it will launch iconic British department store, Debenhams, in Australia, opening the first standalone Debenhams location in September 2017 over 3600sqm on two levels in Melbourne’s St Collins Lane retail precinct.

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St Collins Lane will be the first of 10 planned stores for Australia, each of which is expected to comprise 3600sqm to 4000sqm and be located in Melbourne, Sydney, Perth and Brisbane.

With Australia’s highly concentrated department store sector struggling at both ends of the market due to weak sales and increased competition from international specialty retailers, it’s questionable whether there is room in the market for another major player.  

However, Graham Dean, managing director of Pepkor South East Asia’s department stores division, says that the arrival of Debenhams will introduce new value into the local market.

“Debenhams, being an international department store, will add huge value in bringing that concept into the Australian market, but in a slightly different format. And that’s the key. It’s not bringing Debenhams in its current format and plunking it into Melbourne, Sydney, Brisbane, Perth; it will be more about doing that in a slightly different format. It will be a smaller store format and more of a curated range.”

Pepkor will focus on delivering cut-down versions of Debenhams’s UK stores, with merchandise tailored and curated for each store’s local catchment. This is a similar personalisation strategy to what Myer CEO, Richard Umbers, is targeting as part of his ‘new Myer’ turnaround strategy, and it is a strategy that can potentially pose problems around back-end logistics as well as getting the offer right by anticipating what consumers will look for in a Debenhams store.

“Because the range we could choose from is enormous, we can basically tailor and curate the range depending on the location that we’re going into,” Dean said. “For example, with the store we’ve announced in the Melbourne CBD, we’re able to curate a range that’s more geared towards fashion and beauty, because that’s what will be required in the CBD based on the customers that are going in there every day. We’ll tailor the range and it will predominately be men’s and women’s fashion, fashion accessories, a great beauty offer, and some homewares. But it won’t have children’s wear, for example, because we would put children’s wear in a more suburban location.

“The beauty of that curation is because it’s Northern Hemisphere product coming into the Southern Hemisphere and it’s counter-seasonal, you can take the bestsellers and you can bring that to life in a smaller format store. It’s almost the 80/20 rule. That’s the beauty of opening a small format store.”

Debenhams-London-signCuration alone is far from a winning department store strategy, and there are a number of examples of the cut-down model proving unsuccessful for department stores overseas. With Debenhams, Pepkor will focus on delivering what Dean terms a “modern department store”, with the focus on services and digital customer connection and interactivity. Pepkor is banking on Debenhams’ exclusive private label range connecting with Australian consumers, with the majority of merchandise being exclusive to Debenhams.

“It won’t be an array of products that are generically available either at David Jones, or Myer,” Dean said. “We’re able to bring to market some compelling brands and products that are international and won’t be available outside of Debenhams. The store in Melbourne will be predominately full of product you can only get at Debenhams. It will be British concession brands that you will typically see on the British high street – access to designer apparel at affordable prices. That’s the difference. We’re taking all the things they do particularly well in the UK, and then trying to do them even better here.”

Pepkor South East Asia, which also owns discount department store chains Harris Scarfe and Best & Less, has been in discussions to bring Debenhams to Australia for the last two years. Much of that time has been spent helping the British brand understand the local market to get the format right.

In the lead up to the launch of the first Debenhams store at Melbourne’s St Collins Lane in a year’s time, Pepkor has placed Debenhams concessions in select Harris Scarfe stores to help drive consumer interest in the brand.

While Pepkor is aiming for 10 standalone Debenhams stores in Australia, it isn’t putting a timeframe on the rollout of stores beyond the first at St Collins Lane.

Debenhams’ launch in Australia is being eyed with some scepticism by retail commentators, and it has been suggested that it could be a testing of the waters for an eventual bid for Myer by Pepkor’s parent company and fellow South African retail giant, Steinhoff International.

“The last thing Australia needs is another department store and the cut-down model has not worked for most European department stores around the world,” argues retail strategist, Peter James Ryan. “If you do the math with 10 stores of 4000 square metres each, you get around $16 million EBIT if they do well.

“For all the risk, that return isn’t worth the investment. Unless, perhaps this is a trial to begin the process of a bid for Myer. Debenhams would be a very good fit for a Myer takeover if they could prove to themselves that the market was worth it.”

 

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