STRUGGLING DEPARTMENT STORES

While sympathising with low income workers seeking pay rises it’s time their advocates stopped using the ridiculous term, “a living wage”. If workers are not receiving a living wage then logically they must be dead, presumably of starvation. I’d opt instead for “a dignified wage” as a more honest term, although what that constitutes is obviously debatable.

The latest reported wage strike is by Wellington’s Farmers Department store employees. Their incomes as reported, are certainly low. Pay them more and the store is uneconomic the management protest. In fact the store is already uneconomic. Here’s why.

Farmers occupy a large ground and basement floor in the prime heart of Lambton Quay, the capital’s premier retail street. Above it lies a 1960s high rise office block. A few years ago the building came on the market and my company bid for it. We intended a major upgrading of the office-building but the real attraction lay in the Farmers tenancy which was paying a ridiculously low rental.

Their lease was coming up for expiry and at current market rates, would have seen a tripling of their rent. We anticipated therefor they wouldn’t renew whereupon we’d have cut their premises into smaller shops, in the process doubling the building’s value.

Well lo and behold we didn’t get the building, instead, to protect their extreme sub-market rental, Farmers bought it. Even the dullest economics student knows that’s lousy economic thinking. If they can’t pay a market rent then they should close, an argument doubtless the shop workers union would also advance re their wages. Alternatively, they should shift to drive-in premises on the CBD fringe. But Farmers, like Department stores world-wide which are going over like ninepins, chose, as is their right, to box on.

The cold hard fact is that for whatever reasons Department stores no longer work. In Britain the various chains are closing stores weekly, ironically in every case to the chagrin of locals.

Britain’s best known chain is Marks and Spencers. They’re enormous. Last year their new CEO told the gathered journalists after the announcement of his appointment, “I feel like I’m adrift on a raft in a stormy ocean and – pause – the raft’s on fire”. That was arguably an understatement.

Yet to my astonishment, wandering through Kiev not long ago, I came across a Marks and Sparks store. Curiosity took me in and I bought a beautiful dress jacket at a fifth the cost had I bought it in New Zealand. Additionally, the store was busy which certainly gave me food for thought. Later I discovered I’d lost my reading glasses. I was fairly sure they’d fallen from my jacket’s vest pocket when I was trying on the new one so I asked the hotel receptionist to ring the store and enquire. “Which one?” she asked. Bloody hell! There are six Marks and Sparks in Kiev and another four elsewhere in the Ukraine. They’re certainly a big outfit as I discovered on enquiry, present in nearly 50 countries. In Glasgow alone they have seven stores.

I hope the remaining department stores survive but they’re somehow having to reinvent themselves if they’re to do so, like so many other activities facing the internet assault.

David Jones has always been an excellent store but they too now have their back to the wall with falling profits. They came into Wellington with enormous fanfare a few years ago, lured by the incredibly cheap entry price in taking over the drowning Kirks, my idea incidentally, to the desperate Kirks chairman. That arose as my company owns the building, not that we wished to but it was sold with two terrific adjacent modern office towers we most certainly wanted.

Since then it’s been a struggle while in the interim their now departed previous CEO has committed them to the large new retail complex in Newmarket, currently under construction.

“How do you think it will go?”, one their senior management chaps over from Australia recently asked me somewhat nervously. God knows, it’s anyone’s guess. I told him I’d urged the previous CEO to target the North Shore rather than the city. Time will tell.

But one thing’s certain. If a business can’t pay decent wages to survive, as Farmers argue with their Wellington store, far better to pull stumps.

World-wide there’s a revolution underway in retailing. I know lots about it as my company owns the most shops in the capital’s prime CBD, this by dint of owning the most office-buildings. Sadly dress shops are now dead in the water, a great shame as their colour and gaiety added zest to the street scene.  Jewellers are booming, bookshops doomed and I suspect menswear is just hanging on. After 100 years of existence the nation-wide chain Munns closed a fortnight ago. Their Queen Street Auckland shop was in one of our buildings and was promptly snapped up at a higher rental by a different activity.

But here’s the biggest change. If ever a shop comes vacant there’s immediately three or four eager aspirants, always, always, cafes or restaurants. We have dozens of them and they all seem to survive.

I belong to an age when everyone brought their cut lunches to work. Suggest that today and the absurd Human Rights Commission, to my immense embarrassment located and doubtless lowering the tone in one of our buildings, would call for my prosecution for proposing the breaching of everyone’s natural human right to have lunch in a restaurant.

4 Comments

Book shops have moved online, Amazon and it’s ilk have driven the costs down both on paper books and digital versions and the bricks and mortar stores that remain have become calendar toy and confectionary vendors.

I personally wonder if Auckland’s CBD is feasible moving forward if Auckland transport’s hate fest for the personal vehicle continues to it’s logical (and signalled) conclusion and cars are banned from the CBD. In one foul swoop rendering both the Innercity rail loop obsolete and potentially hacking off enough senior executives with designated parking enough to split their offices into North and South find locations which will liberate their poorer employees from the evils of public transport thereby improving not only productivity but also “Wellbeing.”

I’ve seen it elsewhere…..

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The reality, which may well be fading, is that shopping precincts fulfill more purposes than simply retail trading. I recently had cause to drive through the main street of Ashburton quite late on a Friday afternoon. The town was abuzz with people speaking to each other, sitting at outdoor cafes, entering and exiting shops, banks, and offices. I am not a resident of Ashburton so I can only surmise that shopping is an adjunct to social contact in the commercial parts of the town rather than a fundamental purpose.

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And watch out for driverless delivery cars that operate on the road, at 50 to 80 km/h, too. They’re nearly here. Retail will be reduced to a showcase industry and home cooking will be reduced to hobbie status, as super-scale semi-robotised kitchens do it better and even cheaper than home cooking.

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Interesting comment about bookshops being doomed. I have heard that they’re experiencing a resurgence. Perhaps people like them as much for the intangible pleasures that bookshops offer, as just for buying books?

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