David Jones falls into administration – and its outdated business model explains why

After 188 years, department store David Jones has been put into administration over unpaid rent at some of its 38 Australia and New Zealand stores, as well as long-term financial woes.

The administrators are expected to manage the business, likely closing some unprofitable stores, until a new owner can be found. The future of its more than 5,600 employees is still unclear.

Voluntary administrators McGrathNicol said on Thursday that David Jones’s physical and online stores would keep trading for now, while the business is restructured.

So how did a once prestigious store – which until 2011 boasted “There’s no other store like David Jones” – get to this point?

Warnings signs before today’s collapse

For months, there has been growing speculation about David Jones’ future. Consumer group Choice recently warned people to use their gift vouchers sooner rather than later.

The combination of poor sales and major brands exiting the store has left the retailer in a precarious position.

Just over a week ago, it was revealed that David Jones had secured A$10 million in emergency funding to buy stock ahead of its crucial pre-Christmas sales.

From one Sydney store to many

As a researcher writing a book on the history of Australia’s department stores, I’ve watched for years as David Jones has struggled to reconcile its glamorous past with an increasingly difficult present.

Welsh-born immigrant David Jones opened his first store, David Jones and Co, in central Sydney in 1838. His goal was to sell

the best and most exclusive goods […] that embrace the everyday wants of mankind.

Working with a London-based buyer, Jones had a direct link with the latest trends and fashions. His business flourished and new departments were added. By the beginning of the 20th century, David Jones had become a department store.

A 19th century business model

The modern department store model emerged in the 19th century. In addition to operating different departments managed by their own team, this model relied on a mass market.

Large sales enabled stores to acquire an expanding range of goods at discounted rates. These were sold on to consumers at competitive prices, which stimulated mass sales. It was an enormously profitable loop.

The department store’s success also reflected their unique selling proposition, especially around customer service, convenience and exclusivity.

Department stores once prided themselves on their capacity to deliver an elevated level of service to customers that smaller competitors simply could not emulate.

Convenience was another key offering. In a world of small, dispersed stores, shopping could be a tiresome activity. Long before the arrival of shopping centres, department stores housed everything under one roof, providing an easier and more comfortable shopping experience.

A third element was exclusivity. By having exclusive rights to major brands, department stores differentiated themselves from other competitors. Stocking a particular brand also enabled them to position themselves as arbiters of style.

A weakening grip on customer loyalty

But the foundations of the department store’s unique selling proposition have progressively weakened.

From the 1960s, the self-service model of retailing disrupted the department store’s capacity to maintain its historical level of service.

As shoppers served themselves, staffing levels fell. Casual workers replaced full-time staff. While many customers found themselves missing the old levels of service, the trend towards casualisation continued.

The convenience derived from shopping at a department store was also undermined by more recent innovations.

With ample car parks and rows of specialist shops under a single roof, the suburban shopping centre offered even greater convenience to shoppers. Then came online shopping: often cheaper, and even more convenient.

The department store’s exclusive hold on brands was also undermined by many brands deciding to open their own stores. While department stores countered this shift by creating in-store “concessions” – a store within a store – the move seemed to recast department stores as mere clearing houses.

Failed merger talks and a $400m store

By 2014, the department stores’ profound challenges led David Jones and Myer to explore a possible merger. The talks ended when the South African retailing conglomerate, Woolworths Holdings Limited, acquired David Jones for A$2.1 billion.

The new owners looked to reinvigorate the business by addressing fundamental issues. In addition to improving David Jones’ private label offerings, the firm announced an upgrade of David Jones’ flagship store on Elizabeth Street in Sydney.

The ambitious plans came at a cost. David Jones’ historic Market Street store was sold off. Other property divestments followed, including Elizabeth Street (which was subsequently leased back).

A more profound break with the past occurred when the retailer’s head office was relocated to Melbourne in 2016.

After a $400 million renovation, its Elizabeth Street store in Sydney fatefully reopened in December 2019 – just months before COVID-19 hit.

As digital retailing boomed, bricks and mortar stores floundered. Hopes for a post-pandemic upsurge were subsequently dashed by ongoing cost of living concerns.

After almost a decade of frustrating results, Woolworths Holdings sold David Jones for just $100 million to its current owner, private equity firm Anchorage Capital Partners.

While the sale excluded several properties and the Country Road business, the heavily discounted price nevertheless signalled that David Jones was not a healthy business.

What are the prospects for DJs, Myer and others?

As David Jones faces tough decisions about the future of its stores and staff, we may ask ourselves whether upmarket and mid-range department stores can survive.

Rival retailer Myer recently announced a $276.5 million loss for the 2026 financial year. It does not augur well.

The survival of David Jones and department stores more generally will depend on whether they’re open to a radical overhaul of their 19th century business model.

Learning from the past is easier said than done. But without a willingness to be more innovative and bold, it seems there will no longer be stores like David Jones.