Debenhams' debut set to shake up the competition

Debenhams plans to open smaller format department stores in Australia, offering an exclusive selection of its designer fashion labels.

St Collins Lane in Melbourne, which will be the home of the first Debenhams department store in Australia. Photo: Stefan Postles

The arrival of the British retailer is expected to intensify competition in Australia’s $18.6 billion department store sector, which is already thriving after the entrance of the likes of Zara, H&M and Uniqlo.

Research company IBISWorld’s senior industry analyst Nathan Cloutman said Myer is set to feel the biggest impact from Debenhams’ arrival.

“Debenhams will threaten Myer’s market share as they both target men and women between 35 and 55 years old and from the high to mid-price range,” he said.

“David Jones on the other hand is focused on the higher end of the market.”

Mr Cloutman said department stores have higher operating costs and will continually struggle with the entrance of international specialty retailers and emergence of online rivals, including ASOS.

“Over the next five years there will be more price competition and heavy discounting. This is going to further constrain revenue and profit growth,” he said.

Motley Fool research analyst Scott Phillips said Myer is also vulnerable as it is in the middle of work to turn around its fortunes, while David Jones has sprinted ahead with strong sales growth.

“DJs have found themselves a place at the top of the market,” he said.

“Debenhams may put more pressure on the underperforming retailers.”

But the British retailer will face its own challenges, with Australia’s retail landscape dominated by Westfield shopping centres rather than high-end street shops, Mr Phillips said.

Debenhams will likely drum up excitement, and offer more prestigious UK and European brands, he added.