Popular retailer goes: Global megastore launches in place

AUSTRALIA'S department store bosses should be very afraid.

After years of divvying up the $19.5 billion market into clearly defined segments - with Kmart and Big W battling for the discount shopper, David Jones and Myer at the premium end and Target in the middle - the titans of traditional retail are about to get a rude awakening.

A global discount chain is about to disrupt our department store sector, with plans to open 35 stores in April under a business model unlike anything we've seen.

While shopping at local department stores is a fairly predictable affair, TK Maxx will bring its fast-changing product offering Down Under, in an approach that has been compared to H&M, Zara and Top Shop.

"They'll have new styles coming into the store every week, so that as soon as consumers go in, they think they'd better buy the product now, because next week it might not be there," IbisWorld retail analyst Lauren Magner said.

"It creates that scarcity effect and encourages consumers to buy on the spot. And they know there'll always be something new and fresh."

While mid-market department store Target is likely to be at the most risk, she says "no one is safe", noting it has been years since a new competitor entered the sector.

The difference between TK Maxx and traditional Australian department stores is that "it doesn't buy seasonally," Ms Magner said.

"It buys constantly throughout the year with several deliveries per week and many products on the shelves - and no two stores are the same."

Owned by American giant TJX Companies Inc, which operates the similarly named TJ Maxx in the United States, TK Maxx has department stores across Europe.

Parent company TJX has bought out Australian discount store Trade Secret and plans to convert its 35 stores to the TK Maxx brand.

Trade Secret has stores on the Sunshine Coast, as well as in Toowoomba and Ipswich. 

WHAT'S IN STORE?

TK Maxx's fast-changing range is expected to rival what can be found at Target, Big W, Kmart and Myer, but with more of a focus on fast-changing trends.

"It all depends on what their strategy for Australia is; the demographics here are very different to overseas, so they might bring different products here," Ms Magner said.

The company is keeping mum about exactly what it has in store for local shoppers, with spokeswoman Tessa Buenen declining to name any brands it will sell here.

But she promised a "huge" assortment of women's, men's and kids' fashion, footwear, accessories, lingerie, beauty and home wares from local and international brands at "a variety of price points".

"Let's say a department store cancels an order, if a manufacturer makes up too much product or we have a vendor who is clearing product, our buyer goes in and negotiates a great deal and we're able to pass on those savings," Ms Buenen told news.com.au, saying TK Maxx would lure them with "the thrill of the find".

"We know that Australian shoppers are especially smart and savvy and they have a great appetite for international brands," she said.

"The majority of the product we sell is current season and we deliver great value through the way we buy ... You can find something basic at a low price, but also you can walk in and find a high end brand or up and coming designer."

DEPARTMENT STORES DISRUPTED

With Harris Scarfe set to open up to five department stores on behalf of UK giant Debenhams over the next few years, the sector is in for a major shake-up.

That venture was likely to be pose more of a challenge to Myer, Ms Magner said, while TK Maxx posed a big risk for already-struggling Target.

A shift in consumer sentiment towards bargain hunting has already hit the chain hard, as clothing shoppers abandon the mid-market in favour of a mix of cheap buys and quality investment pieces.

"Target is losing sales to Kmart, and it's a difficult situation for [parent company] Wesfarmers to figure out a strategy where those two companies can be successful side-by-side," Ms Magner said.

Sales at the retailer are expected to contract by an annualised 1.9 per cent to $3.4 billion over the five years to fiscal 2016-17, IbisWorld's latest industry report reveals.

By comparison, Kmart - which has implemented a savvy buying and marketing strategy focused on everyday low prices - has boosted its revenue by 14.1 per cent in 2015-16.

"Operators like Target risk being pushed out of the industry if they're unable to offer the low prices being demanded by consumers," Ms Magner said, noting that Kmart had managed to lower its prices by sourcing from cheaper overseas manufacturers and streamlining its product range to boost sales volume.

"It's also phased out discounting as a pricing strategy in favour of having low prices all the time so they can have consumer traffic coming through their store all year round," she said.

And Kmart was perceived by consumers as being a better value proposition by offering high quality at a low price, she said.

- With Rebecca Sullivan

News Corp Australia

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