Alarm bells ring over future of hallowed Sydney institution

David Jones occupies a hallowed space for many generations of Sydneysiders. A trip to the landmark store in the heart of the CBD was a rite of passage for young men and women from the suburbs. Children would spend many sleepless nights before Christmas in giddy anticipation of viewing the magical toy display that filled the street-level windows along Market Street and beyond.

So when news broke this week that the department store was delaying payments to its suppliers and they were being denied trade credit insurance to cover them if they were not paid at all, a wave of panic swept across the city.

The company and its owners, Anchorage Capital, dismissed concerns about the group’s ability to pay its bills as “misinformed” and argued it was in a good position to withstand a turbulent economy.

But even still, serious doubts about its viability remain. As business columnist Liz Knight wrote on Tuesday: “In the already fragile discretionary retail sector, this is a significant red flag – despite commentary from the company that its long payment terms are the result of a new ‘payment supplier process’.”

Quoted in a Good Weekend feature last September, former David Jones chief executive Paul Zahra says the problems besetting Australian stores are part of a global trend.

Department stores have been under pressure in Australia and abroad, with big US brands Saks Fifth Avenue and Neiman Marcus collapsing amid pressure from online outlets.

“Department stores have been structurally challenged around the world. They’re having to rethink their physical footprint, invest heavily in digital to remain relevant, and rethink their value proposition,” Zahra said.

The latest dramas are a long way from the David Jones origin story in 1838 when Welsh draper David Jones opened one of the world’s first department stores in Pitt Street. DJs, as it is commonly known, and Grace Brothers (which renamed itself Myer) become icons of the CBD and beyond, as they became anchor tenants in suburban shopping malls.

Roger Leong, senior collection curator at the Powerhouse museum, said DJs was the “tastemaker of Sydney’s department store landscape”.

“All the society ladies would have their standing account there; they’d be chauffeured in and buy their gloves or their perfume, and then they’d be off to lunch, maybe upstairs to the Grand Restaurant or to the famous Princes in Martin Place.”

However, in recent decades, department stores have been smashed by an alarming combination of the global financial crisis, the COVID-19 pandemic, an ongoing cost-of-living crisis and, most painfully, the rapid rise of online shopping. They have also been hit by what’s termed the bifurcation of retail, where top-end shoppers have migrated to super-luxe stores such as Hermes, and the bottom end of the market hunts for more bargain-basement offerings, with department stores taking the hit in the middle.

Australians spent a record $69 billion online in 2024 – but department stores accounted for only 5 per cent of this.

While Anchorage is desperately trying to reassure the market it can withstand these challenges and remain viable, it’s hard not to fear for the future of this venerable Sydney institution.

Unless the retail giant can find a dramatic way to reinvent itself for the online generation, it does feel like the glory days of David Jones as a bastion of middle-class refinement may be numbered.

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