The Rise and Fall Of Department Stores:why Did They Come Unstuck?

Listener: 3 December, 2005.

Keywords: Business & Finance;

Once in the heart of our cities were department stores. Many readers will have visited them as children, accompanied by mother, aunt or grandmother. Perhaps you played in the children’s area while they were shopping. There was the excitement of the lift with its own operator, and one even had an escalator that was so grand to ride. And sometimes – not always, and you had to be especially good – you were taken to the graciously tableclothed tearoom for orange cordial and a generous slice of that very special cake.

Until adults point it out, children live in a gender-free world. I did not realise that department stores were women’s zones. In a world where men went to work and women stayed at home, shops were for women. Department stores were so segregated, according to Helen Laurenson’s Going Up, Going Down: The rise and fall of the department store, that the men had discreet separate entrances to their clothing departments. One of the few stores left, Kirks on Lambton Quay, still has its men’s clothing entrance tucked away on a sidestreet.

Many will read the book for its delightful evocation of a past era. But, as its subtitle reminds us, there has been a rise, followed by a fall of department stores. An economist has to ask why.

Such questions are often answered with the implicit assumption that department stores were the norm, destroyed by some evil spirit. It may be more helpful to ask why the various departments – manchester, mercery, hosiery, haberdashery, mantles, millinery, napery, lingerie … – lived under the same roof. What was the glue that stuck them together?

Some of the glue was credit. Remember how Mum had an account there? Today you use a credit card. The building was another costly capital item. Nowadays, it is owned by some property development company or pension fund, rather than the shop. Import licences were important between 1938 and the 1980s, privileging those who had them, and discouraging new entrants.

Laurenson draws attention to another glue. Before television and all that, how did one know what was the fashion? Your department store followed overseas trends carefully, set them here, and told you. That was why they were competing in the bigger cities, for each serviced a different social group. That’s why your mum went to one or two but not others. (I thought it was the playroof.)

Some argue that department stores failed when shopping moved to the suburbs. But they survive there transformed. The shopping mall is the modern department store, with the children’s area in the arcade, and the separate departments and tearooms as independent shops. Each depends on the judgment of individual entrepreneurs rather than the departmental store management – and come and go depending on the quality of that judgment. The malls meet the needs of many more social groups. I recently walked through one, with my daughter identifying the customers of each clothing shop – by age, by occupation, by taste, by purpose (work, informal, sport, evening …). There is a whole range of knowledge that we men have little access to: Laurenson’s book helps.

The decentralisation of department store management to individual shops reminds us that management was, and probably remains, key. Perhaps that is why a few stores left survive, often targeting the premium market.

Department stores are not the only example of businesses that came unglued. Stock and station agents depended on credit to keep a wide diversity of activities together. As farmers obtained alternative sources of finance with the monetary liberalisation of the 1980s, the agents lost activities to independent providers because the farmers were no longer tied into buying from their credit supplier. Now there is only one left.

So, although we might be nostalgic about department stores (and in the case of a few farm families, their stock and station agent who helped them through the Depression), changes in capital markets, in international communications and management practices, together with increasing social heterogeneity, have led to new ways to meet our needs. But one retains a soft spot for the tablecloth, the cordial and that cake.