Contents Page Page No.

1. Executive Summary..1
2. Introduction...1
3. Macroenvironment (PESTLE) Analysis...1
3.1 Political...1
3.2 Economic1
3.3 Social..2
3.4 Technological.2
3.5 Legal...3
4. Porters Five-Forces Analysis..3
4.1 Barriers to Entry.3
4.2 Threat of Substitutes,,,3
4.3 Bargaining Power of Buyers..3
4.4 Bargaining Power of Suppliers..4
4.5 Rivalry Between Existing Competitors.5
5. Competitive Advantages.5
6. Conclusion...6
7. References7

1. Executive Summary

This report will explore the macroenvironment that Myer Department Store operates in, and
assess the threats and opportunities presented by it. It will also examine the Australian retail
industry, and identify the possible challenges that Myer may face while trying to differentiate
itself and retain its share of the market; as well as identifying the key resources that Myer
possesses, and how they might be of use in the future of the company.

2. Introduction

Myer is an Australian departmental store that was first established in 1911 by the Myer brothers.
It specializes in 11 main product categories: Womenswear, Menswear, Miss Shop (Youth),
Childrenswear, Intimate apparel, Beauty, fragrance and cosmetics, Homewares, Electrical goods,
Toys, Footwear, handbags and accessories, and General merchandise (Myer, 2017).

Currently, 66 Myer departmental store outlets exist across Australia, with 23 of these located in
CBD (Central Business District) areas and flagship locations.

Following years of decreasing profits, Myer announced the adoption of a new company strategy
in September 2015, aiming to increase sales by 20% over a five-year period of time. The
company aimed to place a greater focus and greater investments into their best stores and most
valuable customers, while producing improved merchandise and shopping experiences to meet
these customers needs. They also aimed to meet the challenges facing the retail sector (Myer,
2015).

3. Macroenvironment (PESTLE) Analysis

3.1 Political

Australia is currently governed by a parliamentary democracy under a constitutional

monarchy, and is considered to be fairly stable, and does not significantly affect the department
store industry.

3.2 Economic

Australias GDP grew 2.9% in 2016, an increase from 2.5% in 2015, and has grown at an
average rate of 3.3% per year since 1992. This signals a steady growth in the Australian
economy, and indicates further possible growth for industries in the future, the retail industry
being one of these. Research has indicated that retail revenue was expected to grow at an annual
rate of 5.4% from years 2011-2016 (Canadean, 2016), and is an opportunity for Myer to increase
their future revenue.

3.3 Social

The Australian demographic consists of a population that is mainly 25-54 years old. Research
shows that people in the age group of 34-54 years old account for approximately 40.3% of the
department store market; consisting largely of consumers with established careers, stable
incomes and most likely children (Magner, 2017), they are likely to visit department stores such
as Myers. Due to their type of income they possess greater spending power, and are a potential
strength which Myer can make use of.

3.4 Technological

The retail industry which Myer operates in has received medium digitization. This includes
web advertising, the usage of social media platforms, and the option to shop online. There are
significant opportunities for future improvement in this area for Myer, given that the organization
has already made some use of this factor in exploits such as their Omni-Channel shopping, and
the existence of accounts on social media platforms such as Instagram and Facebook.

The online retail industry in Australia was also projected to increase its revenue at an annual
rate of 13.2% during the period 2011-2013 (Canadean, 2016). This presents opportunities to
Myer in terms of the usage of further technological advancements to capture a larger share of the
market.
3.5 Legal

In 2016, the Australian government announced a 2.4% minimum wage increase, effective as of
1st July, 2016. This move will drive up manpower costs for the retail industry, and act as a threat,
especially with the potential growth of the retail industry. The need to obtain increased
manpower can drive up operating costs and therefore reduce profitability.

4. Porters Five-Forces Analysis

4.1 Barriers to Entry

Myer operates in the department store industry in Australia, alongside four other major players
that consist of Target, Kmart, Big W and David Jones. The industry is highly concentrated, with
major players contributing to 93.1% of the industrys revenue. (Magner, 2017). This proves a
significant barrier to entry to any organizations considering entry to the market, as they would
have to differentiate themselves in a short amount of time in order to effectively compete with
the existing department stores which have already captured a majority of the customer base. This
would require a significant amount of resources which new entrants may or may not possess.

4.2 Threat of Substitutes

There is a fairly low threat of substitutes in the industry. This is due to a similar key point
offered by all major players to their customers- an offer to match competitors prices should their
prices prove to be lower than their own. This ensures that there is not much difference between
product prices at the major department stores. Being department stores, they also largely stock
the same brands, therefore ensuring that department stores generally offer the same price for the
same amount of value.

A significant point of differentiation are the services offered by the department stores- for
example, Myer offers their Giftorium service, which suggests gifts according to special
occasions and the gender of the recipient. David Jones offers in-house fitting services for brides-
to-be, prosthetics, and lingerie; while Kmart provides a shopping service for businesses. These
unique services ensure that these department stores have at least a little competitive edge over
their competitors.

There is also a difference in the way the stores are perceived; Myer and David Jones are viewed
as more sophisticated, while Kmart, Target and Big W are considered more mid-range. As such,
customers may not easily substitute certain stores for another.

4.3 Bargaining Power of Buyers

Buyers have little to no bargaining power with regards to department stores. This is due to the
fixed prices set by department stores, and the large size of these organizations. There are often
more a number of franchises set up across the country, and product prices are regulated across all
of them.

Customers are less capable of bargaining for lower prices as the department stores are not at the
mercy of a particularly small customer base; with this, they are less likely to cave to customer
demands and lower their prices.

4.4 Bargaining Power of Suppliers

Suppliers possess weak bargaining power as there are a large number of suppliers for goods
such as clothing, cosmetics, and household appliances available in all over the country. If a
department store decides not to obtain goods from a certain supplier, there are a significantly
large number of other suppliers to choose from. Suppliers have little choice in bargaining for a
higher price at which they would potentially sell their goods.

4.5 Rivalry Between Existing Competitors

Rivalry between existing competitors in the retail industry is fairly intense. The key players in
this industry all possess numerous outlets; with Kmart and Big W in particular owning 214 and
186 venues across Australia respectively. In comparison, Myer and David Jones only operate 66
and 42 outlets each. In addition to this the market is in a gradually declining state, with a
decrease in overall revenue in the past 5 years (Magner, 2017).

Apart from the threat of competitors with physical stores, the organizations may face threats
from online retailers such as Amazon, which possess large amounts of capital and are slowly
penetrating the Australian market.

5. Competitive Advantages

Myer possesses an edge in the technological aspect of shopping. In 2016, they partnered with
eBay to bring shoppers the first departmental store VR (Virtual Reality) shopping experience.
This resource can be considered rare, as none of the other competitors have managed to produce
a similar shopping experience. It might also be somewhat inimitable as competitors are not likely
to be able to obtain a partnership with eBay.

Technology is expected to be heavily involved with the retail experience in future. Therefore, a
sustainable competitive advantage can be established if Myer continues to make use of it to
provide and improve customer experiences, instead of simply focusing on product range in the
future.

An increase in the degree of personalized service is likely to entice more customers to shop with
Myer; a good example is their Giftorium, which delivered better results than expected at
Christmas (Myer, 2016). It is both a valuable and non-substitutable resource, and should be
expanded upon in order to produce a greater competitive advantage.

6. Conclusion

In essence, it can be seen that Myer is operating in a highly-saturated market, and experiences
difficulty in capturing market share. This, however, may be combatted by shifting its focus to the
customer experience to gain a competitive advantage, instead of merely aiming to expand their
product lineups.

References:

1. Central Intelligence Agency, 2017, The World Factbook: Australia. Retrieved 21 Feb
2017.
2. Myer, 2017, About Us. Retrieved 19 Feb 2017, from <https://www.myer.com.au/p/about-
myer/the-company/about-us/>.

3. Magner, L., 2017, IBISWorld Industry Report G4620 Department Stores in Australia,
IBISWorld.

4. Tang, E., 2016, 2015 GDP Growth Rate of 2.5 Per cent Confirms the Resilience of Our
Economy, Australian Trade and Investment Commission.

5. Dobbs, M.E., 2014, Guidelines for Applying Porters Five Forces Framework: A Set of
Industry Analysis Templates, Competitiveness Review, vol. 24 No. 1, pp. 32-45.

6. Canadean, 2016, Myer Holdings Limited, Canadean.

7. Myer, 2015, New Myer: A Sharper and More Focussed Offer to Serve a More Valuable
Customer, Driving Productivity and Growth, Myer Holdings Limited.

8. Australian Department of Industry, Innovation and Science, 2016, Australian Industry

Report, Australian Government.