rianne Smith in 1880, joined soon after by her husband William Smith and brother Andrew Caughey. It has been helmed through its 144 years by successive generations of those families.  The company’s flagship store is located on Queen Street in the heart of downtown Auckland. During the street’s heydays of the 1960s and 1970s it was a fashion hub and a destination for shopping and entertainment with thriving cinemas and theatres. It was essentially the city’s (if not the nation’s) prime retail strip. However from the 1990s, the city’s shoppers had begun to migrate to suburban shopping malls, then a decade or so later online shopping began its slow erosion of customers from brick-and-mortar stores.  So too, the suburb of Newmarket began to establish itself as the new retail hub, boosted by the opening – and subsequent expansion – of Scentre Group’s Westfield Mall, one of its largest properties in the country, that includes a luxury precinct and an alfresco high-street strip – and that houses the nation’s only David Jones store, a key rival to Smith & Caughey’s.  Tony Caughey, chairman of Smith & Caughey’s, says there is no single reason for the retailer’s demise, referring instead to a “perfect storm” of factors.  ​​“Over the last five years we have experienced a 40 per cent decline in revenue from our physical stores from factors largely outside our control. As a result, the company is trading at a significant loss which is unsustainable. Sadly, we do not believe sales can be restored to levels necessary to continue to operate,” Caughey said in a statement on Wednesday.  A range of factors have created a perfect storm, he continued.  “In recent years the retail landscape has undergone a significant transformation. This includes the growth of increased competition from new shopping malls, and the rise of retail stores for luxury and prestige brands that has reshaped consumer preference and impacted the appeal of prestige department stores.  “In addition, the aftermath of the Covid pandemic has led to a reduction in the number of office workers in the central city on any given day, followed by the huge drop in consumer confidence and the mounting impact of the cost-of-living crises. “The impacts of the ongoing roadworks and development activity in the area have been disruptive to the traditional shopper who is coming into the city centre less frequently.” Smith & Caughey’s has engaged professionals to analyse more than a dozen strategic options for the viability of the business during the past two years. None were considered workable.  “In the current climate there appears to be no appetite for the risks associated with further investment in retail. We have been unable to find a solution to deal with the significant headwinds we face,” Caughey said. “Sadly, we don’t believe this is a storm to be weathered. In the absence of strong consumer confidence, an essential element for a prestige retail organisation, the company is concerned that it may no longer be able to sustain the impact of a continued sales drop in our physical stores compounding the impact of the past five years.” While there are two Smith & Caughey’s stores, most of the focus of attention this week has been on the multi-storey Queen Street flagship. The company’s secondary store in Newmarket – the axis of Auckland’s most expensive residential ward of Orakei and where in recent years the more upmarket international brands have aggregated in the ever-expanding Westfield Newmarket – was always that, an extension of the downtown flagship offering a curation of products and brands in a compact two-storey retail space with little of the character or ambience of the mother ship. Following in the footsteps All but one of Smith & Caughey’s peers have already met a similar fate.  It was only a decade ago that each of the nation’s major cities had its own grand department store, built to serve the affluent farming communities of their hinterlands, and the wealthy families established by the early pioneers in New Zealand, which was only settled by the British post-1840.  Kirkcaldie & Stains (known to locals as Kirkcaldie’s or even just Kirks) was founded in Wellington in 1863 and closed down in 2016. Its prime space on Lambton Quay was taken over by Australia’s David Jones, which in turn called time on the city in 2021 leaving the retailer with just one store in the country – in Newmarket, Auckland.  Dunedin’s Arthur Barnett submitted to the times in 2015 after 112 years of trading, acquired by H&J Smith. At one point it had outposts in four South Island cities, and from 1970-77 even operated a store in Melbourne.  Last November, H&J Smith in Invercargill, the southernmost city in NZ, closed its doors for the last time after 123 years of trading.  And then there was one… The soon-to-be lone survivor of the gentrified group is Ballantynes in Christchurch, although that is but a shadow of its once grand self. Established in 1854, it is the oldest of the group (although it only took the Ballantynes name in 1872 when John Ballantyne acquired what was then a millinery business) and has two stores besides its Christchurch flagship – in Invercargill and Timaru.   Like the others, Ballantynes operated from a rambling collection of seven interconnected buildings behind a grand old Italianate street-fronting facade. In November 1947, the building caught fire, spreading rapidly due to its polished hardwood floors and untreated soft wood-fibre linings (approved by the city council contrary to its bylaws). A lack of fire escapes – and even functioning alarms – saw many of the 458 staff and 250-300 customers trapped inside, with 41 dying in the blaze, which to this day remains New Zealand’s most deadly fire disaster.  By 2011 when Christchurch was decimated by a major earthquake, Ballantynes’ then-building emerged relatively unscathed, given its relatively modern, low-rise (two-storey) construction, but it was still forced to close for eight months while many of its neighbouring buildings were demolished and streets returned to usable state. A privately owned company, Ballantynes’ financial results are not public, however, it has pursued a vigorous online strategy, which – together with the relatively low maintenance of its youthful premises in Christchurch, Timaru and Invercargill and their positioning in relatively well-trafficked high street locations – have likely provided some buffer to the perils that have impacted its Auckland peer.  A lack of scale One contributing factor to Smith & Caughey’s inevitable demise that has not been widely noted is its lack of scale. Unlike Australia, New Zealand does not have a nationwide department store group in the premium space. Aside from some minor absorptions, for more than a century, the large stores mentioned above largely continued to operate on their own, focused on their immediate catchments, whereas across the Tasman, regional department store groups amalgamated. Over time, this gave them strength in buying power and created a compelling opportunity for premium brands and designers, both local and foreign. In New Zealand, a brand would have had to negotiate terms and range with buyers in five cities if they wanted nationwide exposure.  The only exception to this is Farmers Trading Company, established in 1909 to serve, oddly enough – farmers. While it has endured turbulent times and multiple owners over the past 100 years, it has always been a mid-market retailer, meeting everyday needs, and prospering through being a one-stop destination in the pre-mall era. Nowadays, Farmers is owned by Pascoe Group (a local jewellery retailer) and has 60 stores across the country. But they deal in mainstream brands, filling a niche somewhat more budget-oriented than Smith & Caughey’s customers but more aspirational, perhaps, than discount-oriented The Warehouse Group.  Furthermore, for Smith & Caughey’s, mid-market to luxury brands in beauty, fashion, homewares, kitchenware, fine foods and those other staple department store categories may have found it more lucrative to develop their own store networks where their brands could be displayed to the exclusion of competitors, and where they don’t need to cede margins to a sales partner.  Smith & Caughey’s may also have been impacted by the recently arrived luxury department store concept Faradays, in Parnell (a luxury suburb close to Newmarket), which has secured a lot of brands pitched to younger, trendier shoppers rather than the older customers who have traditionally been the target of older department stores.  What happens next While Tony Caughey has been diligent – perhaps magnanimous – in giving staff and interested parties a five-week window to offer feedback on the company’s future, the reality is there is very little hope of any lifeline. Two years of consulting and a dozen options might illustrate the commitment to keeping the family business going, but they also clearly signal the lack of any means of escaping the inevitable.   The company says it will use the consultation period to consider and evaluate staff feedback on the proposal, and any other options for the retail business that may emerge during the process.  Caughey acknowledges the “profound challenge” in presenting the plan to staff this week.  “Presenting this proposal has been a deeply emotional time for the people connected to this historic establishment. We are acutely mindful of the impact to staff, customers and suppliers by the proposal,” he said.  “This is an unsettling position for the staff, board and shareholders. We must be realistic and at the heart of us commencing this consultation process now, is the need to look after all Smith & Caughey’s staff as well as we can, and to operate in good faith.” The closure date is expected to be soon after the busy Christmas season and a six month lead time gives the chance of an orderly winding down for both suppliers, staff and customers. Caughey says the company will be equally committed to honouring its Christmas traditions. “Whatever the outcome of the consultation process, our intention is still to offer our traditional experience of inspiring world class Christmas windows, Santa’s Enchanted Forest and Santa Claus himself,” he said.  Robert Stockdill, global head of news with Inside Retail, is a New Zealander and was a customer of Smith & Caughey’s during 18 years he lived in Greater Auckland.