Legacy stores have been closing but physical retail is not 'dead'

Once likening its clothes to the fashions shown on the streets of Paris and Milan, Katies promised skirts, shirts, pants and knitwear for $26 a piece. "Matchable clothes at an unmatchable price," was the women's retailer's tagline in a commercial aired in 1991.At its peak in the 80s and 90s, Katies was seen as a worthy, more affordable opponent of garments sold at David Jones and Myer for women who wanted to look smart and stylish on a budget."From top to toe everything is $19," one advertisement for skirts and sweaters read.The "Going Places with Katies" campaign was a popular, iconic advertising slogan used by Katies during the 1980s. (Supplied: Australian Women's Weekly)But at the turn of the century, the 60-year-old fashion brand struggled to reframe itself for more youthful shoppers.Katies advertisements promised affordable fashion that was up to date with the latest trends. (Supplied: Australian Women's Weekly)Fast forward to January 2025 and the brand, once a fixture of shopping centres around the country, would close its remaining stores after decades of falls in sales and a change in public perception of the brand.Part of the Mosaic brands group, it was one of the final stores in the portfolio to close alongside Rivers, following the demise of Noni B, Rockmans and BeMe.Mosaic's collapse came after it had been struck with fines and court action, as well as consumers winding back on spending.An old Katies storefront in Kalgoorlie, Western Australia.The past 12 months have seen several long-running retail stores disappearing from Australia's high streets and shopping centres.And more than clothing stores have been hit.In June alone, Lincraft, Glue Store, and Barbecues Galore all announced the closure or scaling down of their physical stores by the end of this year.Most recently, shoe store Betts announced it would close 20 of its 35 stores, shifting toward an online-focused business model.Events over the first half of this year, including the Middle East conflict, created a tough environment for Australian retailers, with costs rising and demand weakening, according to the Deloitte Access Economics Retail Forecast. As a result, more chains are shunning storefronts in favour of online business models to keep costs down and meet Australians where they are actually shopping.The 'Kmart effect'While households are tightening their belts, Caroline Tan, a fashion retail expert at RMIT, said retailers like Glue Store, Lincraft, and Barbecues Galore all had the same fundamental problem: "massive overhead with nothing that differentiated them"."When consumers tighten spending, they don't shop generic," she said."They trade down to budget options or seek something genuinely distinctive."The 'middle ', which are stores with mid-range prices with no clear point of view, simply do not survive in this climate."A Kmart store seen in Hornsby in the 1990s. (Supplied: Facebook)Ms Tan said if Australians were visiting a physical store, it was likely stores such as Kmart and Target, which duplicated fast-fashion trends at a lower price than traditional mid-market brands while creating an in-store experience."The Kmart effect is real, and proved that fast-fashion trends don't require a premium price tag," she said."The entire middle market got hollowed out from underneath."Mid-range brands can't match Kmart's pricing or branding doesn't justify the premium anymore."Over the two years until July 2022, Kmart captured the facial data of "tens or hundreds of thousands" of customers. (Supplied)The group of brands, which includes Kmart and Target stores as well as the Anko products sold in them, made $11.4 billion in revenue last year, according to the Wesfarmers 2025 annual report.The middle market refers to middle-income Australians and the value-driven retailers that target them.Despite these economic pressures hitting households, the latest figures from the Australian Bureau of Statistics showed that consumers continued to spend on retail despite cost-of-living pressures.Retail spending increased 5.8 per cent over the year to May to $39.67 billion, with growth recorded across every retail category.Australian Retail Council Chief Economist Glenn Fahey said while the stronger-than-expected sales figures were encouraging for some retailers, they would not necessarily translate into stronger profitability."Retailers continue to face significant cost pressures across wages, freight, energy, leasing and broader supply chains, and those costs continue to erode already tight margins," he said."While May was a robust month, we know retailers entered a much more subdued end-of-financial-year promotional period in June."Our forecasts continue to point to relatively weak EOFY sales growth, reflecting the fact consumers remain highly value-conscious and continue to carefully manage household budgets."Favouring online marketplacesChristine Moody, a brand expert at QUT's business school, said another major issue for physical stores was that people would not shop at niche stores when they could access online mass discount marketplaces that delivered fast like Amazon, Temu or Shein."They [these brands] are the ones that are tending to disappear because there's no unique story about the brand and you can get the product from anywhere and probably a little bit cheaper if you get a shop around. So you've got to have that point of difference," she said. Ms Moody said consumers had changed and many would only attend a physical store if enticed with a unique user experience.Australians spent a total of $82.6 billion online in 2025, up 14 per cent, according to the Australia Post eCommerce report 2026.Now, 24 per cent of all retail spend is online."It's time for brands to really dig into the story of their brand and really think about who your customer is because if they can't think about the in-store experience, I'd rather stay home in my slippers and order online," Ms Moody said.The in-store experienceMs Moody said shoppers would only head to their local centre if they could have an enjoyable and convenient experience.She said physical stores were really important for touching and feeling things, but they could not just be the extension of an online showroom.Clothing retailers had a good month in April, with sales up 3.2 per cent. (ABC News: Giulio Saggin, file photo)"You walk into a store like Mecca and it's an experience and you will probably walk out with more than you intended to buy," she said. "It's not just the shelves, the products, it's how you're greeted, it's how it's laid out."It is targeting people who have both the ability to spend and a compelling reason to visit the store."Noni B and all remaining Mosaic group stores closed their doors by mid-April this year. (ABC News: Adobe stock)The KPMG retail sector report asked 750 Australian consumers how important advancements in shopping experiences were in 2026, with 47.1 per cent of respondents saying improved in-store experiences were important.They were also asked what challenges prevented them from enjoying an ideal shopping experience, and 24.4 per cent said lack of in-store assistance or expertise.So how are some thriving?Both Ms Moody and Ms Tan agreed the rule book for creating and maintaining a successful physical retail chain had "completely changed"."Opening a shop just to act as a point of sale is a high-risk gamble," Ms Tan said."But if you use physical storefronts as a multi-sensory extension of your digital presence (tight inventory, flexible spaces, community engagement), brick-and-mortar is still one of the best ways to build long-term brand equity."Emerging womenswear brands such as LKSD and Fayt that had expanded from online stores to retail spaces across Australia in recent years were an example, she said."LSKD has scaled past an estimated $150 million in annual revenue with goals to expand its physical footprint," she said."When they open a location, they run community 'tights and shorts swaps' that draw massive crowds."Their store isn't rows of generic shelves, it's curated "outfit destinations" built around activities and lifestyle moments."She said it was not just retail, it was "community building"."You've got premium brands building experiential destinations with genuine innovation," she said."And you've got the middle tier, which is getting wiped out because it's neither."Generic retail is dead, physical retail isn't."