CHRISTMAS can be a stressful time. But this one will be especially tough for the executives of Australia’s big department stores.

Christmas 2017 is going to be make or break. If it goes badly, department stores might find their slow decline turns into a downward spiral.

Australian retail spending is soft across all categories, but of the major categories the ABS reports on it is department stores that are doing worst. This next chart shows that since 2009 sales have drifted backwards, not keeping up with economic growth, inflation or population growth.

The grand old business model that gave the world names like Harrods — as well as our Myer and David Jones — might not fit with the modern world.

BLEEDING

David Jones’ preliminary audited results for the last year were a litany of bad news for people who like department stores. Profit fell sharply as revenue went backwards. But David Jones seems to have a plan.

David Jones department stores have long included “food halls.” Food is an area where Aussies are spending more money, so David Jones is investing in boutique convenience stores that will sell fancy foods to posh people. To the extent this means they’re moving away from being a department store, it might yet save them.

Myer results came out today. We knew already they are going to be a murder scene and they delivered, with revenue falling 2.7 per cent and profit going to shareholders down by 80 per cent.

Myer had already sheepishly admitted to investors its results would not be as good as expected. It announced in July that its investment in Topshop was a multimillion-dollar write off and that its brand Sass and Bide was not worth as much as previously.

The Myer stock price is half its recent peak as investors prepare themselves for the worst.

WHY NOW?

Myer and David Jones are being undermined by two separate trends.

First, consumers are unconfident, and that means we are mad for cheap. With crappy wages growth and high underemployment, we want discounts more than anything, and that’s not what Myer ad DJs are selling.

(One department store killing it in Australia: Kmart. I was shopping for a new dog bed the other day and they had one at half the price of Aldi. They’re crazy cheap.)

But that’s just about bad times. Bad times come and go. When they do eventually go, the internet may have changed the game so department stores can’t survive. The internet is the second major trend that is eroding department stores.

In the USA, where Amazon is well-established, some of the biggest department store names like Macys and Sears are closing stores all over the country. The impact has been so great that it has dragged down the malls that housed those department stores too. America, land of the mall, is finally moving away from the concept.

Amazon is rumoured to be launching in Australia within 60 days. I’m not sure I believe that. The PR risk of launching too soon and having delivery problems that ruin Christmas is enormous. While there could be a partial opening, I’d expect Amazon to make a full launch after Christmas and give themselves a year to build up slowly to the frenzy of the gifting season.

That could make Christmas 2017 crucial — a sort of last stand for Myer and David Jones. If they can’t make a good year out of it this year, in a few years Myer’s famous Christmas windows might be no longer.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy