David Jones Enters Administration After 188 Years: A Lesson in Sunk Costs

By Olivia Hart

David Jones has entered voluntary administration for the first time in its 188-year history, leaving more than 6,000 employees across Australia and New Zealand waiting to learn what happens to their jobs. The collapse marks the latest failure of a legacy Australian retail brand, and it follows a pattern that analysts say smaller operators ignore at their peril.

The retailers are falling in quick succession. Footwear chain Betts entered voluntary administration in July this year, though it has since secured a $13.3 million rescue deal. In September, fashion brand Cue Clothing entered receivership, and 31 stores have already been earmarked to close.

Why did these brands fail?

Consumers once visited David Jones, Betts and Cue for three reasons, according to the analysis: they were places to find things, they offered someone's taste to trust, and they suited occasions people wanted to dress up for. People still want clothes and shoes. The way they get them has changed.

Shoppers now find products on their phones, trust the opinions of people around them more than the store itself, and can start an occasion anywhere with accessibility at the tap of a finger. The verdict is blunt: the format has dated, not the need.

The precedent is long. Music moved from records to tape to CDs to streaming, and listeners never stopped listening — the businesses built around a single format either changed or did not. The corporate graveyard tells the rest of the story:

• Blockbuster filed for bankruptcy in 2010
• Kodak followed in 2012
• Toys 'R' Us collapsed in 2017
• Sears in 2018
• Tupperware in 2024

Every one of these brands was once considered the default in its category.

Is this happening to search too?

The pattern is not confined to retail. The BBC recently reported the value of Google plunging US$500 billion as its own AI search hit its ad sales. That is roughly three-quarters of Australia's annual GDP wiped from a single company's market value. More consumers now use AI, TikTok, or friends before search engines — an evolution of search playing out in real time.

What does sunk cost have to do with it?

When something — in this case, a business — has cost years, money and memories, it becomes emotional. Owners keep it going longer than they should. That is the sunk cost fallacy at work: the more invested, the harder it is to see the format clearly.

The evidence dates back decades. In 1985, researchers Hal Arkes and Catherine Blumer sold season theatre tickets at three different prices and tracked who turned up. The people who paid full price attended more plays in the first half of the season. The performances were identical; the only difference was the price paid. The money was spent either way — paying more simply made people feel obliged to get their money's worth.

David Jones fits the mould, on the outside at least. The analysis describes a business carrying what it has already paid for: multi-level stores in big shopping centres, the big leases that came with them, and 188 years of legacy as the place everyone went for occasions. Those decisions were not wrong when made. Market movements happen subtly, but the changes can happen rapidly. Eventually the decisions get heavier because the cost stays front of mind.

What should small business owners actually do?

The same trap operates at smaller scale, the analysis warns:

• Service offers that no longer sell but built the business
• A logo designed with friends late at night that no longer fits
• Stock, software or a shop fit-out paid for upfront and kept in use long after it stopped serving
• A first customer the owner keeps saying yes to, even when the work no longer aligns

Many businesses do it. Many shoppers do too. It is how people are wired, the analysis concedes.

The prescription is one question, asked honestly: if you were starting a business today, would you make the same choices again? Pick one thing, then decide whether to keep it, change it, or retire it. The closing instruction is worth repeating: protect the need, not the format.

For David Jones and its 6,000 staff, that test came 188 years too late — and the administrator's next moves will show whether the brand survives its own sunk costs.