David Jones' strategy targets omnichannel, staffing and store renewal

Published on Wed, 25/09/2013, 03:00:07

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By Claire Reilly

David Jones has released its yearly results, announcing profits for the 2013 financial year roughly in line with the last financial year, excluding costs associated with the retailer’s new Retail Brand Management Agreement with Dick Smith.

For the 52 weeks ended 27 July 2013, profits were $95.2 million, including a pre-tax charge of $9.1 million relating to the Dick Smith transaction. Excluding the impact of this one-off charge, profits were $101.6 million — a marginal increase on last year’s $101.1 million result.

As part of the results release, David Jones updated the market on its Future Strategic Direction Plan (FSDP), first announced in March 2012 as a measure to combat the financial losses David Jones was experiencing amidst a difficult retail climate.

David Jones CEO and managing director Paul Zahra said the FSDP initially set out the retailer’s strategy “to deal with structural changes in the retail sector and the prevailing challenging retail conditions”.

“The plan set out the ‘blueprint’ for the future of our business,” he said. “Key priorities were the transformation into an Omnichannel Retailer, cost price harmonisation and strengthening our core business.

“Through FY13 we have made significant progress in not only implementing our Future Strategic Direction Plan, but also in refreshing the plan and establishing a foundation for future innovation and growth within our business.”

Zahra outlined several key areas of business development for David Jones as part of the retail strategy, including, “addressing the structural changes faced by the retail sector; strengthening its core business; enhancing its store network; and focusing on the next steps in the company’s strategy”.

On the first point, DJs has advanced its omnichannel strategy, including the establishment of a new fulfilment centre and call centre, as well as back-end structures to assist with logistics and consumer-facing features including a new mobile-enabled online store, launched in November last year. Through social media expansion and online marketing around its new online assets, the company claimed a 711 per cent quarter-on-quarter increase in sales in 4Q13, and an “average online order [that] is three times the value of its average in-store transaction value”.

Related to online shopping, David Jones has identified cost price harmonisation as a major issue for the business — this is a common gripe for consumers who often have to pay greater prices for products from international brands on Australian websites, compared to overseas sites. DJs said it has identified 250 international brands that “required cost price harmonisation” and has negotiated to “harmonise” prices with 60 per cent of these.

Customer service has also been isolated as a key focus for the business, with DJs developing a new “contemporary service standards” training program, rolling out a new point of sale system, and introducing new specialty service and management roles for staff.

To improve gross profit margins, DJs has targeted “low productivity” categories such as electronics (sales of electronics will now be managed in-store and online by Dick Smith), reduced discounting activity and increased the prevalence of its own private label.

Finally, David Jones has opened two new stores in Victoria (Highpoint in March 2013, Malvern Central in September 2013) with two new stores in Indooroopilly (Queensland) and Macquarie Centre (New South Wales) due to open in May 2014 and FY15 respectively.

According to FSDP update, “The new stores incorporate the company’s ‘Next Generation Store’ concept and include features such as more efficient energy usage, more productive Gross Lettable Area, complimentary customer Wi-Fi, customer dwell areas, traffic analytics, mobile device charging areas and high tech omni-mirrors that allow customers to photograph and post images on Facebook, Instagram, Twitter and Pinterest or email images of merchandise to family and friends”.

Speaking about the future of David Jones, Zahra said the business would need to “continually innovate” in order to adapt to the demands of the new global market.

“We have a well positioned store portfolio of 38 stores mostly in metropolitan locations with attractive demographics,” he said. “In addition we have an iconic brand, a distinctive positioning in the Australian market, a strong service ethic and a loyal customer base.

“These strengths together with the initiatives in our Future Strategic Direction Plan position us well to address the challenges the Australian discretionary retail sector is currently facing and to leverage the opportunities for future growth.”


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