After seeing its profits slump by nearly 40 per cent year on year in 2012, Australian department store David Jones (DJs) put itself up for sale. Mid-market department store Myer appears to be closing in on a merger (or takeover, as some analysts have termed the deal) with DJs.
DJs posted a 4.6 percent slump in profit in its first-half results, in spite of a 3.8 per cent increase in sales, and there is little doubt that the 150-year old Australian institution is in trouble. Its leadership is in question, with CEO Paul Zahra announcing his retirement in October and the abrupt departure of its chairman and two non-executive board directors. Zahra has since been persuaded to stay on by new chairman Gordon Cairns, but even if Myers merges with DJs it will have an uphill climb to revitalise a brand that no longer interests Australian shoppers.
DIAGNOSIS 1 Douglas Nash
Douglas Nash, director of strategy, Interbrand Sydney
For years, David Jones has failed to make investments in its brand that could galvanise a willing, but jaded, customer who now has real choice in where to shop.
DJs has to wake up to the fact it is a brand, and not merely a collection of premium retail footprints with concession stalls in them. This means that it has to embrace wholeheartedly the belief that DJs should create a lifestyle that a customer can have a long-term relationship with.
Practically speaking, if potential customers are going to buy into this, it means DJs needs to invest in a service that creates value from its recent investments in back-end technology.
Secondly, if it is going to be able to do this without bankrupting the business, it needs to rediscover the authenticity of the brand, and their internal commitment to it.
In retail, the middle market is a fundamentally dangerous place to be in, and DJs has been chasing greater volumes at the expense of what its customers know it to be:a luxury shopping experience.
DJs needs to stop diluting the brand. It's time to stop competing on price (never a strong suit) and start adding value that customers will be prepared to pay for. In short, DJs has to become a high-margin business, with a suitably high level of service.
DIAGNOSIS 2 Douglas Nicol
Douglas Nicol, creative partner and director, The Works Sydney
A fixture on the Australian high street, David Jones trades on its reputation as a premium retailer for the masses, however, with the exception of a few capital city locations a visit to one of its suburban stores is anything but the premium experience its marketing portrays. Money, quite rightly, is being spent on creating a multichannel experience, but I suspect that’s being done at the expense of the in-store environment so customers are seeing a promise that isn’t being delivered.
While specialist retailers such as Zara have a compelling story attached to their brand, the only story David Jones seems to have is that it’s a bit posh. Trying to be all things to all people is increasingly difficult and the reality is you don’t tend to do anything very well. DJs should consider doing two or three things and doing them well.
Customers use high street retailers to look at and try on products, then buy them online elsewhere. While not unique to David Jones, more exclusive products that can only be purchased in-store would enhance the premium proposition it advances.
In the US, department store Macy’s claims that 50 per cent of its sales start in store and then end online. DJs needs to combine social, digital and mobile with its in-store experience.