David Jones to lure them in with food
It became one of Australia's biggest brands by selling upmarket apparel over almost two centuries. Now David Jones, one of the world's oldest department-store chains, is targeting Australia's A$100-billion-a-year (R1.054-trillion) food sector to insulate it from the encroachment of online rivals.
The strategy is being rolled out by John Dixon, a former Marks & Spencer executive who was appointed CEO of the chain by Woolworths, the South African group that acquired David Jones in 2014. David Jones is investing A$100-million to build a food-retail business and open a network of convenience stores.
"There is nothing like this anywhere in the world. It is a food revolution for Australia," said Dixon during a tour of a newly renovated David Jones food hall in Sydney.
The food hall is based around a 280-seat restaurant developed by celebrity chef Neil Perry. It incorporates an oyster bar, bakery, butcher, fishmonger and delicatessens, offering delicacies that can be cooked and consumed on site or at home.
It is part of a shake-up at David Jones, which faces a tough retail environment and the imminent arrival of US online behemoth Amazon in its home market. Next month it reveals its new online shopping platform, next year a new loyalty programme and, in 2019, an upgrade to its flagship Sydney city centre store.
Australian retailers have had a bruising year with weak consumer confidence and poor sales, pushing a dozen clothing retailers into administration. It follows an influx of foreign retailers.
"A lot of international retailers have seen Australia as a good place to do business over the past few years, with steady population growth, a good standard of living and 26 years of economic growth," said Dixon. But he warned that discretionary spending had been hit by competition and uncertainty caused by volatile politics at home and abroad, concerns about the housing market and the lowest wage growth in 20 years.
Last month, Woolworths said sales growth at David Jones had slowed in the six months to June 25, with sales in comparable stores declining 0.7%, as "falling consumer confidence resulted in lower footfall" through stores.
Myer, its main rival, issued a profit warning in July.
Dixon dismissed analysts' speculation that Woolworths South Africa could bid for Myer and merge it with David Jones, saying it was busy revamping its upmarket chain. The food strategy would create a "halo effect", whereby shoppers would come to eat and buy groceries and end up buying clothing or beauty products.
About half the food on sale is under David Jones's own label, and Dixon plans to raise this to 70% by 2020. He said Australia's two big supermarkets - Coles and Woolworths, which is not part of Woolworths South Africa - had left a big gap at the premium end of the market.
Nathan Cloutman, of market research company IbisWorld, said: "The food strategy is part of David Jones's move towards the premium market. This should help insulate them from online rivals such as Amazon." - The Financial Times