David Jones, one of Australia’s most recognisable brands, has a new owner and it could mean changes are coming to the department store chain.
Australian private equity firm Anchorage Capital Partners announced on Monday it had acquired David Jones from previous owners, South African-based Woolworths Holdings Limited (which has no connection to Australia’s supermarket chain).
Back in 2014, Woolworths purchased David Jones for $2.1 billion and while we don’t know how much Anchorage paid for it, reports claim it was significantly lower.
Associate professor of finance at RMIT’s School of Economics, Finance and Marketing, Angel Zhong, said while Anchorage may have bought David Jones for a fraction of the price Woolworths paid, it’s likely because several David Jones stores have closed.
The golden age of department stores is over, Dr Zhong said.
However, Dr Zhong and Gary Mortimer, an expert in retail and consumer behaviour from Queensland University of Technology, have a few ideas on what Australians can expect from David Jones under Anchorage’s ownership.
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David Jones returns to Australian ownership
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A premium experience
Professor Mortimer said David Jones could sell a luxury experience, along with luxury products.
Although he doesn’t think Australian consumers will notice anything “structurally different” in the next couple of years and the brand itself won’t change, he said there would likely be a few areas Anchorage will invest in.
“I think consumers will be looking for investment in staffing, and really returning this 180-odd-year-old department store back to this high-end luxury, premium shopping experience,” he said.
Department stores such as David Jones and Myer are now essentially smaller versions of what shopping centres offer.
Back in the heyday of department stores, they had a variety of brands under one roof.
“That’s what attracted people through that front door. But you know, when you walk into say Bondi Junction, or Parramatta, many of those big brands that we look for have their own independent specialty stores,” he said.
For that reason, he said there is no compelling reason for shoppers to get lost in a department store.
To get around this, David Jones could offer a premium experience to shoppers and adopt practices from department stores overseas like Harrods in London.
Perhaps shoppers could be offered Champagne upon arrival, or have access to personal shoppers to help them make their purchases from exclusive brands.
“I think shoppers want that experience, because if it’s just about buying men’s business shirts at 40 per cent off, I can do that online,” he said.
Australian shoppers are aspirational, Professor Mortimer said.
“They want to aspire to that experience where it’s very different to sitting at home, on your couch, simply shopping on your smartphone,” he said.
To do this, Anchorage would need to reinvest in staff and fitouts, while probably closing a few more “loss-leading” stores.
Dr Zhong said the potential for a luxury experience in a David Jones store would be dependent on how well Australia comes out of the cost-of-living crisis.
Australians might be aspirational, but if David Jones was to provide a luxurious shopping experience, it could risk isolating its target audience, she said.
Although this might target people with “large purchasing power”, she said this would only be a small part of the market.
Digital transformation ‘crucial’
There’s no denying online shopping is a force to be reckoned with.
Accelerating David Jones’ digital transformation will be crucial if it wants to keep its dominant position within Australia, Dr Zhong said.
COVID accelerated the move towards online shopping, giving people the option to move away from physical stores, she said.
The cost-of-living crisis and inflation only gave consumers more cause to skip department stores in favour of finding a bargain online.
Dr Zhong said Anchorage would have done the research and worked out areas where David Jones isn’t doing too well.
“In order to compete with other competitors for consumers, I think there will be better offerings of products and [a better] experience for Australian consumers,” she said.
“So overall, I think that’s good news. It’s time for someone to refresh this old, national brand.”
Department stores out of the suburbs
David Jones’ last annual report showed just under 25 per cent of sales came from online shopping, Professor Mortimer said.
“When you [have] got almost a quarter of your revenue coming from online, then you start to look at your assets of physical stores,” he said.
“All you’re doing is simply cannibalising the physical store sites. So you end up with, you know, 40 odd stores, but 25 per cent of your sales is coming from a centralised online system.”
These stores often have very long leases, but both David Jones and Myer have started closing stores.
He believes there is a future for the big department store, but it’s not in the suburbs. Instead, it’s with flagship stores in the CBD.
