Money David Jones expands to New Zealand as commitment to food strategy stays strong

12:26  13 february  2018
12:26  13 february  2018 Source:   smartcompany.com.au

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Department store chain David Jones plans to expand its New Zealand operations as the department store also stays focused on its premium food retail offering.

Last week, David Jones revealed plans to set up a second store in Auckland, following on from its first store in Wellington in 2016.

The NZ Herald reports the company’s chief executive David Thomas announced the move along with Scentre Group chief operating officer Greg Miles, with David Jones set to be a key piece in a new $NZ790 million ($850 million) Westfield development in Auckland.

The new development will focus on premium “fashion, food and technology”, which fits with David Jones’ focus on developing a high-end food offering for consumers.

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The 2017 preliminary report of its parent company Woolworths Holdings Ltd said David Jones will “provide a market leading food experience by investing $100 million over the next three years in existing and new stores”, with a food concept store to also open in the Melbourne suburb of Malvern in March.

In the report, Woolworths said its Australian presence made “strong progress in transformation initiatives”. This included opening a standalone food hall in Bondi Junction. The company also reported on a change in digital strategy, which it said has contributed to its 4% of total sales.

SmartCompany has previously reported on how David Jones has prioritised private-label food products in the hopes of boosting sales.

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The strategy was focused on streamlining the number of products available through the department store’s food offering, including reducing the number of private label food products on offer from 24% to 70% by 2020.

Management has said it is committed to the food strategy and the rest of its strategic blueprint, despite the department store also facing challenging retail conditions.

In a trading update in January, The Australian reports the brand’s parent company, South African retail giant Woolworth Holdings, announced it would book a $712 million impairment charge against the business.

David Jones will need to be strategic with locations

Gary Mortimer, retail expert and associate professor in the school of business at Queensland University of Technology, says David Jones recent focus on becoming a premium retailer means it is filling a gap in the Australian market.

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The new premises allowed the retailer to expand and to include furniture and furnishings. The years that followed marked a period of major expansion for David Jones Limited. In addition, Food , Glorious Food was established on the Lower Ground Floor of Market Street, with a fairy-tale array of

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“David Jones has historically been considered the high-end department store of Australia,” Mortimer says.

“Despite some level of discounting they tend to have really positioned themselves on excellence for service, quality of products, and exclusivity.”

Mortimer believes the retailer has likely chosen to pursue its food strategy because no other retailer in Australia currently has a monopoly on this high-end grocery space.

He says Woolworths has identified a gap in the market to offer something similar to high-end food retailers in other markets, such as Marks and Spencer.

“They found the supermarket sector as a fairly competitive market dominated by two key players. What was missing was a high-end premium offer often seen elsewhere,” he says.

While it has been relatively successful so far, Mortimer observes a previous attempt to tap into this market, with Australian supermarket chain Woolworths opening and closing down Thomas Dux grocers in Australian between 2008 and 2017.

He says David Jones will need to be highly strategic in how it market its premium food offer.

“What they’ve initially done is set up elements of their own department store to do an expanded food offer, and that appears to have worked well for them. Now they’re entering [standalone] food stores,” he says.

“If a standalone premium food store is to work I think David Jones would be selective in where they place those stores.”

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