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DJs only has itself to blame

Predictably enough, there it was in a national broadsheet that we'll let go unnamed: "Department store chain David Jones has confirmed the dire state of the consumer sector, reporting a 40 per cent dive in annual profit and warning that shoppers are still nervous about the economy."

No, the 40 per cent fall in David Jones' profit confirms the poor state of David Jones' board and management but actually says very little about the consumer sector. The consumer has kept spending quite respectably over the past year, but has chosen not to do so in either of our mid-market department store chains.

It's a wonder the ladies in black making a sale don't trigger a loud “t-ching” with prices preceded by a pound sign popping up. 

As previously suggested, DJs is underperforming because it's a tired 20th century business that has suddenly discovered it's in the second decade of the 21st century. The board appears to have been captured by the previous chief executive until his dramatic fall from grace, blinded by the high margins he was achieving and not noticing that the company was failing to invest in its future. Stand still in a hyper-competitive restructuring world and there's a good chance you'll be run over. Just ask Darrell Lea.

For example, current chief executive Paul Zahra inherited a 20-year-old point of sale system. In modern retailing terms, that's not far removed from an abacus and a tin cash box. It's a wonder the ladies in black making a sale don't trigger a loud “t-ching” with prices preceded by a pound sign popping up in a glass window beneath embossed silverwork.

By way of comparison, when Wesfarmers took over Officeworks, it was disappointed to find a 10-year-old POS system and set about replacing it.

The worry for anyone still punting on a DJs retail revival is that the well-liked Zahra had been a senior member of the management team and the board remains the board. That they had no idea of where retail in general and DJs in particular were heading doesn't inspire confidence that they suddenly understand what they should be doing and know how to do it.

The DJs recovery plan looks suspiciously as if it has been lifted holus bolus from an annual report by US department store chain Nordstrom. The trouble is that Nordstrom is successful now because of what it started doing last decade. DJs and Myer will have to run very fast to try to catch up to where Nordstrom was yesterday while facing an unceasing increase in competition at all ends of their market.

The suggestion that a wary consumer with a locked purse is the main problem facing DJs and Myer is laughable. The vendors of motor vehicles, travel and i-thingies don't know such a consumer. Try a better-informed consumer with instantaneous access to product knowledge and value, and you'd be closer to the mark.

Meanwhile there's the apparent poor reading of consumer activity suggested by the CBA's latest credit and debit card activity reading. The Reserve Bank minutes released on Tuesday included a line that retailers had told the bank on a no-names-no-pack drill basis that spending had picked up in August after July's fall, but CBA customers' use of plastic last month was fractionally lower than in July.

However, combine the CBA survey with the ABS retail sales numbers for June and July and it's not so bad. Retail sales overall retreated in July, especially at department stores, but that was after June's sharp rally on Julia Gillard's mini-cash splash. Odds are the ABS August trend series will continue to show solid but not spectacular growth.

Which is what our restructuring economy should be getting used to by now.

The key insight within Glenn Stevens' “glass half full” speech was that since mid-2009, per capita real consumption spending had been trending at 1.5 per cent – a perfectly respectable figure, but well down on the unsustainable 2.8 per cent rate many businesses had become used to from the early 1990s up to the GFC. Businesses such as retail (and the more rapacious retail landlords) are still adjusting to what that means, never mind learning to live with the impact of traded goods deflation.

The smart stores, like Kmart, have had to restructure to handle the restructuring, cutting out the middlemen, going straight to the factories, pruning product lines and offering savvy consumers value at their price points. The very fat mark ups DJs and Myer have depended on no longer pass muster with many consumers.

And then there are the broader issues of a richer nation tending to spend proportionately more on services and experiences and less on things. The correlation of consumer spending and retail sales was broken a couple of years ago, never mind the impact of internet shopping.

We're changing. We'll only go along for the ride with businesses that are nimble enough to change with us and offer value as part of an involving shopping experience. If that means we prove to have been over-shopped on expectations of that 2.8 per cent real capita spending increase continuing forever, so be it.

Restructuring is like that, however painful or even tragic it may be for people in the frontline.

Michael Pascoe is a BusinessDay contributing editor.


  • DJ's and Myer don't understand the vast array of suppliers that are willing and able to undercut them. I recently priced some perfume from Myer at $180 a bottle and then got online and purchased it for $109. That's a $71.00 saving. They have to stop the fat markups as you mention.

    Date and time
    September 20, 2012, 4:33PM
    • You are right, there are a lot of problems, and Myers and DJs have the same problem.

      But number one is the lack of shopper experience. Looking for customer service in DJs is almost impossible, with many brands having to send their own staff to provide service (with a label stuck on saying "Visitor" and not allowed to handle cash)

      The people you see walking about these department stores are dressed up and cashed and they don't want to be treated like second class citizens. I can better service brand name store.

      Date and time
      September 20, 2012, 6:55PM
    • The problem is that DJ /Myer are more than likely dealing with the "authorized Australian Agent" for the perfume that is making a profit too, not direct with the manufacturer. This is mainly because the manufacturer will not sell to them direct. This is the traditional supply line for this country. Very 19th century stuff. Progressive retailers have by-passed the traditional supply lines while our department stores (probably out of longstanding loyalty) rightly or wrongly stuck by the local guys. DJ and Myer should have been more agressively negotiating with the brands in their supply chain 10 or 15 years ago to sort this out, but they, by and large, just followed the status quo.

      Mad Man
      East Hills
      Date and time
      September 20, 2012, 10:46PM
    • I'm not much of a consumer but when I visit the city I do like a bit of retail therapy. DJ's and Myers do nothing for me at all.
      I like to shop in a tangible sense, online is Ok for some things, but if you are into tactile texture it's very disappointing. I don't have a big budget also, so when I buy a product I want value and service.
      Perfumes are the biggest ripp off, I'd prefer a shower instead.
      If DJ's, Myer and their clans are to succeed they need to deliver the goods with a retail experience. Otherwise customers will continue to shop online.

      I personally can't be that bothered but understand how many do.
      Lift your game with great customer attention and service.

      I'll buy with some service,
      Date and time
      September 21, 2012, 2:06AM
    • I've saved thousands of dollars shopping online. Even if they charged the GST, it is often cheaper than the sales price in the department stores. Anyone who goes into a department store paying full retail price is a mug.

      There are times I am not sure about sizes or how it will look. You know, things like shoes, jackets, sunglasses etc. I go try these items on in the department store and then I order them on my iphone from inside the change room. I would like to thank the department stores for providing this wonderful free service.

      Date and time
      September 21, 2012, 2:16AM
    • DJ is being unfairly targeted. The truth is the traditional stores simply can not compete anymore! Full stop. How can a business with thousands of staff sitting uselessly in the shopfront waiting for customers who are all at work not have FAT EXPENSES? How can a shop in prime real estate compete with an efficient warehouse model selling point?
      And even more so how can a reseller compete with a manufacturer themselves selling the goods from their own factory through Amazon and the likes?

      David Jones is history and so is Myer!

      Date and time
      September 21, 2012, 7:33AM
    • It is such a joke isn't it? How far removed Myer and DJ's are removed from their customers! The fat mark-ups are no longer acceptible, The poor customer service no longer cuts it.

      Happy spender, if it's worth it.
      Syndey CBD
      Date and time
      September 21, 2012, 10:04AM
    • And here is a headline from another page; perhaps DJ's, Myer,Harvey Norman and others should take a leaf out of Solly Lew's book, stop whinging and get on with business.

      "Retail brand owner Premier Investments has posted a 68 per cent profit rise and says recent sales have been stronger than in the previous year".

      Date and time
      September 21, 2012, 11:47AM
    • Spot on. I love walking through DJ's but I don't buy from there, because YES I am a savvy shopper, and I always check the price online. All DJ's helps me with is to see what is available, then buy online. They have to become competitive. I love the store, it's beautiful, especially DJ's in Sydney city, but it's over priced.

      Date and time
      September 21, 2012, 12:25PM
  • When Australian retailers offer me choice, quality, value and excellent customer service, then I will happily spend my hard earned dollars here!

    Date and time
    September 20, 2012, 4:41PM

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