Ragtrader founder Fraser McEwing weighs in on the sale of David Jones to Anchorage Capital, following the sale's finalisation this week.
The sale of David Jones to Anchorage Capital is more than an iconic retailer changing hands. It is throwing down the gauntlet about Australian department stores in general. Not that there are many involved – just David Jones and Myer.
As I’ve often said before, we are treated to everything a department store used to do when we walk into a shopping centre. There it all is, under one roof, with parking provided. The only strategy left open to department stores is offering superlative service, exclusive products, or concentrated collections of products that are not available elsewhere in the shopping precinct. And that is no easy task.
But apart from products, there is something that both Myer and David Jones have which is impossible to buy: tradition and trust. Most people, me included, have a great affection for Myer and David Jones. Life without them would be like the passing of a favourite aunt.
When I was a kid in Melbourne, Myer was on a par with a religious institution. I’m sure Sydney residents felt the same way about David Jones. The question then arises, is tradition and trust a money maker? On the surface, no, because customers are there to buy goods rather than spend time feeling sentimental. But look a little further. Remember at how Myer was on life support when John King took over from Bernie Brookes.
King saw the value in tradition and trust in the online business. There are so many shonky deals online that, if price and delivery are comparable, customers feel safer buying from Myer or David Jones. Sure, sometimes they will be disappointed when they open the bag, but the imperial backing of Myer or David Jones creates confidence that the transaction is in good hands.
Myer’s spectacular return to profitability has a lot to do with its growth in online business during covid. It’s share price has recovered from a low of 10 cents during covid to a trajectory that will probably pass a dollar. And nobody would be more relieved than Solly Lew, who put in a poultice of Premier Investments’ cash that promptly dropped its pants.
Enough of that. We’re here to talk about David Jones and where it might be headed under Anchorage.
Because David Jones’ 42 stores are now in private hands, it doesn’t have to fess up when things are going badly. But Anchorage claims the company is now profitable, cash generative and self-funding. Moreover, the profitability didn’t start from the time Anchorage completed the takeover. It was well on the go before that, under CEO Scott Fyfe, who believed the company needed a fresh framework to fire up its staff – which would flow through to its customers.
That’s when Vision 2025+ came into being.
It is not a detailed handbook on how the stores should be run but more an emotionally charged set of aspirations. Interestingly, they are all contained in a single-page document under headings our purpose, our vision, our principles, our key objectives our brand expression, our cultural foundations. Woven through that list of intentions is the key statement: like no other. Anchorage liked the concept and gave Scott Fyfe the green light to continue its implementation.
Aspirations aside, how will the Anchorage-owned David Jones differ from the Woolworths one? Like managers in most big companies, spokespeople are obliged to toe the public relations line, but the questions I put to CEO Stott Fyfe and his management team at least revealed something of the real path ahead.
What clearly comes across is that Anchorage doesn’t want to interrupt the current upswing, based on Vision 2025+.
CEO Scott Fyfe sums it up: ‘Our focus remains the same – in line with Vision 2025+ – which is to provide world-class experiences for David Jones customers, both instore and online, through a focus on forging new premium brand partnerships and continually enhancing our sophisticated omni-channel approach. The future of the Australian retail industry is in a premium offering of both products and experiences, across in-store and online, and that is the point of difference that David Jones has always had. We will continue to focus on forging world class in-store experiences, both through service and bespoke offerings, as well as a market-leading omnichannel approach to retail.’
One could read into that a plan for steady as she goes. It certainly applies to many parts the business that are achieving key performance indicators. Of particular interest to apparel suppliers is David Jones open to buy policy in which it invites pitches from those outside the existing product range.
But showing anything in the mid to downmarket category would be a waste of time. The company is brand driven with a strong preference for exclusivity. That’s because is products must speak to brand driven customers – as has always been the case. The store claims that over 70 percent of all its brands are exclusive to David Jones. This, if nothing else, would elevate David Jones positioning in any shopping centre.
The buying office has added over 200 new brands in the last two years. They include Victoria Beckham, Michael Lo, JW Anderson, Stone Island, Sordo and Pangaia. And it won’t stop there. Much of the apparel brand uplift has come from the ambitious establishment of label concession floors – which the company says has paid off handsomely.
Like Myer, David Jones was caught napping when online shopping boomed during the worst of covid but is now making up for lost time. In the last half of 2022 David Jones online sales accounted for 15.8 percent of total sales, with apparel contributing a large proportion of that. The company says there is plenty of growth left in the online business, especially as it will be front and centre of the transition to perfecting omnichannel marketing.
But it would be wrong to see the company’s omnichannel plans as a switch to electronic retailing. Part of the attraction of the store has always been in the shopping experience. When I think of David Jones I can smell the ground floor perfume concessions and the smiling pianist playing his white grand.
Right now, it looks as through the David Jones and Anchorage Capital management are pretty pleased with one another.
According to an Anchorage spokesperson: ‘Anchorage looks forward to working with David Jones’ chief executive Scott Fyfe and his leadership team to support David Jones through its next chapter of growth. David Jones’ management, strategy and ambition will continue with Anchorage, which is aligned to David Jones’ strategy and objectives of growth and innovation.
‘David Jones has a clearly defined customer-centric and data-led strategy to know and grow its customer base. David Jones will continue to focus on deepening its relationships with customers and enhance their shopping experience.
‘The business will continue to evolve as Scott and the team execute on its brand strategy – investing in emerging, premium, luxury and pillar brands to ensure that David Jones is putting the best offer and curation in front of the customer – like no other.'