David Jones is struggling to make digital sales – but experts say that’s perfectly fine right now
Friday, August 30, 2013/
Department store giant David Jones has always struggled when it comes to ecommerce, and yesterday’s sales announcements were no exception – for all its investment, the company’s digital sales still only make up 1% of revenue.
But is the result such a bad thing? How quickly can such a large company expect to turn things around, especially after entering the market so late?
Experts are divided.
“I think David Jones has so many issues to work through that while online is important, there are more crucial and immediate things to get right,” Peter Esho, chief market analyst at Invast Securities, told SmartCompany.
“What they’re saying is that they know online is important, but they have other priorities.”
After the company announced its results yesterday – total comparable sales were down 2.9% in the July quarter – chief executive Paul Zahra said the company’s online channel was “absolutely on fire”, but only represented 1% of sales.
While that figure still represents a solid $18 million, it comes after several years of investment in the online brand. Experts believe millions will have been spent on getting the website up and running, investment in photography and managing the entire digital operation.
Is 1% realistic? Should the company be ahead of that point by now, or is $18 million a year good enough for now?
The general assessment seems to be the issue is not with online sales, but rather David Jones in general – the brand has lost its way.
Esho says in order for the company’s digital sales to improve, it must “recapture the exclusivity and brand identity it had a decade or two ago”.
“David Jones needs to rebuild that presence. Exiting the electrical space is part of that, but you need to continue spending money so even in tough times you can make yourself appear as a luxury brand,” he says.
“People still have money, and they want to spend on luxury items. David Jones just needs to make sure it’s the premier destination.”
But what does that mean for online sales? Clearly, consumers are willing to buy expensive brands online –the success of companies like Winning Appliances and ASOS shows price isn’t a barrier.
But Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany it’s still too early to necessarily expect David Jones to be a digital powerhouse right now.
“Investing in your IT processes, totally integrating everything, that’s a huge investment and the business case is that it will take anywhere between 2-5 years to come to fruition.
“And that seems to be exactly what David Jones is saying it’s experiencing.”
So for now, David Jones is on track. But ultimately, Walker says, that 1% will need to increase – and soon.
“This is where the market is heading. David Jones will get to somewhere between maybe 6% to 10% of sales, and perhaps not much more.
“It’s worth remembering wanting to get to that point within just 12 months is just looking at a short-term plan.”