There’s been a lot of speculation and discussion around the potential for a Myer-David Jones merger over the past three weeks. Last week, Bernie Brookes was re-appointed CEO of Myer, and an analyst report stated that they could find few merger synergies in any deal and that shoppers would be confused by it all.
I love retail, and spend a lot of time in retail observing shoppers. I buy retail shares because I understand what’s happening at the coal face of the store and on websites much better than I understand the coal face in mining. I tend to back shares in companies led by people that I believe are passionate about, and are making a big difference in, their businesses: Terry Smart at JB Hi-Fi; Ian McLeod and John Durkan at Coles, to name a few. We are not short of good retailers in Australia.
So mid last year I called my broker Charlie in Melbourne. Now, as an aside, I had a very affronted reader comment on SmartCompany that I was “big noting” because I mentioned that I had a stockbroker. Most readers of SmartCompany own their own businesses, so I was surprised by the comment. I’ve had a broker since I was a 26-year-old father with two kids under the age of two, struggling under the weight of a mortgage with only one salary coming into the house.
I had met a Chinese dentist in Hong Kong who told me that I had to make money whilst I was asleep. He could only make money six days a week while people were paying him to look inside their mouths. So he had found a stockbroker to invest his savings in the market…so he could make money whilst he was asleep. It resonated with me and I took a little bit of my savings and took advice in buying shares. I’ve ridden the ups and downs since then, but have been able to make money whilst I’m asleep. I recommend taking that step to all readers of SmartCompany.
So back in June I asked Charlie to buy two small, equal tranches of shares: 1000 shares in Myer and 1000 shares in DJs. The combined value of those 2000 shares was $5460. Today those 2000 shares have a combined value of $5,810. An increase in a rising market of $350 and 6.2% with merger speculation. Not a lot.
Here’s why I bought an equal share in both companies back then. In the time that I have owned those shares, US retailer Nordstrom has acquired more “new and first time” Australian shoppers than Myer and DJs combined. I don’t know that for a fact, I just talk to people and watch Nordstrom’s online marketing activity, “Hello Australia”, focusing on Australian shoppers and realise that many Myer and DJs shoppers now shop at Nordstrom. They still shop Myer and DJs, but they’ve diluted their dollar spend with them. All new Australian shoppers at Nordstrom are genuinely new dollars for Nordstrom.
Now there’s nothing wrong with what Myer and DJs are doing in Australia. They have both invested in new online capability, increased store associate training and hours, and bought more retail-own brands to protect margin. All outstanding things.
But with respect, Nordstrom is selling to the WORLD now, not just Australia. I haven’t even brought ASOS, Zara or Neiman Marcus’s online stores into play. Remember Neiman Marcus of Dallas, Texas, took out glossy magazine advertising before Christmas asking Australians to shop with them online. I don’t remember seeing any DJs or Myer ads in Dallas last year.
Here’s the thing. We don’t live our shopping lives in Australia any more. We live our shopping lives around the world. For Myer and DJs to remain competitive, they will need to do something radically and innovatively different in order to compete with global retailers all nibbling at our market. Many retailers and pure online companies are now complementary, working with each other globally: ASOS and Primark; Nordstrom and Etsy.
A merger between Myer and DJs isn’t a bad thing at all. Over time it may be the only thing that keeps these brands alive. And as for shoppers being confused? We get over stuff very fast if you look after us.
Kevin Moore is a retail expert and the chairman of Crossmark Asia-Pacific Holdings.
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