David Jones claims web revenue triples, but department store sales take worst hit in seven years

Department store giant David Jones has said revenue from its online sales channels has tripled in the last few months, with the company putting the last few days of work into its new web sales portal and apps.

But it may not be enough to save the struggling department store sector. According to the latest sales figures from the ABS, department stores took a beating in the September quarter – they recorded their largest decline in seven years.

That decline is evidence of several factors, including lower consumer confidence, new entrants like Zara and Topshop providing new competition.

“The biggest issue right now is that they [the sector] have simply too many department stores,” says Retail Doctor Group managing director Brian Walker. “They are difficult to manage and there is so much competition now.”

CommSec’s Craig James released some analysis this morning saying as much. “Department stores are clearly in trouble,” he warned.

“In the September quarter real spending at department stores fell by 3.6% – the biggest decline in seven years. The major department stores will have to work quickly to remain relevant in an increasingly fluid spending environment where store loyalty is a premium.”

David Jones is attempting such a turnaround scheme, investing millions into an omni-channel strategy that emphasises high quality photography and video to entice purchases.

The company claims the plan is working. David Robinson, head of David Jones’ omni-channel strategy, says the company has performed “six years’ worth of work in six months”.

“We’re really pleased with where we’re at – it’s not the finish line but we’ve got to the starting line and we’ve come a long way in a very short period of time,” he told The Australian Financial Review.

He cites some improvements, like the huge new warehouse where its products will be shipped, and references new content management systems to help track the huge endeavour. The new site is set to launch tomorrow.

But Brian Walker says despite the effort to modernise, which is commendable, there are still too many problems facing the department store sector.

“They may have tripled revenue, but it’s coming from an extremely low base and relative to the amount of expenditure it’s still very low.”

David Jones has never revealed how much money it makes online, only that online sales make up less than 1% of total revenue.

The problem is both relevance and prominence, Walker says. There are simply too many department stores to make a difference.

“The department stores have expanded into the suburbs, and they’re capital hungry and difficult to manage.”

“And they can’t face the competition with new entrants like Zara and Topshop and so on. Those are eating away at their core markets.”

“They’re better off having fewer stores, and then making those stores extraordinary destinations.”

Making an omni-channel strategy is part of that process, Walker says, adding that ultimately department stores have a bright future if they’re willing to emphasise customer service and cross-channel collaboration.

“There is still a great opportunity here.”

Keep up to date with news and views about retail by reading SmartCompany’s retail bloggers Brian Walker, Kevin Moore and John Winning.