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David Jones Limited SWOT & PESTLE Analysis

ID : 5269953 | Nov 2017

OVERVIEW

Name of the Company: David Jones Limited

Business Sector: Retail

Operating Geography: Australia, Global

About the Company: The Company was founded in 1838 by David Jones. The company is headquartered in Sydney, Australia and employed around 7900 people as of July 2014. David Jones has currently 39 stores located across most of the Australian states. The company's products include ladies' fashion, menswear, shoes & accessories, cosmetics, children’s wear & toys, home wares, stationery, books, CDs & DVDs, white goods, etc. The company provides financial services and includes the David Jones store credit card. The company also offers other products and services that include insurance cards, gift cards, etc.

Revenue:

SWOT & PESTLE Analysis

The SWOT Analysis for David Jones Limited is given below:
Strengths
Weaknesses
1. Oldest operating departmental store in the retail sector of Australia and the world.
2. Unrelenting loyalty of the customers for the brand.
3. Wide range of high quality Australian and international brands spread across fashion, beauty and living.
4. Omni-channel retailing through a variety of channels like stores, websites, etc.
5. Cost price harmonization for all the brands.
6. Competitive prices on the best national and international brands.
7. Acquisition of the company by Woolworths Holdings has helped the company improve its market position.
1. Weak financial position of the company amid the global financial crisis mainly due to difficult trading conditions and changing consumer sentiments.
2. Loss of sales of the company to international online retailers.
3. Capital invested on the refurbishment of stores may lower the cash flow for other engagements.
Opportunities
Threats
1. Acquisition will result in world's largest department store that can offer highly enhanced value proposition.
2. Private label strategy.
3. Internal re jigging of management structure to enhance productivity and profitability of the company.
4. New fashion focused small stores for enhancement of market presence.
5. Weak Australian dollar improving domestic online retail sales.
1. Competition threats from international retailers in the established sector by setting up of shops across Australia.
2. Competition threats from the international retailers in the online retailing sector.
3. Cost price harmonisation strategy resulting in loss of suppliers.
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Strengths

1. Oldest operating departmental store in the Retail sector of Australia and the world: David Jones, an iconic Australian brand, is the oldest functional department store in the world which continues to trade under its original nomenclature. Moreover, it is one of the oldest operating departmental stores in Australia. The company has exclusive and innovative design, wide presence and currently has 39 stores located across most of the Australian states and territories.

2. Unrelenting loyalty of the customers for the brand: The love, emotion and the relentless loyalty for the brand of the company is astounding. The company holds a special place in the hearts of the shoppers and non-shoppers.

3. Wide range of high quality Australian and International brands spread across fashion, beauty and living: The company offers a wide range of high quality Australian and international brands spread across high fashion, beauty and living product groups targeting the premium customer segments. The company is also good at reinventing their products and services.

4. Omni-channel retailing through a variety of channels like stores, websites, etc.: The company has also transformed into an Omni-channel retailer by welcoming customer through a variety of channels like stores, websites, direct mail and catalogues, mobile platforms, social networks, home shopping and gaming.

5. Cost price harmonization for all the brands: The company employs a cost price harmonization for all the brands they associate with so as to get better prices from suppliers to meet the store’s rivals abroad. The retail price reductions through the cost price harmonisation program have enabled them to reclaim market share from other online operators which operate offshore.

6. Competitive prices on the best national and international brands: Acquisition of David Jones by Woolworths Holdings Limited has rejuvenated the brand at a time when apparel companies are expanding in South Africa and Australia. The sales have increased by 2% to $890 million while operating profit and gross profit margins showing considerable improvement since then.

7. Acquisition of the company by Woolworths Holdings has helped the company improve its market position: David Jones promises to offer competitive prices on the best national and international brands which will enable it to maintain a high service standard while maintaining integrity as an Australia company.

Weaknesses

1. Weak financial position of the company amid the global financial crisis mainly due to difficult trading conditions and changing consumer sentiments: The company’s financial performance has been declining for the period 2009-2013. The net revenue of David Jones decreased from $1985.5 million in FY2009 to $1845 million in FY2013 by a compound annual growth rate (CAGR) of -1.82%. The decrease in the revenues was attributed to the challenging trading environment and also the strategy of the company to improve margins by reducing the amount of discounting. Also, the operating profit and the net profit decreased from $225.6 million and $156.5 million in FY2009 to $149 million and $101.6 million in FY2013 respectively. The operating profit and the net profit saw a CAGR of -10% and -10% respectively. Subsequently, the cash flow from operations also decreased to $180 million for the FY2013 from $196.7 million for FY2012 due to changes in the working capital in the FY2012. This indicates a gloomy position for the company majorly due to difficult trading conditions attributing to the weak consumer sentiments amid the global financial crisis and migration of the shoppers to online international retailers.

2. Loss of sales of the company to international online retailers: The company has been losing sales to international online retailers of late due to slowness in embracing online shopping while the counterparts Macy’s and John Lewis in USA and UK are encouraging people to shop online and have already reported huge profits through online shopping.

3. Capital invested on the refurbishment of stores may lower the cash flow for other engagements: The Capital invested on the refurbishment of stores to make them well informed, equip them with modern technology, make them look hugely different in terms of visual products, concession stores as well as the arena of retail space may lower the cash flow for other engagements.

Opportunities

1. Acquisition will result in world's largest department store that can offer highly enhanced value proposition: Acquisition of David Jones by Woolworths Holdings Limited will help the company as their businesses are closely aligned in terms of target markets. The combination would thus create ‘one of the world's largest department stores with large customer base’ that can offer highly increased value proposition and in-trend product as part of the most innovative, exciting shopping experience to its customers.

2. Private label strategy: Woolworths suggested in April 2014 during the takeover deal that private label sales could reach as high as 30% of sales. This approach could prove to be a step in the right direction for the company as according to a survey by Roy Morgan. Now, as per the research company, the key to success with these private-label brands will be dependent on the amount of effort and resources put into the branding activity by the company.

3. Internal re jigging of management structure to enhance productivity and profitability of the company: An internal re jigging of management structure happening as part of the retail giant’s integration with new owner Woolworths South Africa for infusion of life into the existing ageing platforms by integrating them onto Woolworths SA infrastructure may enhance the productivity and profitability of the company.

4. New fashion focused small stores for enhancement of market presence: The new stores setup by the company would include smaller, fashion focused, village style formats and full-format flagship department stores for yielding superior customer and retailer outcomes in the face of retail sector pressures and further increase its market presence. Extensive research into the needs of the customers has resulted in the incorporation of changes such as reduction of floor space devoted to categories which typically recorded lesser turnovers per square metre than other lines which have been performing better.

5. Weak Australian dollar improving domestic online retail sales: Weak Australian dollar implies apparel bought overseas becomes costly as the higher cost is ultimately passed on to the consumer. This may result in a surge in shopping from domestic online retail stores as it happens to be a cheaper alternative.

Threats

1. Competition threats from International retailers in the established sector by setting up of shops across Australia: H&M, Uniqlo, Zara, Topshop, International retailing giants, setting up shop in various locations in Australia intensifies the competition for David Jones and its other Australian counterparts. The international retailers are entering the Australian market during a tough phase for retail trade all over the world. Consumer sentiments, in particular, have remained weak since the global financial crisis, and shoppers have preferred online international retailers. Despite major renovations in e-commerce arena and marketing campaigns, David Jones has fallen prey to the difficult trading conditions and is presently experiencing a gloomy market scenario.

2. Competition threats from the international retailers in the online retailing sector: Falling consumer confidence and their changed attitudes towards buying indicates that they have a proclivity towards quality and price at the same time. The time when the customers used to overpay for the quality are over and the customers focus on value buying.

3. Cost price harmonisation strategy resulting in loss of suppliers: The cost price harmonization strategy might augur well for the company initially by reflecting a boom in sales but might prove as a deterrent for the suppliers. The company is making the strategy work to protect their customer value proposition and ensure that the international brands the consumers love are accessible at the company at a much lower price.

David Jones Limited SWOT analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.
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The PESTLE Analysis for David Jones Limited is given below:
Political
Economical
1. Laws and regulations enforced by the government against the misuse of market power by the market leaders1. Change in spending habits of consumers
Social
Technological
1. David Jones provides financial aid to projects that centre on the physical well-being and health of Australian women and children
2. David Jones supports the Look Good Feel Better charitable organisation that helps cancer affected people
3. David Jones supports research to improve cancer for children and young
1. Technology up gradation leading to customers shopping online
2. Opening up of next generation stores
3. Ethical consumerism - determines sales
Legal
Environmental
1. Legal actions of ACCC against the company in relation to price wars
2. Legal actions of ACCC against the company in misrepresentation of safety of products
3. Legal actions of ACCC against the company in relation to bullying of suppliers
1. Use of sustainable products and practices
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Political

1. Laws and regulations enforced by the government against the misuse of market power by the market leaders: Woolworths, after acquisition of David Jones, is one of the retail giants in Australia and the 15th retail giant all over the world controlling the majority of the market share in Australia. Woolworths along with the other retail giant Coles have created a duopolistic market gorging on every other retailer by creating a lot of problems for the small retailers through cutting of supply options for the small retailers, predatory pricing and changing the way Australian food is produced. The government has started taking steps to control this misuse of market power by the retail giants. They have even designed a bill that would the court for the break-up of companies that tend to misuse their market power. This is in a way of stopping the retail giants in using their market power to restrict the small retailers from entering the market. This will in a way help the customers have a higher bargaining power and the autonomy to choose from a wide variety of options before going making a purchase.

Economic

1. Change in spending habits of consumers: Falling consumer confidence plagued by the global financial crisis and their changed attitudes towards buying indicates that they have a deep inclination towards quality and price at the same time. The customers are focusing more on value buying and the company has come up with a strategy of price harmonisation that focuses on everyday low prices for customers. This strategy has not only helped them to match the overseas retail rivals in terms of the prices offered by them but also has helped them to retain the market share. Through a wide range of products at offer and prices being reduced to lowest as possible, they are trying to be customer friendly and in a way are creating a price war that would either close down the small and marginal firms or be bought out by one of the retail giants.

Social

1. David Jones provides financial aid to projects that centre on the physical well-being and health of Australian women and children: David Jones is keen on providing financial aid for projects which centre on the health of women and children. Through this it aims to make a valuable contribution to the Australian society. David Jones has been aiding the community through several important activities over the years since its inception. It has been associated with the National Breast Cancer Foundation since 1994, and in the year 2004 became its Diamond Partner. The company has also hosted a number of fundraising activities to continue to support the research programs conducted by the organization. In 2010, the company, having generated over $1 million for research at the foundation, was awarded The Pink Circle Award. Every year, the company holds the Shop Pink Donation Day. All the profits made on that day in all stores across the country are donated to the foundation. The company has gone one step further in supporting the foundation by developing ‘a breast screening program through the establishment of Rose Clinics’. The clinics provide a unique free health screening service for women over 40 years of age to enable the timely detection of breast cancer.

2. David Jones supports the Look Good Feel Better charitable organisation that helps cancer affected people: David Jones also supports the work carried out by the Look Good Feel Better (LGFB), a charitable organisation that helps cancer affected women, men and teenagers manage their side effects, related to appearance, of cancer treatment. David Jones also supports the Children’s Cancer Institute of Australia (CCIA) in managing the funds needed for research into Neuro-blastoma.

3. David Jones supports research to improve cancer for children and young: David Jones is partnering with a plethora of key events in relation to Australian fashion including Sydney Racing Carnival, Caulfield Cup Carnival, L’Oreal Melbourne Fashion Festival and Melbourne Spring Fashion Week inter alia.

Technological

1. Technology up gradation leading to customers shopping online: David Jones has been investing more into the technology up gradation of its existing stores and launching of new web stores, new POS system and automated consignment systems. The investment has happened due to loss in sales to the online international retailers. Now, the customers can avoid the pain of visiting the stores as they have the option of shopping directly from their home.

2. Opening up of Next generation stores: The company has successfully opened its new Highpoint (Vic) store and its new Malvern Central (Vic) village format store that incorporates the Company’s “Next Generation Store” concepts. These stores house the best national and international brands across a range of categories including women’s wear, men’s wear, children’s wear, etc along with complimentary customer Wi-Fi, digital charging stations, inter alia.

3. Ethical consumerism - Determines sales: With the technology being the mainstay at present and consumers having access to everything with just a click, the decisions of purchase are made on social responsibility of the product manufacturers.

Legal

1. Legal actions of ACCC against the company in relation to price wars: The price wars, started by the retail giants Woolworths (holding company of David Jones) and Coles have created a lot of problems for the small retailers through cutting of supply options for the small retailers, predatory pricing thereby ultimately buying them out. The government has started taking steps to control this misuse of market power by the retail giants. They have designed a bill that the court would use for the break-up of companies that tend to misuse their market power. This is a way of stopping the misuse of market power by the retail giants to restrict the small retailers from entering the market.

2. Legal actions of ACCC against the company in misrepresentation of safety of products: The recent case against the holding company Woolworths Holdings limited in relation to misrepresentations about the safety of three of its products has been dealt with severely. The consumer watchdog Australian Competition and Consumer Commission has been continuously monitoring the proceedings and seeks to implement monetary penalties against the same.

3. Legal actions of ACCC against the company in relation to bullying of suppliers: The government has also put laws and regulations in place to check complaints about supermarket giant Woolworths in relation to bullying suppliers into paying millions of dollars to fund a discount war.

Environmental

1. Use of sustainable products and practices: David Jones has been in a constant process of reducing greenhouse gas emissions and will in fact continue investing in energy savings projects and encourage elimination of unnecessary use of electricity. They will also continue to monitor and reduce emissions from their fleet of shuttle trucks and refrigerant gases that are used in air conditioning and refrigeration. David Jones has also started to control the amount of waste generated and reduce the waste sent to landfill by more than fifty percent. They are planning to reduce it further by improving their existing recycling process. The company is continuing investing in water saving techniques by actively tracking any misuse in water and repairing them to avoid unnecessary use of water. Apart from taking all the steps itself to protect the environment, it has also started involving its stakeholders in the environment protection process by creating awareness of the environmental programs and also motivating behavioural changes in them so as to integrate sustainability into decision making. They have started involving around 9000 employees in this process and even the consumers by demonstrating what they are doing towards the sustainability of environment. They engage the suppliers by implementation of green procurement principles for their business purchases and engage them in a variety of sustainability challenges through the Australian packaging covenant.

David Jones Limited PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.
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