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Vol. 1 October 2013

THINKING BUSINESS
Author: Mohan Dhall, Mohannah Education

Operations at David Jones Ltd

Introduction to David Jones Ltd.

David Jones commenced business in 1838 and has traded for 175 years. It was set up in Sydney as a
prestige goods business and currently has 36 retail outlets and also allows for on-line trade through David
Jones Online (http://shop.davidjones.com.au/djs/en/davidjones). The business became a public company
in 1906 and listed on the Australian Stock Exchange in 1920. David Jones is Australias oldest department
store and is the worlds 2nd oldest business that has traded under its original name behind Hudsons Bay a
Canadian business that is one month older than David Jones. Early expansion of the business was within
central Sydney, with the first three stores all being opened in what is now the City of Sydney. After World
War II a further five stores in NSW were added and then interstate growth became a feature. The location
of the 36 stores that are now owned by David Jones is shown in Table 1 below. The company also has two
warehouse outlets denoted as W in the Table.
David Jones Ltd Store Locations across Australia
NSW

ACT

VIC

Sydney Elizabeth St

Canberra City

Melbourne City

Sydney Market St

Woden

Chadstone

Sydney Bondi Junction

Doncaster
SA

Sydney Chatswood

Maribyrnong

Sydney Parramatta

Adelaide City

Malvern

Sydney Warringah

Oaklands Park

Glenwaverly

Sydney Castle Hill

Westlakes

Cheltenham
WA

Sydney Burwood

QLD

Sydney Miranda

Perth City

Brisbane City

Sydney Hornsby

Claremont

Robina

Sydney Macarthur

Booragoon

Toowong

Sydney Birkenhead (W)*

Karrinyup

Gravatt

Wollongong

Biggera Waters (W)*

Newcastle

Carindale

Tuggerah - Central Coast

Chermside

Table 1 The location of each of the David Jones stores by State/Territory and suburb, *(W) indicates a warehouse store

David Jones as a retailer has enjoyed considerable financial success over its history of trading. However
since 2009 retail conditions in Australia have not been as consistent as they had been prior and, as
a consequence, the business has faced some financial pressures. The operating income and profits
figures for the period 2009 2013 are shown in Table 2.
Data for financial year ended, $000s
Financial
Indicator

30 June
2009

30 June
2010

30 June
2011

30 June
2012

30 June
2013

Revenue

1,985,490

2,053,087

1,961,744

1,867,817

1,845,012

COGS

1,199,344

1,237,358

1,194,475

1,167,987

1,138,868

Gross Profit

786,146

815,729

767,269

699,830

706,144

Expenses

629,624

644,963

599,130

598,727

604,590

Net Profit

156,522

170,766

168,139

101,103

101,554

Table 2 Summarised revenue statement data for David Jones Ltd 2009 - 2013

Note that though David Jones is well-known as a brand (goods) retailer it earns up to 33%
of its after tax income from the provision of financial services.
David Jones Ltd as a department store competes with Myer within the Australian market.
Myer may be termed a head-to-head competitor, although in reality David Jones carries a
much wider range of prestige brands. David Jones actually competes directly with numerous
smaller specialty retailers. For example, David Jones carries the brand Review and within the
shopping centres that it has outlets Review is a standalone store. This is also the case with other
brands such as Cue, Prada, Esprit, Guess, Bardot, Oroton, Napoleon Perdis, Jimmy Choo, Sass n Bide,
Coach, Witchery and Swarovski.

Role of Operations at David Jones Ltd.

The operations role, processes and strategies at David Jones Ltd encompass a huge range of activities.
David Jones is primarily a retailer of high quality goods and thus needs to source such goods and have
them available for sale in stores throughout the nation as well as on-line.
Strategic role of operations management at David Jones Ltd
The operations function is intrinsic to David Jones. It sells over 1,000 distinct brands and tens of thousands
of products. It integrates the sale of goods with associated services, as exemplified by the sale of cosmetics
and also each of the following: a personalised shopping service, bridal support for nuptials, style advice,
clothing alterations, lingerie fitting and prosthesis fitting. Through providing these services David Jones
augments the goods it sells.
Whilst cost leadership has not been a particular focus (as it focuses on exclusive and luxury brands) David
Jones has realised that prices from suppliers are up to 40% higher for Australia than the same goods sold
elsewhere. Thus they have implemented a cost reduction strategy that includes a threat to dispense with
suppliers that continually overcharge, relative to prices given to retailers in other global markets.
David Jones differentiates its good/services on the basis of having segmented the market according to taste
and preferences. High quality products and associated complementary services are offered and the reputation
of the company is built upon this. Whilst most consumers would be aware of the range of goods sold at David
Jones few would be aware of the range of services offered some of which are particular to the corporate
sector as shown in Thinking Business Insight 1.

Thinking Business Insight 1

Corporate Services at DJs

David Jones Corporate Services assist corporate clients with the purchase of David Jones Gift Cards for
Incentive Programs, Loyalty Programs, Rewards and Recognition and Gifts.
David Jones Gift Cards:
 Can be used across fashion, beauty, home, electrical and fine food and wine.
 Can be used to purchase any product or service in any stores located throughout Australia and are
valid for 24 months
 Appeal to all age groups
 Add value to the companys reward and recognition program or promotion
Corporate Services offer:
 Personalised customer service
 Secure delivery of physical Gift Cards via courier and bulk activation process
 Instant delivery of eGift Cards via email
 EFT, cheque and credit card payment options
 Discounts to eligible customers
Corporate Christmas Hampers are also available for purchase through Corporate
Services, to be delivered in bulk to one location. All hampers contain quality products,
including treats from some of Australias most respected chefs.
Source: http://www.davidjones.com.au/Corporate-Services

Interdependence with other key business functions

The operations function is interdependent with each other key function in that it affects
and is affected by decisions made in the other aspects of business: marketing, finance and
employment relations. A clear example can be seen with respect to the strategy to reduce
sourcing costs. Sourcing is an operations decision however the companys financial goals
and pressures affect the decision. Moreover, a reduction in sourcing costs means prices can
be varied thus affecting marketing strategies. When operations decisions are made concerning
sourcing then volumes purchased may need to change in order to guarantee lower prices. This will
have a consequential effect on employment. Thus, even in this simple example the effects on each
key business function in David Jones can be traced.

Influences on Operations at David Jones Ltd.

As with all businesses, there is a host of external factors that affect and shape the operations of David
Jones. External factors include:





Globalisation
Technology
Quality expectations
Environmental sustainability

 Cost-based competition
 Government policies
 Legal regulation

Globalisation
David Jones has a very long history of sourcing the best brands globally and selling them. Globalisation has
increased the number of global brands and has also created the global consumer consumers who seek
global brands. This has been of benefit to David Jones although the company has not, until recently, realised
that the prices being sought in its supply chain are higher than the prices given to similar retailers in other
regions and markets. Globalisation has meant that the range of products sold by David Jones is far greater
than it has been and it also means that it can have a seasonal approach to the retail cycle.
Technology
Until recently David Jones had not really understood the importance or power of harnessing technology
through its supply chain and also in the retail aspects of the business. This meant that it has been slow to take
advantage of this influence, and indeed it actually has lost business as a result. Nevertheless a renewed focus
and investment in technology means that David Jones can now reach the market through its omni-channel
use of technology. See Thinking Business Insight 2 below.

Thinking Business Insight 2

Omni-present

David Jones was quite slow to respond to challenges presented by technology. It made an attempt
to create an effective on-line space and the company made an initial investment into e-commerce
in 2003 but lost $28m and the project was halted. In 2009 David Jones re-entered the on-line space
with the aim of getting 10% of all sales via this method. In early 2012 David Jones announced that it
was investing in on-line retailing through an end-to-end omni-channel investment. This investment
involves a host of changes including:
 Having an on-line store that allows people across all platforms and devices to view and purchase
products
 Live steaming of events and promotions
 Engaging in the use of social media
 Integration of on-line orders with supply chain management (SCM), fulfillment of orders
and warehousing.
Quality expectations
David Jones has built its reputation on quality. The customers it sells to have quality
expectations created through this long history of trading. Once reputation has been
built on quality then a business would not alter this perception for fear of alienating the
customer base.

Cost-based competition
Myer, the one real direct competitor to David Jones has successfully undertaken a
cost leadership strategy thus placing David Jones under pressure. Moreover, through its
approach to sourcing Myer has been able to lower its costs by reducing supply costs. David
Jones is now copying the strategy, which is termed cost price harmonisation.
Government policies and legal regulation
Public companies like David Jones are subject to stringent legal requirements including meeting
regulations in terms of corporations law, competition and consumer law, workplace laws,
environmental laws, trading regulations, public health laws and so forth. Clearly, the company must
comply with the range of laws, and a failure to do so will affect its reputation and also its share price
(value).
Environmental sustainability
All businesses are aware of the need to demonstrate a commitment to the environment and broader
social values. The David Jones approach is summarised in Thinking Business Insight 3.

Thinking Business Insight 3

Reduce, reuse, recyclerethink

David Jones Ltds Environment Strategy aims to engage shareholders, customers, employees and
suppliers to ensure that the business model is environmentally sustainable by July 2016. It involves a
commitment to continually improve environmental outcomes by reducing greenhouse gas emissions,
protecting and conserving natural resources, optimising water and improving the level of engagement
and reporting. Improving environmental outcomes is done through each of the following:
 Reducing Greenhouse Gas (GHG) emissions through investing in energy savings projects and encouraging
behavioural change to eliminate unnecessary use of electricity.
 David Jones has reduced the amount of waste sent to landfill more than 50% and plans to deliver further
reductions by improving existing recycling programs and working with suppliers to influence packaging
design.
 It is investing in water saving technology, and has a short-term aim to track and repair any leaks from 1,000
taps and toilets, and 50 cooling towers.
Engaging stakeholders is done through:
 The rethink campaign that aims to increase awareness of the companys environmental programs and
motivate behavioural change with the 9,000 employees so that they integrate sustainability into decisionmaking.
 Applying green procurement principles to business purchases, and planning to engage merchandise
suppliers on a range of sustainability challenges
Reporting performance is done through:
 David Jones publishes an Environment Report in its Annual Report.
 Signing and supporting the National Packaging Covenant in 2003 and supporting the objectives and
principles of the new Australian Packaging Covenant
 David Jones was recognised in 2010 as one of Australias Top-30 listed companies for carbon disclosure
on the Carbon Disclosure Leadership Index (CDLI).
 David Jones has an obligation to report under the National Greenhouse and Energy Reporting
scheme.
Adapted from: http://www.davidjones.com.au/Community-and-Environment/Environment

Corporate social responsibility at David Jones

CSR takes a number of forms at David Jones, including
educating staff in a stringent Code of Ethics. This is
shown below.

MOHANNAH EDUCATION P/L

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Dundas NSW 2117 Australia
Tel: (02) 9638 7499
Fax: (02) 8014 6476
Mob: 0466 800 706
Email: office@mohannaheducation.com.au
Web: www. mohannaheducation.com.au