The Current State of the Retail Sector in Australia
The retail sector in Australia has seen weak growth rates that may be as a result of low wage growth rate and increasing household debt (Grimmer, 2018). The outlook of the sector is however positive due to a strong housing market and low-interest rates which encourage consumption. Furthermore, online sales have been growing at a faster rate than the overall retailing sector. Retailers have been investing heavily in omnichannel offerings as digital presence becomes a key driver of competitive advantage (Levy, Weitz & Grewal, 2018). The internet has attracted and retained a large pool of consumers due to its convenience and the possibility of comparing prices to seek the cheapest option. Nevertheless, grocery retailers have seen stronger growth than the rest of the retail segment.
The department store sector operates in the retail industry. The industry is a key contributor to the economy of the country with regard to GDP and employment. The department store has a few large firms dominating the entire market. It, therefore, takes the structure of an oligopolistic market. This market has a few sellers and many buyers. The sellers are offering similar products that can be differentiated by each seller (Hitt, Ireland & Hoskisson, 2012). More so, there are significant barriers to entry and exit of the sector. These barriers include large capital requirements, economies of scale, and the establishment of well-known brands that would require a hefty investment in marketing to compete with (Ingene & Takahashi, 2017).
The retail sector is increasingly using data to analyze market requirements and act accordingly to maximize customer engagement and satisfaction. Customer data is collected from various sources such as online interactions, surveys, and sales data. Many stores have vast pools of data that can remain neutral unless it is mined and used to provide information that assists in consumer insights. Furthermore, department stores have also focused on personalizing in-store services. The in-store experience is improved by offering many sales assistants as well as complementary services such as Wi-Fi (Ingene & Takahashi, 2017).
The retail sector is large as it services consumers from of all ages and income levels. In July 2018, the sector saw a turnover of $26, 823.4 million which was an increase of 0.3% from the previous month (Wei, Asian, Ertek & Hu, 2018). Low wage growth can be offset by the income tax cuts in the current budget to see accelerating growth in this sector. Consumers are likely to welcome the cuts as they will have more discretionary income even if wages are still sluggish.
The Australian Department Store Industry: Structure and Opportunities
The market is segmented by several qualities. Demographic segmentation involves diving the consumer base by age, gender, religion, income, ethnicity, and education. David Jones targets the middle and higher classes. This group has an average and higher than average income and is often well-educated. Furthermore, David Jones employs geographic segmentation to target consumers in different regions. The company has stores in major population centers to capture as many customers as possible. With regards to psychographic segmentation, the company targets consumers with exquisite tastes (Freeman, 2010). As such, the company partners with international brands to deliver quality products to the market.
Financial and Corporate Performance
In 2017, financial reports revealed that David Jones’ half-year operating profits had declined by 37% to $ 66 million (Wei, Asian, Ertek & Hu, 2018). This is a significant decline in operating profit. This may have been attributed to low-trading velocity in the first quarter with trade increasing in the period leading up to December. In the same period, operating costs increased by 9.7% (Wei et al., 2018). This increase can be attributed to new stores operational costs. Overall, the company has trends that are similar to those of the entire industry (Wei et al., 2018). Modest sales and profits growth has resulted in reduced investor confidence and therefore mild or negative growth in share prices. The corporate leadership of the company focuses on several key objectives. The company has achieved some but is yet to achieve all goals. These include becoming an omnichannel retailer, harmonizing costs, growing the store network, investing in technology, reducing the cost of business and investing in customer engagement to maximize customer lifetime value.
David Jones uses a direct distribution channel. The company sells to the customers directly without the use of intermediaries. As a department store, the company has outlets that customers visit to acquire various products. However, the company has been employing an omnichannel approach to presenting the product to consumers. For instance, the company markets through the internet. The internet is a preferred option for many consumers to window shop and cross-check prices. As such, it provides convenience for remote shoppers (Freeman, 2010).
Strengths
- Strong brand image- The Company is the oldest departmental store in Australia. IT is a household brand that is well-known and respected. The company has had time to establish itself as a force to reckon with by proving services to many generations. As such, it does not need to spend as much resources on marketing as would new entrants to the market (Freeman, 2010).
- The company has a pool of loyal customers whose love for the brand ensure that it has an assured stream of revenue.
- The company also works with a wide range of brands who provide high-quality products and services to maximize value delivered to the final consumer (David, 2011).
- By using omnichannel retailing, the company can now reach companies through several platforms. This increases shopping convenience as well as improving customer satisfaction through better quality customer service (David, 2011).
- By streamlining the supply chain and utilizing its bargaining power, David Jones offers competitive prices which increase consumer demand for its products.
Weaknesses
- Slow sales growth- Negative sales growth is a sign of trouble for any business.
- Poor financial performance. Slow growth of sales has reduced the company’s ability to meet its short-term obligations. This has also led to reduced profitability.
- The company also has a limited global penetration as it focuses on one region only.
Opportunities
- The company has recently ventured into the pharmaceutical and financial sectors. These provide a vital portfolio broadening opportunity that limits the impact of shocks in the retail market to the company.
- The company also has stores in a variety of locations. Such stores offer an opportunity to capture a large customer base. More so, the use of internet marketing presents an opportunity to reach an even larger consumer base (Price, 2016).
Threats
- The company faces increased competition from companies such as Target, Marks and Spenser, L’elegante, and Myers. These companies threaten the position of David Jones as a market leader, and they can take away its market share (Robson, 2014).
- The products offered by David Jones are not unique. Customers can easily switch to new ones due to lower prices or the companies non-responsiveness to their needs and preferences (Cohen & Roussel, 2013).
The company’s competitive advantage stems from its strengths and opportunities. Being a well-established brand, the company has loyal customers. Its marketing expenditure can, therefore, be limited to introducing new products and new consumer segments. More so, the company has a large pool of resources that can be invested in research and development to fuel the venture into other sectors (Balaji & Roy, 2017). Such a move is necessary as diversification increases the probability of success of a company. Furthermore, the internet offers a new channel to capture consumers and get them to be loyal customers.
The Role of Data Analytics and Personalization in the Retail Sector
Strategic Options
David Jones has the option of expanding its operations to several countries. Its parent company, Woolworths has operations in South Africa. David Jones set up operations in New Zealand in an attempt to capture a market whose characteristics are similar to those of the Australian market. Furthermore, the company has invested resources in transforming the company into a force to reckon with in the age of digital transactions (Bailey, Price, Pyman & Parker, 2015). By investing in technology and increasing the reliance on omnichannel retailing, the company positions itself as a retailer who is adept at identifying consumer trends and working to meet them (Hill, 2014). At the same time, the company has been strategizing on ways of strengthening its core business. In the face of reducing sales, reducing operational costs is necessary.
It is essential for David Jones to engage its customers more in a bid to increase sales and boost profits. Customer engagement involves improving the value of services that customers receive. Often, customers can change retailer due to the service they receive especially when the tangible product is similar, or it serves the same purpose. Furthermore, David Jones can reduce operational costs by streamlining its supply chain. By working with its parent company, David Jones can minimize the costs of acquiring products from overseas suppliers. Online platforms offer a great way of connecting with consumers. As consumers’ needs and preferences are dynamic, David Jones can use the internet to research how the trend of such variables and thereby tailor its services accordingly (Hill, 2017). It is also essential to harmonize online sales and brick and mortar sales to optimize customer engagement and satisfaction.
References
Bailey, J., Price, R., Pyman, A., & Parker, J. (2015). Union power in retail: Contrasting cases in Australia and New Zealand. New Zealand Journal of Employment Relations, 40(1), 1.
Balaji, M. S., & Roy, S. K. (2017). Value co-creation with Internet of things technology in the retail industry. Journal of Marketing Management, 33(1-2), 7-31.
Cohen, S., & Roussel, J. (2013). Strategic Supply Chain Management: The Five Core Disciplines for Top Performance, Second Editon. McGraw-Hill.
David, F. R. (2011). Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge university press.
Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between suppliers and supermarkets in the Australian grocery industry. Journal of Consumer Behaviour, 17(1), e13-e20.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Hill, T. (2017). Manufacturing strategy: the strategic management of the manufacturing function. Macmillan International Higher Education.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.
Ingene, C. A., & Takahashi, I. (2017). The changing Japanese retail market potential from 1997 to 2007. In The Customer is NOT Always Right? Marketing Orientationsin a Dynamic Business World (pp. 516-516). Springer, Cham.
Levy, M., Weitz, B. A., & Grewal, D. (2012). Retailing management (Vol. 6). New York: McGraw-Hill/Irwin.
Price, R. (2016). Controlling routine front line service workers: an Australian retail supermarket case. Work, employment and society, 30(6), 915-931.
Robson, W. (2015). Strategic management and information systems. Pearson Higher Ed.
Wei, C., Asian, S., Ertek, G., & Hu, Z. H. (2018). Location-based pricing and channel selection in a supply chain: a case study from the food retail industry. Annals of Operations Research, 1-26.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
