By James Wells in Maui
MAUI: The chief executive officer of David Jones, Mark McInnes, told delegates on the opening day of the Narta conference about the secrets behind his business model.
In one of the most impressive presentations by a retailer at a Narta conference in recent memory, McInnes presented a clear and concise business plan which is designed to benefit the shareholders and cardholders in his business.
McInnes explained that a quote made by UK department store owner, Gordon Selfridge in 1909 remains the premise that David Jones is built on – “In my store, women can realize their dreams”.
Capitalising on its loyal and valuable customer base, McInnes is unashamedly targeting busy professionals and high income earners who are looking to purchase good quality brands in stores with wide aisles and strong service.
As the demography of Australians change and an increasing proportion of older and wealthier as well as younger and wealthier consumers emerge, David Jones is targeting its retail offering specifically at females. Ideally, McInnes would like to establish loyalty in three generations in the one family.
His most enthusiastic clients, which he calls ‘delighted customers’, represent 26 per cent of his customer base, spend $2,400 annually and visit the store 44 times a year. His research shows his less enthusiastic customers still visit his store 32 times a year.
The company’s strategy is to create retail experiences which are available to medium to high income earners.
One of the keys to the David Jones success is its credit card business which in recent times has growth from $5 million in earnings in 1996 to $30 million this year. Over 800,000 David Jones cards exist, and of these, 400,000 are active users that purchase products once every three months. Almost one third of the company’s 40 million annual transactions are made on David Jones branded cards.
McInnes hinted at a single David Jones branded Amex or Visa card that would be funded by the retaler. He said the products that are currently on the market such as the Harvey Norman Go Card which has recently passed the 100,000 mark since launching last year are beneficial to organizations like GE Money who secure the revenue from the cards.
“We are the only company that can own the revenue stream. We are the only company that can issue a co-branded card where we own the income.”
McInnes also said that the company has reduced its cost of doing business to allow for strategic expenditure and return dividends to shareholders. He says the company has learned from its foray into its failed food business in 2000 when the company spent over $240 million in two years. Annual investment has been reduced to approximately $50 million per year.
His philosophy on expenditure is based on the basic premise that no company becomes a great company without a focus on reducing cost and creating a cost culture.