Australians are willing to pay more to shop in department stores despite the better deals offered online, upmarket retailer David Jones says.
Chief executive Paul Zahra said it was up to the major brands to offer globally competitive prices, as the nation’s oldest department store tried to convince suppliers to drop their prices.
“Of course Australians know that they’re always going to pay, not always, but in many cases, pay a little bit more,” Mr Zahra told analysts in a briefing. “Our market research tells us that they’re prepared for that.”
He said that Australian shoppers who purchased goods from offshore websites continued to avoid GST and tariffs that would otherwise add 15 per cent to the price.
The company will still press ahead with opening six new stores and some smaller format stores despite the cheaper offerings online.
Mr Zahra on Wednesday revealed plans to revamp customer service and boost online sales but conceded the department store chain had lost a “little bit of relevance” and hadn’t invested enough in technology and people.
He also flagged cost reductions among some of the major brands and said Australian prices would tend to fall in line with overseas retailers as online retailing spread.
“The price difference will happen over time,” Mr Zahra said. “Most consumers are prepared to pay a little bit more because they have the confidence in the brand.”
He said it was not in any brand’s interest to lose business in any region.
“It’s early days, but we’re seeing market share shift from brands that have taken action (on pricing) as opposed to those that haven’t.”
Investors continued to hammer David Jones stock on Thursday, a day after it warned full year profits could slump by up to 40 per cent and as rumours surfaced that private equity groups were circling the company.
David Jones shares dipped as low as $2.34 in intraday trade but closed three cents lower at $2.40.
Commonwealth Bank analysts said in a research note on Thursday that David Jones’ gross margins were down because it needed to discount stock to clear excess inventory.
“Should DJs successfully roll out its integrated online offer as scheduled, we may need to upgrade our conservative online sales forecasts for the company, which is currently 2.2 per cent of sales by fiscal 2020,” the analysts said.
