Six lessons to take from David Jones’ struggles

David Jones’ net profit for the six months to the end of January fell 19.6% yet Oroton posted a 4% profit increase, suggesting start-ups can learn from both retailers, albeit for different reasons.

David Jones expects profits for this financial year to plunge by up to 40% after a significant fall in its first-half earnings.

Net profits for the six months to the end of January dropped 19.6% to $85 million, and sales fell almost 7%.

Meanwhile, Oroton has managed to dodge much of the gloom and doom in the sector, posting double-digit revenue growth and a 4% profit increase for the first half.

Oroton posted same-store sales growth of 9% and revealed its online store has achieved sales growth of more than 60%.

How is it that one retailer is performing so well while another flounders? David Jones and Oroton aren’t start-ups by any means, but there is plenty that start-ups can learn from them.

StartupSmart looks at the do’s and don’ts of Oroton and DJs:

1. Do look to emerging markets

A huge part of Oroton’s success is its newfound focus on the Asian market. Only two years into its Asian push, group revenue has increased 13.4% to $99.1 million.

“We are focused on long-term brand development and investment in our Asian expansion strategy,” OrotonGroup chief executive Sally Macdonald said.

The company now has 92 stores, with six of those in Asia. Oroton plans to open an additional store in Malaysia in July 2012, and is reviewing other opportunities in Asia.

2. Do be realistic about bricks-and-mortar

With online sales growth of more than 60%, Oroton’s online store continues to be the largest and fastest growing store for the company.

Oroton intends to focus more heavily on online sales, with rent costs and annual indexation becoming an issue for the retailer’s bricks-and-mortar stores.

The company has already closed one store when the lease expired, and it’s likely there could be further store closures as the company attempts to reduce its fixed costs base in Australia.

3. Do maintain interest

Oroton isn’t afraid to get creative in its marketing efforts. Last year, it sent out an email to its members titled 3 Easy Steps To Shop Lingerie, complete with a video.

“Shopping for lingerie is easier than ever with our virtual fitting room. Just choose your style, see it on and watch the video for the 360 degree view,” the email said.

Oroton also uses YouTube to spruik its wares, and is no stranger to blogging, not only about its own products but other topics of interest, maintaining grassroots appeal.

4. Don’t expand when you’re struggling

After unveiling a massive fall in annual profits, David Jones says it plans to expand its chain of 36 stores across Australia by opening smaller shops, and increasing its workforce.

The plans for a revamp of the business include creating 100 new floor staff supervisor jobs, and 200 frontline service roles to deliver specialised services to shoppers.

Introducing more supervising staff is a good idea, but the push for 300 new employees averages out to about six per store. That’s not a whole lot per store, yet it’s going to be expensive to implement across the company.

5. Don’t get complacent about selling online

It’s not enough to simply set up a website and flood it with products, as is the case with David Jones, which has included a whopping 90,000 products on its site.

Successful online retailing is all about the experience. The entire process of getting onto the site, browsing and selecting products should be completely seamless.

By having so many products on its site, David Jones also runs the risk of overwhelming its customers, who may be inclined to exit the site altogether.

6. Don’t leave technology upgrades to the last minute

David Jones says it has added 200 staff to improve its IT systems and online business.

External consultants have been brought in to help revamp the retailer’s online store and hook it up to its inventory system. But it’s a little too late – this should have been done years ago.

David Jones is also notorious for its archaic point-of-sale system, which is clunky and time-consuming, particularly when customers wish to return or exchange an item.