David Jones, what Kirkcaldie & Stains wished it could be

Friday, 15 July 2016

Wellington's new David Jones store set to please.

On Sydney's Elizabeth St, visitors to David Jones are greeted by a pianist, playing Beyonce's Halo on a baby grand piano.

Sleek black counters with the latest in cosmetic goods from Tom Ford and Clinique lead into luxury fragrances. Mens and womenswear include labels from Europe and America, as well as the best of Australia and even a handful of Kiwi designers.

High-rolling customers can make appointments to sit in private areas which resemble fashionable living spaces, to be brought outfits to try on, while sipping champagne.

Analysts say David Jones' new Wellington store could turn the capital's central business district into the destination of choice for shoppers.

In the wedding suite in David Jones' Sydney store, brides-to-be can try on designer dresses costing up to A$14,000.

* Kirkcaldie & Stains department store to become David Jones

* Will the last one out of Kirkcaldie and Stains please turn out the lights?

Chairman Falcon Clouston announced in June 2015 that the Kirks department store would become a David Jones. Months earlier Clouston had travelled to Sydney to approach chief operating officer Dave Thomas about taking over the store.

* David Jones splashes out on Wellington store renovation

* Zara and H&M appear poised to follow David Jones into Wellington**

David Jones has promised to be respectful to the Kirks brand, and that some elements of its predecessor will remain, including doorman Neville Wellbourn.

Shopping bags show only a black and white houndstooth logo, fulfilling David Jones' vision for almost 50 years. The brand should be so well known, it need not say its name.

On the Gold Coast, the cafe in David Jones' store in the vast Pacific Fair shopping centre (which will closely resemble the Wellington cafe) will source oranges from different parts of Australia at different times of the year, to ensure the freshly squeezed orange juice has a consistent sweetness, year round.

Recognising Wellington's cafe sophistication, the company fretted over whether to import roasting machines to New Zealand in order to reassure customers that its beans were roasted locally. (For the time being at least, it has chosen not to.)

Since Kirkcaldie & Stains closed on the site for the last time, almost six months has passed, as escalators were installed and a massive refit take place ahead of the July 28 opening.

David Jones says its Wellington store will offer a combination of brands unavailable elsewhere in New Zealand.

At least for now, it seems likely to become New Zealand's premier shopping destination.

The 7000 square metre store is significantly smaller than David Jones would like it to be, meaning the company will only be able to offer an 'edited' version of what its flagship Australian stores stock.

A statue in David Jones' cosmetics department.

But whatever exactly David Jones brings to Wellington, it promises to be luxurious and modern; what Kirkcaldie & Stains only wished it could have been, if it only had had the money and the scale.

Dave Thomas, a veteran of David Jones' South African owners, Woolworths Group, and now the chief operating officer, gives naked praise to his employer as one of the 'world's great retailers'.

A mother and daughter inspect fragrances at David Jones' Sydney store.

But after years of predictions that bricks and mortar shops would wither in the face of low-cost online operators, the strategy seems almost novel.

'They really make sure they provide, first and foremost, customers with great product. Beautiful product, in beautiful stores, with great service,' Thomas said.

'That may pertain to food, that may pertain to other elements of the offer, but it's all about the product, the store and the service.'

The millions of dollars David Jones is spending in Wellington alone, on a site which hadn't turned a profit in close to a decade, shows David Jones is putting its money where its mouth is.

'The best and most exclusive goods'.

David Jones, like the department store it replaces, is steeped in history.

By the time Kirkcaldie & Stains opened its doors in 1863, Welsh immigrant David Jones had seen his original retail partnership close, opened on his own in Sydney's Market St in 1838, survived the depression of the 1840s, and retired.

The original mission was to supply 'the best and most exclusive goods'. The aspirational branding continues now: 'lead an extraordinary life'.

It is now the oldest department store to operate continuously under its own name, in the world.

The Jones family ran the company until 1980, expanding by opening stores and through acquisition, and it now operates in most major cities in Australia.

But also like Kirkcaldie & Stains, David Jones has suffered from increasing competition from online and international brands.

By the time Woolworths launched an A$2.12 billion (NZ$2.24b) takeover bid in 2014, the strategy had become, in the words of Aaron Faraguna, David Jones' general manager of retail operations, a 'managed decline' of its physical retail space, in favour of focusing on its online offering.

At the time, David Jones faced the prospect of merging with Myer, a department store chain more akin to New Zealand's Farmers.

Now, under South African ownership it is on a mission to push ahead with its upmarket offering, investing heavily in store rebrandings.

Then suddenly, almost out of nowhere, it was coming to Wellington, then still in the doldrums from years of Government restraint, and overlooking Auckland, far larger and already in a housing boom.

'You don't have to sell me on Wellington'.

In June 2015, when Kirks chairman Falcon Clouston announced that the 152-year-old retailer was finally giving up the ghost and would become David Jones, the reaction was surprising only for the lack of surprise. The writing was on the wall.

Despite the best efforts of the company to reform, the department store had been losing money for seven years.

Efforts to jointly purchase alongside Ballantynes of Christchurch and Auckland's Smith & Caughey's still did not give the scale it needed, and it was never able to build a compelling online sales offer.

'We were in a corner,' Clouston said.

The board had sold Kirks' commercial property business, leaving only the department store, which was slowly eating a pile of cash Clouston knew shareholders like Sir Ron Brierley were expecting.

'We had to do something.'

Clouston said he was not bothered about whether Kirks was sold to another retailer per se, but despite the duties he had to shareholders, they were not the only consideration.

'I wouldn't want to sell out and forget about the staff and that sort of thing.'

More than once he signed letters congratulating employees on retirement after 35 or 40 years service.

As well as global suppliers, Kirks was doing business with 'the woman from Naenae who sold us the turkish delight' as well as hundreds of others.

'There were quite a lot of stakeholders in this business who were quite precious to me, other than just the shareholders.'

So Clouston called Thomas in February 2015, saying he was coming to Sydney. 'He said he could spare me half an hour.'

That it was the Victorian who met the Kirks chairman was serendipity. Clouston found a man only too familiar with Lambton Quay.

'Almost straight away, he said to me 'you don't have to sell me on Wellington'.'

Thomas previously ran Country Road, also owned by Woolworths, at a time when it expanded into New Zealand in 2001 and 2002. This included the large retail store immediately south of the Kirks site on Lambton Quay, rumoured to be among a handful of the chain's most profitable stores.

Thomas says he 'loves' Wellington, that the city is 'quite special'.

But when he approached the board of directors about Wellington in the following weeks, it was not because of his fondness for the capital's cafes.

Only a few months earlier Woolworths had completed the takeover of David Jones, and was more focused on bedding in the purchase than an international expansion.

But Thomas was armed with a compelling offer. As well as a seller of an iconic department store effectively coming cap in hand wanting a buyer, Woolworths already knew what it was getting into.

'We really base this business on a lot of information.'

The Country Road loyalty card, not dissimilar to Fly Buys, gives the company detailed information about its customer base, while the company acquires other data to inform it where it is missing out.

'We know a lot about the market, where they're spending, where they're not spending.'

This allowed David Jones to form a picture of the opportunity: high average incomes, in a small, physically constrained city meaning there are few alternatives to the CBD.

'I think that the Wellingtonians are probably the most affluent, under-catered for market within 5000 kilometres of here,' Thomas said.

For Aucklanders the situation is different, with Thomas pointing to a string of large malls around the city, making it more difficult to capture its target market.

'Even if you were to put a store [in Auckland], where would you put it?,' Thomas said.

'Whereas Wellington, when this opportunity presented itself, it's a really magical space that we've been able to secure for the business.

'They [Wellingtonians] deserve this, they've waited a long time and hopefully, we'll bring in something that exceeds all their expectations.

Low-risk move, or audacious spending?

Already the budget for the fitout has been blown, in an effort to get the store just right.

Despite Wellington's former luxury department store being a long-term loss-maker, Thomas jokes that the only risk for David Jones in the capital would be the Wallabies beating the All Blacks.

Some of the brands may not perform as they do across the Tasman, but if they don't, they will be replaced by others.

Inheriting more than 100 staff from a store with a 'fantastic heritage brand' already generating more than $30 million a year in sales, Thomas is expecting big things.

'It's really a low-risk strategy from our perspective.'

Chris Wilkinson, retail consultant, of First Retail Group, said the information retailers held on its customers, 'really gives you a high degree of certainty about where your success is going to come from'.

Research showed that huge amounts of spending were leaking out of Wellington, as customers became more discerning.

'As the Wellington market's become more affluent and our customer base is changing … their expectations and their appetite has changed significantly, and because of that, Kirks hasn't been in a position to satisfy them.

'This new David Jones offer certainly will.'

Wellington is set to be restored as a shopping destination, Wilkinson said, boosted by its new tenant, and the city had to capitalise on its period back in the spotlight.

'A rising tide floats all boats. That's what will happen to Wellington. The mission that Wellington has is to sustain that, because we won't have that edge forever.'

Hamish Rutherford travelled to Sydney and the Gold Coast courtesy of David Jones