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David Jones SWOT analysis
Strong direct selling strategy
David Jones aims to have a presence over all the distribution channels. The company sells directly to their customers in their stores and through their online distribution channel. The company also sends it catalogs to mailing list obtained from third parties (World Market Intelligence 2010). The use of multiple channels to distribute enables David Jones reach more customers.
Solid Financial Performance
In 2005/06 David Jones reported a growth prediction of between 5 and 10 per cent in profits. The retailer also announced a net profit of $77.86 million in 2004/05. According to the Company’s (2012) annual Report the company continued to record impressive financial performance.
Strong Brand name
David Jones is a strong brand name which is popular among its consumers. It is renown for stocking high end clothing.
David Jones 37 stores are concentrated in one Geographical area where they may cannibalize each other’s business (World Market Intelligence 2010).
Loss of Credit Card Contract
David Jones is set to lose its contract with American Express Credit Cards precipitating a severe reduction in earnings (World Market Intelligence 2010).
Customer information Collection
Although David Jones has a customer information collection system in place it relies on third parties to obtain mailing list.
The growth in online retailing is among the opportunities available to David Jones to expand its customer base (World Market Intelligence 2010).
David Jones could come up with new products to appeal to new market niches.
David Jones could improve its Geographical reach by opening new stores in various locations across the country.
Existence of a strong competitor
Myer, David Jones major competitor is engaged in activities to strengthen its market position, putting further pressure on David Jones.
Increasing bank Rates
Increase in bank charges is likely to affect the sales of David Jones.
Higher Labour Wages
Employees are demanding higher compensation rates meaning David Jones have to account for a higher wage bill than ever before (Apparel Retail Industry Profile: Australia, 2009).
Buyer power is low in the Australia apparel industry. This is due the fact that clothing has become an essential commodity for consumers. According to Apparel Retail Industry Profile: Australia (2009), Apparel Retail Industry Profile: Australia (2009) people perceive clothes as part of their social identity. David Jones provides high end clothes that assist the wealth express their identity. Buyer power is thus low as the products offered by David Jones are highly desired by those its targets.
However, David Jones have to be aware of changing fashion trends which are greatly influenced by consumers.
Australian apparel retailers have a wide range of suppliers to choose from. Low-cost producers in developing countries have further led to a decline in supplier power in the apparel industry (Apparel Retail Industry Profile: Australia 2009). In most cases, Australian clothing retailers obtain their supplies from foreign manufacturers. However, the fact that David Jones needs high quality products significantly increase supplier power and the cost of David Jones switching to competing suppliers. Other factors that are associated with rising supplier power include increasing power, chemical and cotton costs, raw materials that suppliers depend on to manufacture clothes.
Threat of Substitutes
Discount Retailers offers products of similar aesthetic quality as David Jones at relatively lower prices. However, the quality and durability of these products would not appeal to David Jones target market. On the others hand, homemade and custom clothing is another substitute to David Jones product offering (Apparel Retail Industry Profile: Australia 2009). As with the low cost products, these alternatives will not appeal to the niche targeted by David Jones. The biggest substitute threat in David Jones market comes to manufacturers selling direct to consumers, a trend that is taking shape in the industry. Direct selling is facilitated by the development and popularity of online selling facilities. However, this threat is still small but is set to grow. Therefore, it can be concluded that the threat of substitute products is still low in the Australian apparel retailing industry.
Threat of New Entrant
The capital outlay for entry into the Australian apparel industry is quite low making it easier for competitors to enter the Australian market (Apparel Retail Industry Profile: Australia 2009). The impressive growth recorded in the Australian industry also makes the Australian Apparel industry an attractive prospect for new entrants. Thus, the threat of new entrants in the Australian apparel industry can be concluded to be very high
Rivalry amongst competitors
The other large scale retailer targeting the same consumers as David Jones is Myer. Rivalry between the two retailers may trigger price wars (Apparel Retail Industry Profile: Australia 2009). However, the fact that the market is dominated by the two retailers means that the threat of competitive rivalry is moderated by their virtual duopoly.
Objectives of David Jones Strategy
To take advantage of the development and popularity of online selling facilities.
To counteract the threat of manufacturers selling substitute products to consumers online.
To make sure their marketing communication reaches as many potential consumers as possible.
Apparel Retail Industry Profile: Australia 2009, Apparel Retail Industry Profile :1-31, Accessed August 19th 2013, Business Source Premier http://web.ebscohost.com.dbgw.lis.curtin.edu.au/
David Jones Annual Report 2012, Accessed August 19th 2013, http://www.davidjones.com.au/ /media/Files/Corporate/Presentations/2012/David%20Jones%202012%20Annual%20Report.ashx
World Market Intelligence 2010, David Jones Limited: SWOT Analysis & Company Profile, World Market Intelligence, Sydney
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