David Jones chief executive outlines plans for retailer

AFTER almost 100 days as CEO of David Jones, Iain Nairn has a few things to sort out beyond the walls of the department store.

David Jones CEO Iain Nairn at a store in Sydney.

AFTER almost 100 days as chief executive of David Jones, Iain Nairn has a few things to sort out beyond the walls of the department store.

On Tuesday the boxes from his family’s home in Melbourne will arrive in their new home in Sydney. It will be a welcome move after commuting between the two cities since taking up the job on August 12.

“I’ll be really pleased to be here,” Nairn tells The Weekend Australian from his modest seventh-floor office with its deep arched window overlooking Hyde Park. “When this all transpired, my wife and I talked about it and decided that if I was going to do this job, I have to be here in the market to understand it. It’s been a bit odd travelling for a few months.”

When South Africa’s Woolworths entered into a deal to buy the 176-year-old Australian department store in April, many in the close-knit retailing world were taken by surprise.

Executives at rival Myer were notably blindsided, given that they still thought they were in with a chance to negotiate a merger between the two department stores. (The $2.2 billion Woolworths buyout of David Jones was finally approved by the Federal Court in July.)

The fashion industry was immediately abuzz with speculation that the houndstooth-bedecked retailer would be dragged downmarket, that its heritage would be ignored for mass-appeal private labels. Would they put the lid down on the piano player in the Sydney store? Would Santa be sacked? Would the flower show be nipped in the bud? In the months since, Woolworths chief Ian Moir has done his bit to calm such talk, and Nairn was happy to further explain why it was important to embrace the heritage of the brand and keep such touchpoints in place.

“I love the piano,” he says with a smile. “(But) an interesting one was the flower show. It’s an expensive exercise. But I tell you what was amazing: yes, we had people coming here that have done so for 40, 50, 60 years to look at the flowers, but actually there were more young, cool guys with their iPhones wandering around. amazed at what we’d created, like it was theatre.

“If you go back through the whole history (of David Jones), that’s what they do well. They did things that were innovative, exciting, that created theatre. And we need to do more of that, not less of it. Because that’s what great brands do.”

These first three months have been mostly about assimilation for Nairn, getting to know the business and “not jump to any conclusions, listen and learn — that’s my style anyway”.

The former Country Road boss also believes that he was in a unique position to further calm any initial apprehension among employees after the takeover. “I was like them two years ago — I was acquired by Woolworths (when I was) running Witchery and Mimco, and we were acquired (by Woolworths-owned Country Road). So actually I could talk about the experience and the change. I was not an old Woolies guy and I wasn’t South African; I was running an iconic Australian group. So I was in a reasonable position to put people at ease in what to expect and how we’d approach it.”

Nairn concedes the company has a lot of work to do, both in store and online, and says that he has “a quick-win strategy but also a long-term strategy”.

“Fundamentally our vision for the business is to take this iconic brand to a new level,” he says.

Top of mind is brand assortment and understanding the customer — and the first can’t come before the second. As such, Nairn says there are no announcements yet of what new brands will come into — or exit — the business until this work is completed, although he concedes that there will definitely be new Australian and international brands entering at the higher end and luxury level.

Underperforming brands are expected to exit as part of the “natural turnover”.

“We believe the opportunity in the mid to long term in Australia is with that more discerning, better-off customer. So keeping that vision in mind, one of the key pieces of work is understanding the customer. Out of that will come: what is the range assortment that the customer wants?

“And not just today, but the way we look at it is macro trends — what is happening in the world. So we’re doing quite a bit of work in terms of future trends, demographic trends, a lot to do with how the Australian population is changing. What are the needs of a premium department store in a CBD like Sydney where we have 23 million customers and 8 million tourists?

“We know those tourists are really driving retail in Australia, so we need to understand that. And then we need to go down every level of our store types and understand that, because different things happen in the market that affect different locations in different ways.”

From the customer perspective, the biggest changes will be visible by next August — a year to the day since Nairn’s arrival. “By August next year the brand assortment across our business will have been transformed. For instance, we will change 1000 pads (branded areas) within our stores between now and then.”

And presentation will be critical. “We have a lot of brands, but we often don’t do them justice and that’s the thing I’m most focused on. Looking at that Dior beauty counter, that whole (cosmetics) floor, we do a great job. We’ve got the best brands in the world and they look like the best brands in world. On some of our floors you’d say, do they look like the best brands? No, they don’t.”

Data analysis will deliver these customer insights. “You’ve got to understand their habits and behaviour and pre-empt their behaviour,” he says — something that the new owners have more experience with. “That’s what Woolworths do incredibly well. They’ve been on this journey for almost 20 years. They have a powerful CRM (customer relationship management) tool developed many years ago for the food industry and it’s incredibly powerful.”

Knowledge is one thing, but loyalty is “really crucial — probably the biggest single thing that’s going to transform this business”.

Nairn is working on an integrated loyalty and financial services scheme he says will be “almost unique in the world”, and aims to deliver it within a year.

“We have a great American Express partnership, and we can see the value of our customer who has one of our cards versus a customer who doesn’t. We have the benefit of the David Jones department store and Country Road group customers, so combined our power in the marketplace will be very strong and then into financial services. I travelled the world looking for something when I was studying for this when at Country Road. Not many people are doing this. Some of the hotels do this well — multi-branded cards.”

While talk of private label brands for the retailer has been rife, with suggestions that Woolworths’ own brands will be downmarket affairs, Nairn counters that only those suitable will be ­selected.

“Obviously we’ll be tapping into some of the Woolworths brands. But they have international class brands as well. They are a vertical design house; nearly 100 per cent (of their product is) designed, from food to apparel. (We will only stock) the ones that are absolutely right and are of international standard and will stand up within that brand assortment.”

The Country Road group of labels, which includes Trenery, Witchery and Mimco, will serve up one of Nairn’s quick-fix solutions before the bigger picture plays out. While recent reports have said that private label business would make up about 20 per cent of sales, Nairn believes it will be higher than that.

“Country Road will be about 10 per cent in their own group of brands,” he says, citing the current lack of children’s wear from Country Road and Witchery in stores, and also the Country Road Home offering, which he describes as Australia’s best-kept secret.

“And we have no Trenery (in David Jones) — that’s our other quick win,” he says of the Country Road spin-off brand that positions itself as a classic brand.

“We launched Trenery into Miranda (shopping centre in Sydney’s south) last week and we actually beat Country Road. Trenery is a lovely brand and doing really well but it’s only got 20 stores in Australia. So David Jones is a great platform for growth of that business.” These brands are also providing quick fixes online, a segment of the company that had been grossly neglected as online shopping took hold globally — it only launched in 2012.

“In our first 100 days we didn’t have any Country Road brands on our website, because it’s really quite complicated technically. We launched it last week, and Mimco took five grand on Tuesday. That was exceptional. In one day. That’s as big as one of our biggest stores.”

Currently online purchases account for almost 3 per cent of sales.

“The best (department stores) in the world are at 20 per cent plus, and we genuinely believe we can get it on that journey. To me it’s about transforming the business to think digital first, getting that mentality into the business.

As for the onslaught of international online retailers and department stores targeting Australia, Nairn is not too concerned.

“To me our job is to be better than those guys. If we do our role as a shopkeeper right — and that’s becoming our biggest shop — we will grow because we will give a better service, we will get it there quicker, we will have a better brand assortment and in fact our prices will be better.

“When a bit of business went offshore that was primarily around dollar changes. When the dollar was at $US1.05 Australia was expensive, but when it’s in the mid-US80c we’re really competitive.

“(But) we really need to build that customer comfort and confidence in our website.”

There was talk after Nairn’s appointment that he faced a big leap from heading a single brand or brands to running a department store, but Nairn’s career trajectory from his teenage years suggests he’s an all-rounder more than used to transition.

Starting out in Britain at heritage menswear label J Hepworth & Sons, Nairn was on the ground as a store manager when the company launched Next into the market in 1982 (it is now Britain’s biggest fashion retailer).

“I started in made-to-measure suits, but they saw the writing on the wall and launched Next, and brought to the world mid-market catwalk fashion in the same ­season.”

Working for the Burton Group when it acquired Debenhams and Harvey Nichols, Nairn was “intimately involved in that whole development of that business”.

Laura Ashley provided even more grist for the transformation mill. “It was a heritage (brand that) had really lost its way.

“It was a huge transformation project, but a great experience. I did everything from apparel to home furnishing to licensing and franchising.

“We traded in 34 countries and we were in virtually every single top-end department store in the world.”

While researching the heritage of David Jones, Nairn says he was most struck by the early innovation of its founder.

“In 1919 David Jones had a mail-order business, in 1919 it sent its first goods to Newcastle in a biplane — delivered free. When you read about how the business started, here was (somebody) who listened to his customers.”