David Jones 'have to look at Auckland'

In Australia, leading retailer David Jones has 1700 brands and the company's biggest department store is 55,000sq m. Photo / Bloomberg

Aussie retailer will need economies of scale and population offered by Super City to boost purchase in the capital: retail expert.

Don't be so sure Australian retail giant David Jones won't be coming to Auckland, despite the company's efforts to downplay such suggestions, says one senior retail analyst.

David Jones department store is planning to launch in Wellington next year with new brands and a complete building revamp for the old home of Kirkcaldie & Stains.

The retailer announced on Thursday that it was buying out the struggling Wellington institution Kirkcaldie & Stains for A$400,000 ($431,000) with an option to purchase its fixed assets for A$500,000 following a seven-year period of losses for the Wellington company.

David Jones chief executive Ian Nairn says the company is not planning on expanding beyond Wellington within the next few years but retail analysts say it is likely Auckland will see a David Jones store in the near future.

"We believe they will have to look at Auckland," says First Retail Group managing director Chris Wilkinson.

"The fact is while they'll be able to achieve some economies of scale, in terms of leveraging their [other brands for] logistics and warehousing and back office, having a store with the kind of population of the Wellington region is not really sustainable as one outpost," he says.

"So if it was a commercial decision I would suggest that they would have to be looking fairly shortly at something else within the country - which is most likely to be Auckland. Within the retail sector it's tipped that that would be in the downtown complex in Auckland. Almost certainly."

Despite the possible competition and the grim news around Kirks, Auckland's landmark department store Smith & Caughey's has reaffirmed the company's commitment to Auckland, saying the arrival of the Australian store was not unusual.

"It is no real surprise that David Jones is entering the market, as we have been expecting it for some years," says executive director Andrew Caughey.

"It will add to the competitive environment that all retail is facing. Regardless of this announcement, Smith and Caugheys is well advanced in planning to expand and enhance its offering over the coming years."

Following the announcement on Thursday, Nairn confirmed David Jones would spend more than $20 million on refurbishing the Wellington store before it opened midway through next year.

The facade and storefront would be retained but the interior would be knocked out and completely rebuilt before the company decided which brands it would stock.

We will preserve the heritage-listed frontage whilst completely renovating the interior. Our aim is to create a world class shopping environment with the quality finishings and latest retail technology that shoppers expect from a premium department store.

Ian Nairn, Chief executive

Nairn says the company is planning on retaining a number of the brands that are currently stocked in Kirks but New Zealand should expect to see some of the brands that are stocked in Australia's David Jones' stores and which might not be available in New Zealand.

He will not give an indication which of these brands might be likely to hit the store but says it will be an edited version of what the company stocks in Australia, and will be decided on after speaking to the local Wellington market.

"[David Jones] have 1700 brands and our biggest store is 55,000sq m. The [Kirks] store we're taking on is only 6000sq m so we have to edit our collection down, and the key will be obviously bringing the brands the customer wants," Nairn says.

"It's not a huge store so if anything we'll err to the premium end, and putting that collection together is going to be pretty exciting."

New Zealand Retailers Association chief executive Mark Johnston says the smaller store size could prove difficult for the company.

"The footprint here is a lot smaller than in Melbourne or Sydney so it's a question of how do you make that work," Johnston says.

"It will be a bit of a challenge but they'll have ideas and given Ian's background and also David Thomas the chief operating officer as well - both of them have come from Country Road and Witchery, also owned by Woolworth Holdings. So they know the New Zealand market quite well and have a good feel for it so they'll have ideas about what will work and what won't."

In Wilkinson's opinion the 152-year-old-Kirks has become stale in the retail sector and unlike some of the other department stores around New Zealand, is not at the heart of its community.

Wilkinson says it has been overtaken by some of the newer retail stores that have created shopping "experiences" through the creation of open and modern stores.

"The problem was when [Kirks] went through its remodelling in the 80s, it hasn't got the occasion that a department store typically has.

"If you go into David Jones in Melbourne or Smith and Caugheys in Auckland you get that sense of occasion, a bit of theatre," he says.

"Kirks doesn't have that and it misses some of the fundamentals in retail, like easy ways for consumers to get upstairs, and there's a whole lot of infrastructure issues that typify how the 80s was in terms of development. And in many ways those have been barriers for them to try and play in the market that they need to be playing in."

Nairn says although Kirks has been struggling, he expects David Jones will be able to succeed in the market as it has the scale to buy in quantity and also due to the investment the company is planning which will include escalators in place of the current stairs.

Wilkinson says the arrival of David Jones represents a shift change in the retail sector in New Zealand with the launch of Top Shop in Auckland raising the bar.

The heritage-listed frontage of Kirkcaldie and Stains' department store on Lambton Quay in Wellington. Photo / Mark Mitchell

Top Shop is tipped to be looking at stores in Wellington and Wilkinson says it is likely there will be a number of other stores that will flock to the Wellington area around David Jones when it arrives.

"Without a doubt what we know in Auckland is that Top Shop has lifted the game of all of the retailers in Queen Street and immediately around them," Wilkinson says. "So the likes of Hallensteins have done very well by the fact that people have come into town. Top Shop being there has got them opening their wallets, they may not have found what they wanted there but they're certainly spending in the shops around and it's really had a ripple effect right throughout that central city area."

Wilkinson says the Wellington region is going to see a cycle that will re-engage consumers with retail in general, and it is likely other retailers will try and take advantage of the six-month hiatus between Kirks closing and David Jones opening to expand in the region.

David Jones

• Leading Australian department store founded in 1838 in Sydney.
• Operates 35 stores and 2 warehouse outlets across Australia.
• Stocks over 1700 brands including its own David Jones line.
• The Wellington store is its first overseas outlet.