DJs fighting back online

Online sales triple while customers double in a month

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 6, 2012 1:03 pm AEDT

David Jones Limited (ASX: DJS) has tripled its online sales and the number of customers shopping online have doubled since last month, when the department store retailer started testing its new web and mobile stores. And that's despite an absence of marketing.

While online sales are still believed to below 1% of total sales, the retailer has stated that it is aiming for it to reach 10% or higher. According to the Australian Financial Review (AFR), David Jones has already increased the number of products available online from 9,000 to 80,000 with another 10,000 products to be available before Christmas.

David Robinson, head of the company's omni-channel strategy, has told the newspaper that David Jones has done 'six years' worth of work in six months. While the company is happy with results so far, it still believes there's plenty more to do. According to the AFR, David Jones plans to add product ratings, customer reviews, videos and express delivery options over the next 6-12 months.

The company also plans to release new web and mobile stores, and a magazine app on Wednesday. Online sales can generate a significant jump in margins because of lower costs. The AFR gave the example of US retailer that generates 10% of its sales online, but those sales translate into 25% of earnings. Myer Holdings Limited (ASX: MYR) boss Bernie Brookes has said that profit margins on online sales could be twice those of normal store sales.

Department store retailers will certainly need to innovate to get customers in-store or shopping online, given the recent heavy falls in department store sales. According to Australian Bureau of Statistics (ABS) data released yesterday, while retail sales rose 0.5%, department store sales had slumped by 3.8%.

Lower GST threshold?

Retailers could also receive a boost if the government lowers the GST threshold for goods sold online through overseas retailers. Sales under $1,000 are currently exempt from GST, but several experts have recommended the government adopt a lower threshold, as a means of garnering significant revenue, and as a way of assisting local retailers. Almost all Western developed countries have a threshold of around $30 equivalent.

Harvey Norman Holdings (ASX: HVN) boss, Gerry Harvey, one of the original agitators for the lower threshold, has told the AFR that he doesn't care if the government adopts the proposals, and he was giving up. Meanwhile Premier Investments (ASX: PMV) chief, Mark McInnes has said that it was one of the greatest loopholes in the legislation, and the government was responsible for setting it right.

Foolish takeaway

Last year, Bernie Brookes suggested that traditional retailers would dominate online sales within 10 years. Give the impressive results David Jones is achieving so far, he could well be right.

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Motley Fool writer/analyst Mike King owns shares in David Jones. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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