Tim Quinn heads up a David Jones buying team of 20 and is responsible for information technology, electrical, music, video, books and stationery. Ingrid Gattari recently spoke to Quinn about DJ's role in the IT retail market.
ARN: With the major vendors under intense margin pressure and looking at new ways to make money, that is, via the Internet, we are looking at a future where vendors are in competition with their resellers and retailers. How will David Jones respond to that future?
Quinn: It's a challenge for everyone. It's not only PC companies facing margin pressure, we are as well.
The Internet is challenging the traditional marketplace with businesses in shopping centres paying high rents competing with online shops run from a private home. To compete with that is the challenge.
All shops have to work out what service they can offer through the Internet.
What is happening with the DJ Web site?
At the moment it's not operational, but there are plans for an active site. We were just not ready to maintain a fully functional Web site so we let it go.
We didn't have the infrastructure or the ability to maintain it or keep the continuity there.
Internet users are probably not DJ customers at the moment. There is no question, however, that the second wave of Net users who are dollar rich and time poor will take advantage of buying basic commodities via the Net if it saves them time.
The sheer pleasure people get out of touching and feeling and making a choice based on what they see - I don't think that will ever be replaced by a PC. There is a certain pleasure about going shopping.
But no one enjoys shopping for basic commodities.
Who are DJ's customers and how do you market to them?
We have a $6 million annual marketing budget and have done a lot of research profiling our target customers. A major area is 35 to 55-year-olds with a reasonably high income of $70,000+ a year.
We know what types of magazines and newspapers appeal to them. Our customers are catalogue-oriented, they read Fairfax publications and the Sunday Mail in Adelaide and Brisbane, for example. Weekend press works well, and mid-week is not bad. And the Good Weekend magazine is great for us. We target them through direct mail and in loyalty card programs.
Generally, IT shopping is a male decision although a lot more females are shopping for technology products. Depending on where they live, IT shoppers are also families who like to shop with big retailers like DJ, Harvey Norman and Myer/Grace Bros, because if the product doesn't work they'll want to take it back. There is still a high degree of scepticism about buying a PC.
In the cities we have a high degree of business customers. It's nothing for us to sell a $7000-$9000 notebook in a city store.
Where do you see the retail market going?
I think interest-free has run its gamut. It's not having the same appeal anymore. The market can only absorb so much.
The reactions we are getting from black-and-white press advertising on brand-name products is almost as effective as interest-free offerings. There are some great values out there on PCs at the moment and as long as you've got the brand name it will sell through. The trouble with the IT business is that because of price reductions we are all trying to do last year's figures on sales that are averaging 10-15 per cent less in value.
Talking about great deals, how did the Internet PC go for you guys?
It was a riot. Amazing. We couldn't keep up with demand and probably upset a lot of customers as a result.
I'm not sure the market is ready for that sort of acceptance, however. People are cynical. Look at mobile phones - no one believes they are $1 anymore. And while there were some real issues with third line forcing, I don't believe anyone is ready to accept that sort of marketing.
I was staggered Myer/Grace Bros bought 7000 machines and I am told there are around 4-5000 left. I believe the market will still be absorbing them at Christmas.
You once said you weren't sure DJ should be selling PCs.
I don't think DJ can afford not to. The margins we make out of it often don't justify the space but there is an expectation for you to stock that range of products.
What are your biggest-selling products?
We are selling a lot of handhelds, palm pilots and personal organisers. The trends are notebook-related and portable appliances. Our biggest-selling notebooks are Toshibas followed by IBM.
What are you doing this year different from last year?
We have better control over our man- agement procedures and are getting better information from the suppliers. Our biggest movers are the hardware products.
We have a better-balanced range of products and that's due to better management from the buying team. If you have a better-balanced range it means there is a better flow of merchandise in and out of the business.
We are more profitable and have a better handle on the whole management of the IT section because a year ago we only had one buyer, now we have three. I have a telecommunications buyer, a software buyer and a business machines buyer.
We have a clearer marketing strategy, a better range and a better handle on the business, which is giving a better pattern of returns with set timely catalogues.
Our major issue is to make more profit out of the IT range.