Upscale department store David Jones has taken another step in downsizing its food business.
On Friday, the company said it would end its partnership with fuel retailer BP, which had seen 35 service stations in Sydney and Melbourne converted into David Jones mini-restaurants.
It comes just months after the department store announced it would close its two stand-alone grocery stores in Melbourne.
This leaves David Jones with a food offering at his Sydney CBD flagship store and nearby Bondi Junction.
“It may not be viable and they could decide to exit the food category altogether,” a retail analyst told news.com.au. The company insisted it would continue to sell food.
Partnership between BP and David Jones to be the market leader
BP and David Jones announced in August 2019 that up to 350 food items from the retailer – including ready meals, sandwiches and cookies – would be sold at 10 gas stations initially.
It has been hailed as a “market leading” catering and convenience offering.
The company took out model Rebecca Judd to pose by the gas pumps at Bayside’s first site in Melbourne.
“The launch of this partnership marks an exciting new chapter for David Jones Food,” said Pieter De Wet, Managing Director, Food Business, David Jones.
“This range of products combines innovation, freshness and taste to offer an offer that is both practical and of the highest quality.”
The company had hoped it would be a lucrative side business for the major department stores.
And that seemed to be the case for a while. In July 2020, the pair announced more than 20 additional conversions in suburbs, including Mosman, Ashfield and Willoughby in Sydney and Epping, Eltham and Kingsway in Melbourne.
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But on Friday, the two companies said the experiment was over.
Commercial publication Convenience and impulse retail announced that BP sites would be deprived of their brand image and their David Jones food offering.
In a statement, David Jones called the scene a “pilot”.
The firm said the store shutdown was due to a “strategic review of the food business to focus exclusively on bespoke dining experiences at our (Sydney CBD) Elizabeth Street and Bondi Junction locations.”
“The 35 existing David Jones-BP dual-brand stores will be upgrading to a new BP convenience offering.”
BP said it “remains committed to providing the best possible experience for our customers and will continue to actively pursue our strategy of transforming retail convenience and putting customers at the heart of everything we do.”
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David Jones’ food struggles
The business is making money. In February, it reported a 33% increase in first-half profits to $ 56 million.
But David Jones has struggled to expand his food offering beyond flagship stores in Sydney and Melbourne.
A plan to open stand-alone David Jones Food stores in upscale suburbs has also been halted.
In March, the company announced that the only two stores, in South Yarra near Melbourne’s CBD and Malvern in the southeast, would close by May. Just like the food hall at the CBD Bourke Street store until a renovation was completed in 2022.
The offshoots of luxury grocers’ gas stations are working overseas. British retailer Marks and Spencer has nearly 250 mini-stores at BP gas stations in Britain.
The owner of DJs, Woolworths in South Africa (not related to Woolworths in Australia) has dozens of supermarkets in gas stations.
Great strategy, poor execution
Associate professor Gary Mortimer, marketing expert for QUT, told news.com.au that this must sound like a “really smart strategy” in Australia.
The sites were mainly located in the main arteries leading from the CBD to the affluent suburbs.
“It was a great strategy, but putting it in gas stations detracted from the experience,” he said.
“The execution fell. Yes, it was a great product, but it wasn’t the DJ staff selling it.
“It was the BP guy behind the counter, so the experience was different from walking into a dining room.”
Prof Mortimer added that supermarkets in South Africa and the UK were more stratified by class than in Australia. Here, consumers were happy to buy most items from Coles, Woolies or Aldi and therefore had less need to turn to a BP David Jones.
DJs insist it will stay in the food
The withdrawal of BP stations and stand-alone supermarkets leaves David Jones with a much smaller food business.
“Maybe having two flagships in grocery stores is about as good as it’s going to be for David Jones?” Professor Mortimer said.
“It may not be viable and they may decide to exit the food category altogether at some point.”
However, David Jones insisted that food remains a priority.
“David Jones remains committed to providing an exceptional food line that reflects the needs and preferences of our customers while reducing costs and improving overall business performance.”
Its Sydney CBD and Bondi Junction dining venues will be “world class,” he added.
The company said it would also focus on “high-end pantry and seasonal gift lines in-store and online.”