![David Jones, led by CEO John Dixon, is working with chef Neil Perry to transform its gourmet food offer.](/content/dam/images/g/u/2/e/u/c/image.related.afrArticleLead.620x350.gu1yhz.png/1485866669320.jpg)
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Upmarket department store chain David Jones is upping the ante on Myer, Woolworths and Coles, finalising plans for a rewards-based customer loyalty program and gourmet prepared meals.
Almost three years after its $2.1 billion acquisition of the venerable department store chain, South African retailer Woolworths Holdings will unveil in February details of David Jones' new chilled meals range and a long-awaited loyalty program that rewards customers for spending instore and online.
Last week David Jones lodged a trademark application with IP Australia for Style Rewards, which covers three classes of goods and services including encoded credit cards, the management and operation of loyalty schemes and the "issue of tokens or vouchers in relation to the supply of benefits for customer loyalty and frequent buyer schemes".
Under previous management, David Jones was reluctant to offer a points-based loyalty scheme similar to Myer's MyerOne card because of the cost of issuing rewards or points.
Woolworths, however, believes loyalty programs are crucial to better understanding and engaging with customers and encouraging them to spend.
Woolworths postponed the new program until it completed the implementation of a new customer relationship management system and is believed to be planning to launch later this year.
Woolworths also hopes to take a larger share of the $245 million Australian consumers spend each day on food and beverages by replicating its premium South African food offer, opening in-store cafes, bars and fine-dining restaurants – ''food for now" – and augmenting its existing gourmet grocery range with ready-made meals – ''food for later".
Last year Woolworths' largest food supplier, South African-based In2Foods, established a joint venture with Melbourne-based fruit and vegetable wholesaler Yarra Valley Farms and acquired a second production facility, in Bankstown in Sydney.
David Jones has been testing the new strategy in its Market Street store over the past few months, widening its range of gourmet packaged foods, opening a new sandwich bar in conjunction with celebrity chef Neil Perry, and selling a limited range of prepared meals including ready-made salads, pre-cut vegetables, soups and curries.
David Jones will launch a wider range of prepared meals at its Bondi Junction store in July and expand the offer to at least three other stores between August and November.
Analysts say Woolworths' growth strategies for David Jones have had mixed success to date – particularly private label – and the retailer will have to execute its $100 million food strategy well to succeed.
"We see opportunity, but think success is not assured," JP Morgan's South African retail analyst, Stephen Carrott, said in a recent report.
"Other attempts at premium food (including David Jones' Foodchain, Woolworths' Thomas Dux) have failed and Australian supermarket and independents (such as Harris Farm) do a good job of fresh, meaning the gap between David Jones fresh (offer) and competitors will be smaller than in South Africa," Mr Carrott said.
"We think prepared meals are the most likely area where David Jones has the opportunity to differentiate v competitors."
David Jones' incremental approach to food expansion will minimise the risks, as will the expertise of Woolworths SA, which generates 30 per cent of earnings from food, and that of DJs' chief executive John Dixon, the former boss of Marks & Spencer's food business.
Mr Carrott has forecast start-up food losses of $7.5 million in 2017 but believes food may break even by 2018-19 and earn $35 million on sales of $700 million in five years, compared with food sales of $55 million in 2016.
Woolworths plans to invest more than $400 million over the next few years in an attempt to transform David Jones into one of the best department stores in the world.
Woolworths sold David Jones' Market Street store to Scentre Group for $360 million in August and plans to use the proceeds to reduce debt before embarking on a $200 million redevelopment of the flagship Elizabeth Street store, commencing in July.