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Dick Smith Power DJ’s Profits

And allows ambitious Dick Smith bag some big spending customers, to boot 

The landmark store-in-store deal was announced yesterday by Dick Smith new CEO, Nick Abboud, whereby the retailer will takeover the running of David Jones’s electronics dept both in bricks-and-mortar stores and online, a department that has been cutback in recent years. 

The tech dept in 30 DJ stores  will be called “David Jones Electronics Powered by Dick Smith” from October 1.
In May, DJs admitted its electronics dept was subject to  industry price pressures ” as it announced 2.2% drop in sales. 
David Jones will incur a number of one-off costs, primarily to Inventory and Head Count in FY13/14 in connection with deal, ranging between $5m – $10m.
“These one-off costs will be more than offset by the benefits that flow through to David Jones from the RBMA” the high end retailer said in a statement. 
DJ’s is confident the Dick Smith deal a positive return within 12 months and drive profits. And it may not be far wrong. 
Abboud, a former Myer CEO, is no stranger to department store retailing. 
The store-in-store concept is already in play within Dick Smith new store rollout – Samsung, Apple, And Sony already have mini stores with the retailer now owned by Anchorage Capital. 
David Jones CEO Paul Zahra  cited benefits including better product range and “great potential for Sales and Profit” for both retailers. 
“We look forward to teaming with such a well- established Australian brand such as Dick Smith. Our partnership will deliver many benefits for our customers including a broader range of Electronics products and ancillary services at more competitive prices in a seamless shopping experience for our customers.” 
Dick Smith will retain all existing DJ electronics staff and provide them with the training, support.  
DJs will also mobile phones in store for the first time. 
The new ‘David Jones Electronics Powered by Dick Smith’ concept areas will have a strong focus on accessories, and will sell higher-end, more ‘aspirational technology’ to suit the David Jones customer demographic.
Dick Smith will pay DJs monthly a fixed percentage of the sales of electronics, but the three year deal does not include small appliances, a category which DJ’s is strong on. 
David Jones will retain control of branding and remain owner of the electronics business customer database, and will still be responsible for taking online orders via its Web site, but Dick Smith will dispatch goods to the customer.
Zahra said the deal meant it had “transformed what was an under-performing category in our business into a profit contributor”.
 “For some time we have reported on the challenges that our electronics business has faced, including deflation and aggressive discounting,” he said.   

Abboud yesterday described the DJs deal as ” the next step in establishing ourselves as a major player in the market”.
“It’s a win-win for both companies. Dick Smith is expanding its network and reaching a wider, high-end customer base,It also strengthens Dick Smith’s buying power.”
However, it not just Abboud that is executing major changes at DS, having unveiled new flagship store two weeks ago.
David Jones is to launch “enhancements” to its webstore, due to go live today, promising “new shopping features and extended range.”
DJ’s share were down -1.64 % to $2.69 on the ASX today.