David Jones expands private label suite, but what will happen to smaller suppliers?

David Jones is reportedly readying to launch a range of private South African labels from parent company Woolworths Holdings into its Australian stores.

The push towards stocking more profitable private labels comes after electronics retailer Kogan launched 15 new private labels in recent months.

David Jones confirmed to SmartCompany several private labels owned by Woolworths Holdings will be introduced to David Jones stores later this year. These include its largest fashion label Studio.W, denim brand RE: and lingerie brand JT One, according to Fairfax reports. David Jones homeware and apparel labels are also scheduled to launch later this year or in early 2015.

“In addition to our existing brand portfolio we will expand our offering later this year with the launch of selected products from WHL where we see a gap in our existing range. Similarly we are reviewing opportunities for WHL-owned Country Road Group brands,” said David Jones in a attempt to SmartCompany.

Woolworths is expected to give Country Road and sister brands Mimco, Witchery and Trenery, increasing floor space in David Jones outlets in coming months.

Retail Doctor Group chief executive Brian Walker told SmartCompany this move was consistent with the announcements made by Woolworths at the time of the $2.15 billion takeover in April.

“In the acquisition process, Woolworths were very transparent about their private labels – brands they knew were successful in South Africa. They said right from the opening, ‘we will bring this to Australia’,” says Walker.

Walker says the current retail environment places a lot of pressure on margin growth and private labels are a profitable solution to create healthy margins.

“Home brands is a successful way to play in the space,” says Walker.

He says it is likely that Woolworths wants to push the floor space of Country Road because of its recent growth.

“Country Road are a success story at the moment. And there is arguably a natural congruence between the David Jones and Country Road customer. It makes good sense.”

But Walker says Woolworths’ private label push may have an adverse effect on David Jones’ smaller suppliers.

“There is a limited amount of space, a finite demand and only so many dollars to go around. By definition, some suppliers will benefit and some will struggle,” he says.

David Jones was not drawn to comment on the potential effect on suppliers but said, “In order to maintain our strong position as Australia’s premium department store, whilst providing the optimum range for our diverse customer base, we are constantly reviewing and refreshing our brands.”

First published on SmartCompany on the 23rd of January 2015.