If Woolworths South Africa does acquire David Jones, it could be biting off more than it can chew, says QUT retail expert Gary Mortimer.
Dr Mortimer, from the QUT Business School, said Australia's retail market was not like the South African market where significant differences in class, wage structures and population density exist.
"Ultimately, the high-end shopper market in Australia is quite small and predominantly located in cities like Melbourne, Sydney and, now growing, in Brisbane," Dr Mortimer said.
"Results from Westpac's Melbourne Institute Index of Consumer Sentiment suggest the shine may have come off already as households start to worry about the future.
"Specifically, the component of the Index measuring consumers' expectations for the economy over the next 12 months is at its lowest level since March 2012."
On the plus side, Dr Mortimer said if the $2.1 billion takeover offer was accepted it would give David Jones access to not only cash, but international retail expertise.
"This would allow them to improve their online offerings, refurbish stores, improve range and secure exclusive international brands," he said.
"A reinvigorated David Jones, clearly positioned as a high-end, full-service department store would capture a bigger slice of discerning shoppers' dollars.
"Already, we are seeing international fashion retailers entering the Australian market, like Zara, Hermes, Louis Vuitton and Hugo Boss, so it is evident that opportunities exist in this segment.
Dr Mortimer said a takeover would leave Myer in a challenging position.
"Myer will be 'stuck in the middle' with no clear position. When Myer is selling Miss Shop printed tee-shirts at $24.95 while upstairs a $299 Wayne Cooper blouse, you have to question are they trying to be all things to all people?"
Dr Mortimer said Woolworths South Africa was one of that country's largest food, apparel and general merchandise retailers.
"It's modelled on British retailer Marks and Spencer, Woolworths has been a leading South African retailer since the early 1930s, targeting middle and upper class consumers," he said.
"Woolworths operates 150 corporate owned stores, nearly 70 franchises and more than 50 international franchises throughout Africa and the Middle East. Woolworths is not foreign to Australia, having owned retail chain Country Road and Trenery since 1998.
"Financial reports suggest this company has significant cash resources, an excellent retail strategy and is looking to expand. Clothing sales to December 2013 increased by 8 per cent, general merchandise up 6.9 per cent and food 5.3 per cent. The group's Australian subsidiary Country Road performed extremely well. Profit before tax increased by 21.1 per cent."
Media contact: Niki Widdowson, QUT media, 07 3138 2999 or n.widdowson@qut.edu.au
