Banks Miss The Cut In Djs Contest

Banks Miss The Cut In Djs Contest

Sydney Morning Herald

Thursday February 15, 2007

Vanda Carson

FOUR banks, including one of the nation's biggest, have fallen out of the running in a beauty parade aimed at selecting the best to run David Jones's new general purpose card.

Speaking yesterday at a briefing to announce record first-half sales that surpassed the magic billion-dollar mark, chief executive Mark McInnes said three second-tier banks, and one of the big four, were no longer contesting the bid.

Seven banks - including global heavyweights HSBC, Citibank and GE - remain in the running for the lucrative venture.

By April the store will know whether it will choose a partner or go it alone.

According to the retailer, the company has the luxury of being able to adopt a "take it or leave it approach" when it deals with the banks, thanks to the depth of market research carried out by its financial services team.

The model it hopes to use will be a unique one, constructed from the best features of what is used by department stores worldwide, he said.

Mr McInnes said the four banks now out of the running had failed to meet strict requirements including meeting the time frame for the card to be released - by mid-2008.

"We studied all of the international markets and we said: 'Here is the business model we want' and that was too confronting for some companies," Mr McInnes said.

"We only have one opportunity to get this right. We now know every single [general purpose card] deal with every single retailer that's been done in the the world.

"That puts us in my view in a very good position to make sure we get the best possible deal for our shareholders."

In the past financial year consolidated interest revenue on the in-store card was worth nearly $48 million, and financial services fees were worth more than $21 million.

Those figures are expected to rise under a general purpose card, which will be either a MasterCard, Visa or American Express card.

Marketing and financial services boss Damian Eales said the quality of the bids was strong, but DJs was only in early stages of analysis and discussion with the bidders, he said.

Mr Eales said his team had compiled its "wish list" of attributes for the deal after meeting with retailers and banks throughout the US, Canada, the UK, Spain and South Africa last year.

They included the owners of US stores Macys and Bloomingdales, Home Depot, Sears, House of Fraser, Saks, Nordstrom, Target (US), Marks and Spencer and Edgars in South Africa.

"I think it's fair to say there was no one model amongst all of those which we thought was ideal, but many aspects we thought would suit our business," Mr Eales said.

"The most important thing we learnt from the trip was over the last 10 years, really the balance of power in negotiations between banks and retailers has very much swung the way of retailers," Mr Eales said.

"We don't feel like we are going to be short any information," Mr McInnes added.

The hard work will likely help the retailer avoid making the same mistake as UK store John Lewis, which gave away its credit card to HSBC, or the then Coles Myer, which sold its general purpose card for just $100 million.