Australian electronics retailer Dick Smith has agreed to operate department store chain David Jones’ electronics business under a new brand ‘David Jones Electronics Powered by Dick Smith’.

Under a retail brand management agreement (RBMA) inked by both the companies, Dick Smith will acquire David Jones’ existing electronics inventory and the related fixture and fittings as on 1 October 2013.

Dick Smith will assume the ownership of products including televisions, computers, tablets, home office, audiovisual and other digital products, while the white goods and small appliances will be operated by David Jones.

The electronics retailer will pay a monthly consideration based on a fixed percentage of sales from the business to David Jones throughout the term of the arrangement.

The initial term of the agreement is three years with three subsequent 12 month options to renew.

David Jones CEO and managing director Paul Zahra said that the agreement with Dick Smith would remove the risks associated with the electronics category, thereby helps the company to seek the sales and profit benefits from the alliance.

"As part of our Future Strategic Direction Plan we stated that we would review all of our underperforming categories, Electronics was one such category," added Zahra.

"Our agreement will also enable us to drive increased foot traffic into our stores and onto our webstore as we leverage the six million catalogues issued by Dick Smith each week."

Dick Smith will also take up the responsibilities of the orders placed on David Jones’ webstore through a ‘Drop Ship’ model, alongside operating the stores.

David Jones Electronics business branding will be in line with the company’s branding principles and the electronics business customer database would be under the ownership of David Jones, the company said in a statement.

Dick Smith CEO Nick Abboud said, "The ability to combine the David Jones Electronics business with our existing Dick Smith business will create critical mass which will strengthen our buying power, allowing for more competitive prices for customers."