list vacuum cleaner retailer since 1931 and has expanded into a substantial retail network of 222 stores (121 company-owned, 81 franchised) in Australia and New Zealand. The company posted a 9.7 per cent decrease in like-for-like sales in FY16, motivating a turnaround strategy that will see the vacuum retailer shift towards a more franchise-focused model. Matthew Elmas: You’ve recently come back to Godfreys after a long stint away. What’s the difference between now and then? John Hardy: I don’t think there’s been a lot of change. The basics are pretty much the same. People buy because they have a need and have a problem they want to solve. What has changed is the method of going to market. I was here 43 years the first time around, so I saw a lot of changes then, but if you wanted to advertise it was 7, 9 or 10 and you we’re pretty well covered. Now there’s digital media, there are bloggers and Facebook. People now get their information in different ways and I think that’s something we have to be quite conscious of. ME: How well does vacuum cleaner retailing lend itself to the digital marketing space? JH: I think it presents a great opportunity. I spent a couple of years as CEO of Super Amart and to be honest, I never ever thought people would buy mattresses or furniture online, but that was a huge part of that business. I would have thought that a mattress was such a huge thing that people would want to lie on it and try it before they bought it, but at Super Amart we sold a lot of mattresses online. I think it’s the same with vacuum cleaners. Most people buy vacuum cleaners as a grudge purchase, so they’ve got a problem and they want it fixed and if you can put a video clip online it makes it a lot easier for them. It’s another opportunity. ME: In the six or so months you’ve been back at Godfreys what have you been able to do in terms of turning the business around? Have you been able to do anything of great value yet? JH: Well geez I hope I’ve put something of value in. ME/JH: [Laughs] JH: There have been issues and the business has lost a bit of direction. With product; with store presentation, which is not as good as what it was when I left it before; and sales training, which has also wandered off into another direction. Those are the things that I’ve been focusing on, especially having a more relevant product. I think they’ve taken their eye off the ball a bit there. We’ve had a very great result in October, we beat budget, so that’s been a first for a long time. We’re very pleased about that, but it just gets down to the product we’ve got, the store presentation and the customer experience. Those are things that we need to do more work on, but they’re showing some promising signs already. ME: In relation to that sales training, do you think that over the last few years your competitors have stepped up their salesmanship and are you looking to regain some competitiveness there? JH: We certainly can do it better. The thing about a vacuum cleaner is that it’s a grudge purchase. If you’re a normal electrical retailer and someone comes in and wants a vacuum and someone else comes in and wants a TV, then towards the TV is where most people will go. Most people will go to the aspirational purchase. Not too many people get excited about vacuums. That’s an advantage that we’ve got. We specialise. ME: Godfreys is looking at having more large format stores. What do those look like for a vacuum cleaner retailer? How does that focus on product fit into that? JH: Years ago when I started selling vacuum cleaners, it was door-to-door. In those days, it wasn’t uncommon for the house next door to share a vacuum. It wasn’t uncommon to make a sale, but it would be to two families. Nowadays, how many vacuum cleaners have you got in your house? I bet you’ve got more than one. There are different kinds of products now. There are stick vacs, which are convenience products that have done away with the dustpan and broom; there’s conventional vacuum cleaners; there’s steam products, which are growing; and there’s carpet shampooers. There’s lots of different formats and, of course, then there’s commercial products. That’s a huge opportunity. Our large format stores encompass all of those products. The business has also lost its way in that we’ve slowed down on repairs, service and all of that sort of stuff that was our DNA, that we we’re the go-to people for. So we are now ramping that back up again. Once you get people coming back to the odd bits and pieces and repairs and things it works. ME: Do the large format stores lend themselves better to the demonstration style retailing that Godfreys has traditionally been known for? JH: You can do both. In a shopping centre store, you’re paying for a steady stream of people walking past your store in higher rent. That’s where I think the demonstrations are really important because it stops people and puts the vacuum cleaner onto their bucket list. In a strip shop or a large format store, you tend to become a destination, so people come there. There’s not many impulse buyers. I think the demonstrations, whether they’re in large stores, small stores or shopping centre stages, are all relevant and I think it’s our point of difference. ME: Will your renewed focus on franchise stores predominantly be large format stores? JH: It’ll be a mix. We’ve got a few franchisees that have large format stores and they’re doing extremely well. We’ve got a lot of them with smaller ones too. When we started franchising in the mid-1980s, we didn’t do it because we needed the money. We did it to retain good people because our structure was fairly flat and people were saying: ‘Well, what do I do and what’s my career path?’ That’s why we introduced franchising, but then we realised that we probably do just as well out of franchising as we do out of a company-owned store by the time we wash all the expenses out. It does give an opportunity to people to earn more money, to own their own business and have something that they can on-sell when they want to have a career change or retire. It actually works both ways because it gives you good people. We also have a process, which is why I don’t think – at least not when I’ve been here – that we’ve had a failure. If someone wants to buy a franchise, having money and a pulse is not good enough. They’ve got to actually work for us for three months. We pay them a normal wage and at the end of three months we can say: ‘Well, I don’t think you’re right for this’ or ‘You now know exactly what you’re getting into and we can proceed’. ME: A lot of retailers are rethinking local approaches to retail. Is localising and tailoring your offer part of your decision to move to a franchise heavy model? Will that be a point of differentiation for you in the market? JH: I think it is, because if you bought a franchise from us, the thought is that you’re going to be in that one for at least five years and then you’re going to renew at the end of five years. You’re going to be in that store and you’re going to do everything that you can to make it succeed. You’re going to be the local soccer club supporter. You’re going to join the chamber of commerce or rotary or something like that. We find that when there’s stability like that people think that say: ‘I’m in this for the long haul so I’ll make myself known to all of these groups.’ Whereas if you’re an employee, you might only be there for six months and you say: ‘Well, do I really want to get myself involved in all of that?’ The franchise model does lend itself to that, where people do want to get involved in the local community. ME: Where do you want these franchises to be located? Will you be converting mostly existing stores? JH: We’d convert some of our existing stores and the ideal place for us is probably areas where we may not want to open a company store, such as in some of the rural areas or outlying areas, and where they do extremely well. If we opened a store in Mt Isa or somewhere miles away from anywhere and if someone gets sick, what do I do? If it’s a franchise, they seem to have staff or relatives and they make it work. ME: Are you looking abroad at all with any of these expansion plans, other than New Zealand where you already operate? JH: It’s funny you say that. I was in China two weeks ago talking to one of our major suppliers, who I’ve had a relationship with since the 1980s. When I first met him, he had one injection moulding machine and a very small operation. Now he employs 4,000 people and is the second largest vacuum manufacturer in the world. Anyway, I was having dinner with him and he asked: ‘Have you considered bringing the model to China?’ I said: ‘Well, I have a bit of a problem. I’ve been coming here for 25 years, but I don’t speak the language’. Then he said: ‘It’s probably better if you don’t.’ ME/JH: [Laughs] JH: He was suggesting that it might be a good thing to have sort of a joint venture. The bloke isn’t short of a dollar. He said he’d be very happy to talk about that if I’d consider it. ME: Does that seem interesting from your end as a point of consideration? JH: There are one hundred million millionaires in China [laughs]. ME: There’s money to be made. JH: Absolutely. They certainly have a lot of money over there and they’re looking. Over the past few years, there’s been a distinct change in attitude and most of them want western things. There’s an opportunity to sell product over there, they’re already doing it already online. One of the people I deal with over there has now toppled Dyson on internet sales. He’s doing it on the internet. To open stores over there would be something interesting, but we’ve got so many things to fix here that it’s going to be a while before we go over there. ME: Speaking of timelines, the franchise model is obviously geared for a mid-term payout that sacrifices the possibility of short-term profitability for the business as you set it up. If I was an investor, what kind of timeline would you give me for the business returning to some kind of strong profitability? JH: I’ve been speaking to our investors and they’d like it to be next week or a bit quicker than that. But in the realistic department, I think it will be two years to get the thing really back into shape. It takes a while to get new product and develop new product, and it’s going to take a while to get the sales training back to where it used to be. The advertising has been fairly quick though. One of the people doing the advertising now was the marketing manager at Barbeques Galore when I was there, who is really good. The guy who makes our TV ads is the guy who used to make them when I was in the ads before, so we got him back. It’s like getting the band back together again [laughs]. ME: What are the prospects for the New Zealand side of the business moving forward, given the turnaround strategy in Australia? JH: We’ve got franchisees in New Zealand, but that market is actually going really well for us. They’re certainly ahead of the game there. They’re beating budget and are generally going really well. We’ve got good operators. ME: Do you attribute your success in New Zealand to a niche you’ve found as a specialty retailer? JH: You won’t get a more competitive market than New Zealand. They’ve got more retail stores, more head than anywhere else in the world. It’s very competitive over there, but I think our model does work very well. Most New Zealanders are very well informed of what’s available and they’re all on the internet looking at what’s available in Australia, so they are well informed and have accepted our specialised model. ME: Final question, because I have to ask this. Will we be seeing you in Godfreys TV ads or perhaps even on social media now that you are back at the business? JH: There’s just not enough Spackle in this world mate. ME/JH: [laughs] JH: I’ve got older. I don’t want to frighten people [laughs].