Luck and courage have helped steer floorcovering retailer Andersens through the coronavirus crisis. There’s no doubt that quick thinking has been crucial.
Andersens was founded in 1957 and has 47 franchised stores, in Queensland and northern New South Wales.
CEO Rowan Hodge chatted to Inside Franchise Business Executive about contingency plans and swift action, disruption, investing in advertising when other brands sliced their spend, and a strong ‘bush culture’.
Retail contingency plans in the face of COVID-19
Q: You leased an additional warehouse and increased stockholding, can you tell us about this?
A: “When we were approaching the virus [in February], all retailers were quite uncertain how it would affect trade. We looked at downstream disruptions that might occur and we wanted to understand our exposure to Chinese imports – we have some Chinese products but most are Australian. In a lockdown economy, what disruptions would there be to supplies, seaborne or otherwise?
“We saw the potential for a pre-federational approach to borders in Australia. If that happened we had significant risk with just one supplier based in Queensland. We would have cross-border risk with a complete lockdown.
“We placed an order for six-months-worth of the top 20 SKUs so that, in the worst case, we had the ability to trade during rotracted disruption, and supply customers with popular product no matter what.
“Out of this there was some foreign inventory. The orders dribbled in over three months. We had some risk with enormous additional inventory. But we knew even if there was no disruption, we wouldn’t be left holding excess stock.”
Q: How have sales tracked across the network?
A: “We’ve been trading at a busy level though certain stores were really quiet at times on the residential side, and showroom floor. What’s compensated for that is now customers are super-qualified leads. There’s a lot more urgency and motivation in buying. It was somewhat unexpected but we saw it in the GFC.
“We had a slow entry to the crisis because of the sales cycle. The sale is difficult to pin down – there are multiple key points:- enquiry, measure and quote, placing of an order, installation, payment collection. During that sales cycle we had a large number of orders already in the system. If there was going to be a precipitous drop off in revenue, there was the possibility of a slow feel of that impact.
“That made us concerned about coming out the other side, as the economy ramps up. We may have a steeper climb out.
“It’s been difficult for us to imagine what the consumer would endure stuck at home. They can look at upgrading flooring but it isn’t urgent. What is going to be the hit on consumer confidence when there’s a necessary spend but timing is discretionary?”
Q: How have you innovated the retail offer?
A: “We had been working on a 12 month project, augmented reality (AR). We have a busy female consumer, she’s working 9-5. What do we do to reach her? Expand our trading hours, offer in-home quotes after hours, seven day trade is difficult but possible, then the more we teased it out the more we were influenced by retail trends overseas and AR.
[With the app the customer can scan in their room, test different floorcoverings and save the ideas]
Andersens’ augmented reality app | Inside Franchise Business
“Using a tablet, the customer could request a call back from the nearest store, we could get in contact and measure at home. We knew if we launched this we’d be first to market, we’d be disruptive.
“We consulted franchisees heavily along the way. The franchise community backed us and we brought the product to market in a test concept late February. There was testing among staff and we had planned to test it in a social media environment. If it moved the needle at all it was a win, if it was big, we’d develop it further.
“The initial proposal landed on my desk the same day we heard about lockdown and people being ordered home.
“It was a tidal moment in this crisis. This was a fight or flight moment: do we hibernate and weather the storm? Or do we fight? We chose growth.”
Q: You committed to a big advertising campaign at this point?
A: “Yes. We fast tracked into an ad and went to TV. This is where we our courage and luck coincided. Most people in the industry had pulled their marketing but we committed to a media buy when others didn’t. As a result, we had incredible value from the ad.
“We were telling consumers about a technology they could browse from home. We had 8000 downloads of the app. For something developed as a ‘let’s see what happens’ project, it vastly outstripped our expectations.
“We saw an above average qualified lead. Customers don’t really walk in to a carpet store unless they are a qualified lead. If you’re downloading an app you’re selecting where to buy, so we generated a fantastic number of qualified leads at a time when other businesses were closing doors.”
Q: How has the business adapted and how has the franchise community responded to the changes?
“We’ve had to adapt for the health side and social distancing, renewing bathroom standards, awareness around social distancing, being conscious of intallers and sales people entering customers’ homes.
“We didn’t know if people would stop inviting us to their homes. We’ve had to reassure customers about our processes.
“Half a store team work from home, half at the coalface. If a team member is exposed, we didn’t want the whole shop offline. It’s about business continuity. It’s the same at head office.
“What is unexpected is that it has brought us all so much closer together. The franchisees have rallied. The average tenure is 15 years, they have very strong financial returns and there’s a high franchise survey sentiment. You could expect negativity or complacency. But instead of saying this was impossible, franchisees went looking for commercial work, real estate, developers, a real mix of commercial business.
“I think there’s also a sense, which I’ve been encouraging, that we’re in this together. We’re tight knit in Queensland and northern NSW, and the first store in ACT had opened. Our core value is that we’re founded in the bush, the country connection is strong, we have bush etiquettes in our business and traces of that are in our city stores.
“So long as that culture is iron clad from me, and the franchise community is comfortable I mean it, nothing is jeapordising the culture, it can accept and endure a great deal of change.”
Q: How is Andersens positioned for lifting out of the lockdown?
A: “By not being in malls, being in a positive category, and luck and courage around the media buy we’ve positioned ourselves very well. We couldn’t be more pleased although we will take some pain.
“We have a positive growth mindset. We’re not distracted by the temptation to qualify our failure. We’re in top gear, looking for what’s next.
“Andersens is actively opening stores. For us the biggest challenge has been going over the border to New South Wales to open a store.
“We’re not out of the woods yet, like all retailers. We’ve managed it as well as we can so far.”