Pre-empt trouble, or go bust

Dick SmithLate last week a report from SV Partners surfaced with the suggestion that a number of Australian retailers are facing collapse.

Reference was made to the recent demise of Dick Smith and Laura Ashley.

SV Partners described this as just the ‘tip of the iceberg’, and stated that there are 11 Australian retailers with turnovers of over $100 million – and three with turnovers of over $500 million – that could suffer the same fate.

Since there are not that many retailers with a turnover of $100 million, it is not too difficult to determine those retailers that SV Partners suggests may be facing difficulties. Apparently there are three that are high risk and several others in serious financial trouble.

Dick Smith – the man, not the business – is recently on record issuing a warning to Gerry Harvey. Dick believes Harvey Norman could be under threat – and I agree. The model is antiquated and needs a total overhaul. If one does not reinvent oneself from time to time, it is inevitable that retail rot sets in.

In the case of Harvey Norman, Gerry himself has been an inspiration in retail. And he is big enough to eat humble pie, which he did when he initially wrote off online selling as a non-entity. But no man is an island, and Harvey Norman is starting to look jaded. The advertising goes from worse to much worse and is exceedingly boring – due to an internal advertising department no doubt.

In light of the above gloom and doom, I visited the Impact Retailing archives and in 2011 we approached two retailers that we perceived desperately needed help. One was Retail Adventures (led by Jan Cameron), who had previously had one of the big four consulting firms work with her for a considerable period of time.

We first approached Jan in February, 2011 and continued to request an audience until November 2011. Regrettably, we never managed to engage Jan, and shortly thereafter Retail Adventures went belly up.

The other retailer was David Jones (at the time led Paul Zahra). In September 2011 Paul had been quoted as saying that DJs’ traffic and transactions had declined as never seen before. We agreed that retail was going through a tough period. We pointed out that retail, more so than many other industries, was undergoing unprecedented change – the most significant in many decades.

We suggested that it was appropriate to look at how the changing business environment was affecting David Jones and how to get executives to pull together as a team into the new world. Again, we could not engage partly due to DJs having their own strategy department. And the rest is history. Paul did not survive and nor did DJs in their then format.

Those retailers identified by SV Partners will hopefully benefit from the lessons that should have been learnt, namely:

  1. Be wary of engaging one of the big consulting firms. They often have little direct retail experience, and as we all know, retail is “different”.
  2. Do not wait until it is too late. Call in external help before the proverbial hits the fan.
  3. Never have internal strategy departments. It is incestuous and they will tell you what you want to hear – because they’ll be out of a job if they don’t.

Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.

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Comments

2 comments

  1. Michael Ratner posted on March 18, 2016

    This article deserves a reply because if it wasn't that fragile it might be laughable. Retail has always been competitive and tough and addressed as such. Now it's pandemonium. The prominent players are beset by panic, as seen in some the latest frantic moves. Today I see Myer are going to put a concierge at the top of each escalator. Myer have also signed up with eBay. Woolies are going to push all their suppliers to 60 days. Hell - there's a list of desperado moves, and none of them have to do with retailing. Have you noticed how some of the big players are hell bent on maintaining turnover or market share and their bottom line is suffering the consequences. Sorry to pick on you Myer, but I see you are about to throw $600 million at some knee jerk strategy. You're missing something. Your concept might just have expired. Here's a message for those sitting on the higher floors of their ivory towers - DON’T TRY TO BE MCDONALD'S. Too many business are impressed with the way McDonald's have thought about success. They have trained robots not to think, to follow the matrix, don’t ask too many questions. McDonald's are right the way they have done it. One step away from robotic intervention. For Christ’s sake, they sell hamburgers. During my many years of dealing with some of the richest and most successful people in the world, my curiosity has always allowed me to interview them, and the main question was, “What is your special ingredient that you attribute to your success?” The convincing answer has always been along the same lines, “We empower our people with the power of the CEO to look after and retain customers. Just fix it. Accept responsibility but FIX IT.” And I would follow up with, “And what if they make stuff ups and cost you lots of money,?” Answer, “We employ problem solvers and service people – that’s the first part of our training. Some people will never get it, so we keep them away from our customers and their new training is very strong on. If you are not serving a customer – make sure you are serving someone who is.” So you now have THE SECRET TO SUCCESS.

  2. Brett Stevenson posted on March 18, 2016

    Lots of food for thought in that Stuart. The one that caught my attention is the first lesson being to be wary of engaging big consulting firms. Touche on that I reckon. Retail has been a gold mine over the last five to 10 years for the consulting firms. Word has it that one firm had an almost permanent space set aside for them at Woolworths for who knows how long. The main line of attack the consulting firms have with retail is to say that we live in an age of Disruption and retail is at the forefront of that disruption therefoere you need our expertise to deal with it. The big question I suggest the Boards of Directors need to proactively ask before they sign off on these consulting deals (and be assured they are big money and big firms with the Big Four accounting firms at the front of the pack) is to ask just what do they pay their senior management and what do they expect of them? I suggest that the use of consulting firms is either 1. an ineffective boards outsourcing policy of their work (remembering that one of the boards critical roles is to ensure the strategic approach of the company is okay). In effect whenever I see consulting firms used I immediately take it as a defacto criticism of the board. Woolworths would suggest a classic example of that. 2. an ineffective senior management outsourcing their work. Ditto to 1 above except often they are also remunerated very highly. The xamples of this are just too many to write down here. 3. a 'knee-jerk' reaction for any new CEO or CFO , or Chairman of the Board, to show a fresh and new strategic approach which they do not trust themselves to think of. That begs the obvious question of just why does this company have them in their positions if theu just 'pass the buck' on possibly their major role. So Stuart I think your first lesson is a good one.

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