Swimming towards the Blue Ocean even easier
The Blue Ocean strategy first came to the attention of the industry around a decade ago when Narta (which is heading off to Europe next week for its 2013 conference) invited one of the books authors to speak at its Hawaiian conference. I was privileged to attend.
The concept suggests a seismic and pioneering shift by businesses from the "red ocean" to a new innovative business model untouched by competition.
With Australian retailing caught in a limbo until Christmas again kick starts sales, it is timely to look at how this concept can benefit this industry.
A good start would be to look at how UK retailer Richer Sounds has recently implemented this strategy. Instead of competing with other electronics retailers who try to dominate on price, they focus on superior service and product knowledge. Their Blue Ocean is fantastic customer satisfaction and superior product knowledge.
Meanwhile Blue Ocean is making it easier to start on your own journey with the launch of its iPad strategy app which promotes teamwork and idea sharing.
Retailers still need a compelling reason for shoppers to come
There’s little doubt that the historic drop in interest rates made by the Reserve Bank and passed on by all leading banks last week will make a vital difference to retailers and the industry. Although it’s too soon to gauge an immediate sales response, it is highly likely that positive benefits will soon begin to flow.
Paying more off the mortgage and then the electricity bills are now the priority for most consumers, but once these are bedded down, the lure of new technology and home improvements will be strong.
Then it will be up to the retailers to deliver a compelling reason for the consumer to visit their store or site. On top of this, they will also need to compete with the new players in town such as the service-centric model operated by Williams Sonoma (see story below).
The experience that our reporter Emily Bencic describes in her Bricks and Mortar story is simple but convincing, Emily describes a shopping experience that appealed to all her senses, and one that left her wanting to return and spend, without a single discount ticket in site.
This is a model to emulate.
Conditions remain fragile for independents
Today's edition of Retail News is one that probably best reflects the landscape of the appliance industry in the first half of 2013.
The positive news of JB's sales growth is overshadowed by the imminent close of Tasmanian retailer Wills, after 105 years. Again, this reflects the polarisation of the fragile retail environment. Robust players such as JB able to withstand the continuing tough economic conditions, while Wills despite its membership of Narta, has been too highly vulnerable to the arrival of online retailing.
Reading further down, I resonant with the comments from David Barkes, who is also an independent operator determined to keep going. You really do have to admire the courage of these guys.
Barke also pointed to the Melbourne Coffee Expo later this month as a positive driver for the industry. Add The Digital Show to this in the second half and that gives retailers some important guidance for moving forward in 2014.
Technology tops gift list
It goes without saying that a family no longer gives Mum chocolates and flowers for Mother's Day. Instead, she can expect to see a digital camera, new phone or an iPad. And now that the Galaxy 5 phone is in store, that will also ready and wrapped on May 12.
Gifts of this nature for Mother's Day are following the trend that women want the latest technology to not only run their lives but their homes as well. Veteran industry retailer Doug Webber now located in Rockhampton, is spot on when he says that robotic vacuum cleaners will also sell well over the next few weeks. Any appliance that will make a woman's life easier is essential in 2013 and they really don't understand why there aren't more robotic products on the market.
Companies that are investing in researching this area will be winners by the end of the century. Just as we have seen the rise of digital technology that connects everyone everywhere, the next frontier is the robotic platform not only for women but for also for an ageing population which is predicted to live longer than any previous generations.
More TV's to feed a consumer ready to spend
Samsung held one of the industry's most lavish events for its 2013 Smart TV range in Sydney on Wednesday evening. The investment in the affair was apt as the company has unveiled a highly sophisticated TV platform that recognises viewing habits while delivering gesture and voice control (badged Natural Language Functionality).
Samsung has relentlessly driven its way to the top of the TV pyramind, knocking off pretigous brands along the way. As leader in a highly competitive market, it deserves this status and many retailers are relieved that more fresh TV technology is now arriving to once again generate consumer demand.
Samsung's launch is timely as spending on credit and debit cards has risen for the seventh straight month, (see story below) and the upward trending in Harvey Norman third quarter results released last week, means that consumers are more interested in shopping than they have been in some time.
The Mother's Day sales period is just around the corner and is positively underpinned by a host of coffee machine deals,while the continual rollout of new tablets/ 'phablets' and Samsung's TV's in-store this month, mean that the final months of the financial year are certainly strengthening.
Masters' 37% growth reflects a new mood
Master's delivered the good news last week with sales increasing 37.4% on the previous year totalling $290 million. Of course, much of this is the natural momentum of new store openings, which nevertheless is going against the general CE industry trend of store closures or takeovers.
Considering the "fragile" retail conditions of recent years, this performance is extraordinary and I believe a reflection of the new mood of the consumer. This is also witnessed by the response to the plethora of cooking shows such as My Kitchen Rules and Masterchef which are recording millions of viewers.
I know families who actually hold their own cooking competitions during the MKR espisodes and bring out the meals to by judged while watching the program. Then they post the results onto their social media pages.
So consumers are now taking a very active role in their lives, rather than just sitting back and waiting to be entertained they are cooking, renovating and posting and feeling good about it.
Any retailer that can feed their business into this mood has to be on the right track.
Time for some good news
The word around the industry's boardrooms last week was the improved conditions in the first quarter and this has been confirmed by the ABS figures showing that February retail sales had seen a bounce of 1.3% (four times greater than analysts predictions).
This is such important news that it made the headlines of the 6pm news on Thursday evening, just as I was leaving for a smart Nespresso launch in Sydney's Pyrmont. It's amazing what some positive news can do for the business spirit. Just talking about this figure over dinner made the guests at my table immediately more optimistic.
Building on this was a revised sales figure of 1.2% for January and there is some solid logic behind it, thanks to the Reserve Banks' interest rate cuts last year.
The industry can work with this by investing in promotions and activities which will capture this improved consumer mood. There are also some great products now on the market for Mother's Day, particularly the slew of smart kitchen appliances. Meanwhile, the wettest start to April in 14 years will also help with some early heating sales.
The confidence of the new retail brands, Leading Appliances and JB Hi Fi Home which are both in an establishment process, will also be buoyed by this news and perhaps those retailers who are still struggling will move into the next quarter with renewed hope.
Are you the problem or the solution?
I often hear industry executives at retirement age proudly proclaim that they are now ready to “sit on some boards”. It’s a nice post if you can get it, but a recent conversation with organisational expert, Keith Dodds (see story below) made me realise that this practice could be at the heart of some of the problems facing many of our retailers.
Instead of transplanting younger, more diverse and agile heads to the boardroom, it’s the greyhairs with thinking often passed its used by date who are responsible for critical decisions that drive many companies forward.
There isn’t one company in Australia that hasn’t been impacted by the information revolution of the last decade dominated mainly by a generation in their twenties. Facebook is the classic global example and Appliances Online is great local model, one where the board has put a digital native, John Winning at the helm.
If you are on a board and haven’t don't have the firsthand experience of working within the digital media or, just aren’t interested in how it works, then you may be a poor choice to be advising any company how to become future ready. Regardless of your past successes.
I’m not saying that the boomer/builder generation has nothing to offer (I one of them!), rather, suggesting that it’s the motives and outdated thinking that assumes we should naturally graduate to such serious roles due to our tenure.
Australian companies need the best leadership possible, and that can be found within any gender, at any age and from any culture.
Brookes bullish about winning online race
It is a remarkable statement, considering the parlous condition of traditional retailing and the lack of deep connection with the female shopper deomstrated by many of these retail brands.
I didn’t attend the business lunch where Brookes spoke, so my knowledge is from a secondary source but it appears that he is drawing on the experience in the UK and the US. In particular, he pointed to the top 20 US online retailers noting that 16 of these were bricks and mortar.
But there are some key differences in Australia that may affect Brookes. Our population is microscopic compared to borth the US and UK and these countries have had around a decade of pioneering their online shopping models. Most have ironed out many of the bugs that continue to challenge some Australian operators.
Meanwhile, a recent Roy Morgan study reveals that early adapters of online retailing reported revenue growth in the past year, while those that were slower to embrace internet selling had gone backwards.
To me, it seems that the jury’s still out on who will be the winner.
Barbarians at the gate
Every time I walk down Sydney’s CBD or visit the prestigious Westfield Bondi, there seems to be another global retailer hanging out a shingle, and I know that this trend is also happening down south in Melbourne.
Considering that Colliers International has released a report, International Retailers: Australia is Hot Property, it now all makes sense. Over a decade ago, it was the arrival of the giant global manufacturers, intent of claiming their slice of Australasia and now the retailers have arrived, particularly those from the US.
Australian players need to be extremely alert for these arrivals. As Martin Kovacs reports in our story below, these global retailers have a number of potential competitive advantages over local operators. The most critical is their international reach which provides them economies of scale which can be used to bring products to Australia at reduced prices.
They are hungry for customers and also come equipped with sophisticated online sites. And Australia also offers a good jumping place into the holy grail, South East Asia and beyond. If there was ever a time for retailers to consider a joint venture with these giants or a revised five year plan, now is the time.
Harvey on a new tack
Sales in January and February have been good, reports Harvey Norman and now we are all holding our breath to see if March will deliver a full quarter of positivity.
The financial community, buoyed by this news also rewarded Harvey with a share price boost after the release of the company’s results last Thursday.
Meanwhile, there seems to be some fresh air circulating around Harvey’s Flemington headquarters. This has been reflected in a new media campaign for the retailer which was quietly launched earlier this year.
Gone is the shouting voiceover, now replaced with a moderate delivery (although it does speed up towards the end of the commercial.) Also absent is the traditional focus on discounts, also replaced with testimonials from customers.
While it’s not a complete makeover which many of Harvey’s suppliers have been calling for, it’s certainly a new tack, aimed to attract rather than badger Australians to come shopping at Harvey Norman. And it’s a change which can only reap different and hopefully better results in 2013.
Giving better value is a good fight
Woolworths CEO Grant O’Brien says that shoppers will switch supermarkets for a 5% price difference. While no definitive research has arrived across my desk, I suspect that the margin is even slimmer in the CE industry.
It’s the fault of globalisation, says O’Brien who, faced with unrelenting price pressure from German giant Aldi, has told retailers even more news that is very hard to stomach. Addressing a business leaders forum last week, O’Brien said that “quiet simply, it is clear that we will not survive in the new reality of retail unless we take the clear new consumer trends and preferences seriously and change.”
Well, one trend that is impacting on both the retail and supply chain is the consumption of home brand products (see story below). Made more cheaply on both the inside and outside, a whopping 94% of Australians out of a survey of 11,600 have purchased home brand products.
What is more niggling is that around 60% of consumers found these products just as appealing as the branded products.
It’s hard to combat this trend, although some are trying. I left the office of an industry supplier on Friday who, even with all his new products wrapped up in patents, says that there is only a few months before they start being copied.
So his company’s strategy is to bring value to the customer through every product they make. Easy to say but hard to do, but its a goal worth pursuing.
DJs moves back to a quality offer
David Jones is actively breaking the grip of the retail industry’s addiction to discounting and relentless promotion has had on its business in order to bring margins back to an acceptable level.
It is a bold and risky move as the pervasive veil of discounting at any cost is a strong force to go up against. But DJs Zahra is walking the talk and, I believe deeply understands that his primary market of affluent women are hungry for quality over quantity. I know I am.
Women walk through DJs doors for a premium experience, the majority don’t go in there to buy games or DVDs, because they know they can get these cheaper and more conveniently online. So DJ’s decision to move out of these categories is sensible.
Once a woman has made it into DJ’s she wants to buy quality, and she wants service, otherwise why would she bother? She doesn’t want to feel that she has to scratch through products that have been sitting around for too long to find “the best deal” nor does she want to serve herself.
If David Jones can deliver this refreshed business model both ins-store and online and then extend it into its premium appliances categories, it will be doing what few other CE retailers can: giving women what they want.
If you would like to learn more about how to bring women into your business subscribe to my blog: Connecting to Women.
Harvey’s stocks rise
The strength of the 2013 sharemarket has been good news for Harvey Norman which has seen its stock increase by 9%, taking it to its highest level since August last year.
Analysts are attributing much of the rise to the lift in the consumer discretionary index as cyclical stocks return to favour.
Harvey’s stock price is now $2.07 on a multiple of 13.4 times forward earnings.
However, the company may need to adopt the “one day at a time” approach as the same analysts are describing Harvey as potentially being one of the weakest retail performers this profit season. UBS has forecast a 6% decline in same store sales and a 21% drop in reported net profit to $102 million for the December half.
The most recent ABS figures for December explain the pressure on Harvey and his competitors. The Christmas sales period traditionally channels 60% of the year’s sales through the cash register. December 2012 sales rose a measly 0.2%, which is nowhere near enough to give any retailer much hope for 2013.
Last week, Credit Suisse also downgraded Harvey’s rating to “underperform”, again pointing to poor furniture sales locally and continuing poor conditions in Europe.
However, Harvey can take some comfort, albeit a bit cold, that there is a least one less competitor to worry about now that Sony has finally bitten the bullet and closed its two Sydney stores.
Our small communities still matter
From whole hamlets being washed away in the country’s north to the jolt of the news of an election in September, it’s been another week when Australians really didn’t know where to put their focus.
The images that emerged after last weekend’s floods in Queensland and New South Wales have reminded me of the vulnerability of our regional partners. Most Australians have taken holidays at Bundaberg, Rockhampton and Grafton, (I have) and to see those towns under siege just two years after the last major floods is disturbing.
While most of the CE industry is clustered around the metropolis’ of Sydney and Melbourne and many suppliers nurturing firm global mindsets rather than local and regional concerns, means that these parts of the industry are easy to overlook.
Once the news of a disaster in a regional town would see the industry’s leaders immediately marshal reserves to support their small retail partners and their customers. Today, those connections are weakened and with many of these towns serviced by the last vestiges of the Retravision group, I wonder about the source of their support.
There is a place for small operators in our industry just as there is for the large corporations, and if we don’t care about them, we will be a poorer Australia.
Has Apple lost its mojo?
Can you imagine the horror within the Apple marketing department when it read the Buzz Marketing report that the brand was no longer “cool” with teenagers? Of course their own intel would have told them some time ago that this was trending, but the revelation on a global platform would have hurt.
This research points to the one of the major factors for the dramatic 30% drop in Apple stock over the past eleven months. The facts tell the true story: sales of the iPhone 5 are flat, posing a major problem for Apple, which led the way only a few years ago with the iPad, now under assault from almost every digital manufacturer.
Samsung has done an exceptional job of penetrating Apple’s territory and psyche and, without Steve Jobs, it seems that the company’s shine is waning. I even heard a anecdotal report of a Gen Y customer who has moved back to the Nokia Lumia phone because he was “bored” with the face of the iPhone.
While this is good news for Nokia, it underwrites what the Japanese suppliers understand only too well, being on top is a heady yet fragile place.
The year of new connections
In my job, you need always be prepared for news to break at anytime, anywhere. One of my biggest scoops was being present at a Narta conference in New Oreleans in 1998 when the trifecta hit: Harvey Norman had bought the Joyce Mayne chain while at the same time swollowing the Tasmanian business of the Narta chairman who stepped down from the role during the trip. The third event during the conference was the appointment of Kay Spencer to the role of managing director of Narta, the most senior role to be held by a woman in the industry.
My only frustration was the fact that Connected hadn't yet been borns and I had to wait another month to report the news on a monthly magazine.
Not any longer.
As the first business days of 2013 unfolded last week, (CES news notwithstanding) I wasn't surprised to be posting the news that Breville and Nespresso had made a global connection which will play out in the local market with a new range of Nespresso machines developed to further drive the galloping coffe capsule market.
It's a sign that some competitors within the industry are moving onto a new playing field, uniting and putting the growth of a category first for progress. The difference between this deal and that between DeLonghi and Nespresso is the elevation of Breville into the premium global atmosphere once only occupied by prestigous European brands.
This can only help the industry as Breville strenghtens marketshare but deepens its global connections. It's rare that an Australian brand reaches such heights and it's a good feeling for an Aussie.
Make sure it is a good life
This will be my last industry column for the year as Connected Retail News won't broadcast on Christmas Eve and we will startup again on January 7 (even the industry's digital media needs to rest).
And that's what I hope many executives will be doing, resting and taking stock of their business plans for 2013. Because while it's tempting to review the year's events, there is little we can take from 2012 that will truly prepare us for the year ahead. Unless it's courage and resilience.
We have said goodbye to many friends and colleagues this year and it's likely that more losses will continue in the next twelve months. But in that process there is faith (the other reason for the season beside sales) that there is life beyond the local consumer electronics industry.
It's this vision that makes these challenging conditions bearable. That we are all doing our best one day at a time and that despite company closures, retrenchments and cutbacks we are all still okay.
That makes me feel good, I hope it does the same for you.
The Connected team wishes you a Merry Christmas and a safe New Year. See you in 2013!
Keep away from distractions this Christmas
A supply executive who has felt the ravages of the decline of the traditional TV market over the past two years gave me a pragmatic insight to the condition of the local consumer electronics industry when we recently met.
"Retail conditions today are the new normal and that is what we working with," he said.
As difficult as this concept is to accept, it is perhaps the wisest approach to present conditions and will go a long way to helping retailers navigate through the Christmas sales period with a degree of sanity. Expecting consumers to make a 360 degree turn and begin desperately shopping over the next fortnight is unrealistic and prevents managers from making plans for 2014 that are built to last.
Another tactic that averts retailers from truly facing up to the deep changes that need to be made continually to their business models, is the distraction of focusing on conditions outside their businesses. The online tax threshold is an example.
Two senior retail executives, Solomon Lew and Myer's chairman Paul McClintock have raised this spectre again. But it is a well trodden path, and while most retailers are frustrated at the status quo regarding $1,000 threshold it is their own businesses they need to re-engineer before attacking the government for "being on the side of foreign companies" as Lew cried last week.
Such distractions only make it harder to look internally and without that discipline, little will change. The best Christmas present retailers can give themselves this year is the gift of realism and hope.
JB stretches brand into a whiter template
The negative stockmarket reaction to JB Hi Fi's plans to stretch the brand into the whitegoods category with the launch of JB Hi Fi Home, saw the stock price fall by around 7% last week.
This surprised some industry players for whom, a new well run retail business focusing on growth categories, is welcome. But investors, remembering the losses JB had sustained with its previous experience with the Clive Anthony's brand seemed to prefer a less ambitious strategy.
But JB may just be on the right track, if the company can convert its existing customer base into visitors to this new venture and marries them with a clever online offer, it may lay down a solid template for the rest of the decade.
The demise of the traditional TVC category, combined with a deep change in consumer spending has been brutal for any retailer who built their business in the digital market. JB is one of these, and it leaders know that if the brand is to prosper it needs new ideas.
Home appliances may not be as sexy as digital products for investors, but we all know that every home always needs a fridge.