At the end of January, Michael Hill announced plans to shut down its loss-making retail operations in the US. RCG's Paul Keane says this is an indication of how tough it is outside the New Zealand market.
Another example of how tough it is in the international retail market was the recent announcement by Michael Hill Jewellers that they are to exit the USA market. For over 10 years Michael Hill has been focused on the USA market, growing the chain to some nine stores. The venture has been a difficult assignment and the decision to exit would have been considered after a long period of determination to break into the international market, the cost to the group in endeavouring to achieve a good economic outcome would have been considerable.
The New Zealand market by comparison, is small and focussed. The ability to gain recognition of a brand in New Zealand or even Australia is considerably easier than the huge USA market where trying to achieve recognition takes years and big dollars.
Pascoes and Stewart Dawson’s are two New Zealand brands owned by the James Pascoe Group that have delivered successful results over decades of business activity. The expansion by the group into Australia was seen by some commentators as a risky business at the time, but the company secured Prouds, a well-known and elderly local brand together with Angus and Coote and Goldmark, both well-known Australian brands. The three brands are represented by a total of in excess of 460 stores across that country.
The result is a powerful exposure across the Australian continent to a growing consumer jewellery market. Hence the difference between the Michael Hill exposure in the USA and the comparison to the Pascoe Group exposure in Australia and New Zealand.
The decline of the Pumpkin Patch Brand was driven by its exposure to the USA market and the inability to get significant buy-in by consumers to that brand in a competitive market.
The Michael Hill decline in the USA is a further example of how a huge market can affect a quality brand from a small nation. There are few examples of successful New Zealand originated brands that can survive in a foreign international competitive market.
Fortunately it seems, Michael Hill have identified the issues and pulled the plug before the exposure has had time to seriously affect the balance of the group, who continue to operate in New Zealand and Australia. Sticking to one's knitting is a key factor in the survival of any business!
Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils. This post originally appeared on RCG's blog.