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Shedding the red: The Warehouse's Mark Powell discusses his exit

Having spent five years as the chief executive of New Zealand’s largest listed retailer, Mark Powell could be excused a little egotism. As it turns out, he’s got more important things on his mind. Here, Powell reflects on innovation, technology and corporate morality.

By Sarah Dunn | March 22, 2016 | News

The Warehouse Group founder Sir Stephen Tindall and Mark Powell at the opening of TWG's new training facility in 2015.

The Warehouse Group (TWG) released the news of chief executive Mark Powell's intention to step down on March 30 last year. The timing seemed typical of Powell – the announcement's proximity to the end of the fiscal year meant the ensuing conversation focused almost immediately on TWG's performance rather than Powell as an individual. It was a self-effacing move from a charismatic yet grounded leader.

Powell's personal modesty is informed by his working class upbringing and his strong Christian beliefs. Growing up in a “not particularly aspirational” part of South Wales as one of five children, Powell expected as a young man to spend his entire career in the coal mining business. He trained at the University of Wales in Cardiff as a mining engineer in 1980, but within a decade, his life was jolted off course.

“I was made redundant at 25, I had to start completely afresh,” Powell says. “I had done all my training in mining, I had a manager’s certificate, I had a degree in mining. I thought I’d be there for life and at 25 I had to start completely again.”

The shock introduced what he now describes as “destructive creativity” into his world. Powell can now view his redundancy from a philosophical standpoint – he is a believer in the greater wisdom of the free market. At an individual level, he says, the market's effects can be painful, but on a macro scale, the changes ultimately achieved by events like those that made him redundant are “wonderful”.

“If you try and ossify things, you crowd out that creative part of the economy, and you end up with a far worse situation,” Powell says.

Following his redundancy, Powell chose to abandon mining for business. He retrained in logistics at the Cranfield School of Management in 1990, then achieved an MBA at Cardiff University in 1998. During part of this latter study, Powell was working as supply chain and home shopping director for a UK company called Iceland Frozen Foods.

Those late to ecommerce will be surprised to note that even 18 years ago, Powell's role at Iceland included online sales.

“Online in and of itself isn’t new,” he says. “We had a £15 million online business.”

From Iceland, Powell joined UK grocery giant Tesco in 2000 as its UK logistics operations director. Two years later, he migrated permanently to New Zealand and joined TWG, where his roles have included interim CEO of Australian operations; group general manager supply chain and merchandise planning, and CEO of Warehouse Stationery.

Powell was appointed group CEO in February 2011. It's important to him to clarify that he didn't accept the position out of personal ambition: “I’d been involved with the group for a long time, and I felt I could help get it to a position where it could at least have a fighting chance of flourishing.”

Fast followers

Powell doesn't like the word “legacy” – too pompous – but without doubt, his tenure's had some lasting effects. Under Powell's leadership, TWG has adapted rapidly and effectively to the advent of ecommerce. The company's full range of products has been available online since 2012, and several of its 2013 acquisitions were either pureplay businesses or those known for a strong online presence: Noel Leeming; Torpedo7; No.1 Fitness; Shotgun Supplements and Shop HQ.

When Powell took the helm five years ago, he says, the group was wrestling with how to get online. He felt the time was ripe to jump straight in, telling the team “Look, we’ve got to get online and we’ve got to get online quick.”

His decisiveness paid off. In 2011, Powell says, TWG's online sales were just $18 million – they're now at $150 million. He believes mobile devices and “the whole digital revolution” have changed the world. Selling and marketing is now “anywhere, any way, any time.”

TWG isn't an early adopter, says Powell: “Not a bleeding edge – not a leading edge even. We’re a fast follower.”

Powell is open to change, as long as it makes sense from the customer's point of view. He distinguishes between low-investment risks and “bet-the-company” situations, but if an idea is customer-driven and easy to test and trial, Powell isn't afraid to give it a go.

“A lot of things in this world are not a lot of money to make work,” he says. “They’re not like putting down a massive new concept store or something like that.”

Asked whether it's possible for companies to get carried away with digital innovation, Powell readily agrees. Google Glass never appealed to him - “To be honest, that's one I can say I was right about” - and he's currently struggling to understand the relevance of beacons and drones. The individual applications of drones are obvious to Powell, but he can't see how the infrastructure would work if every company adopted them for delivery in urban areas.

“I could be just not visionary enough! … I’m always ‘what does it mean for the customer, could we trial this quickly and understand it, could we see if it works?’”

Powell is certain that the dynamics driving customer behaviour haven't changed. At the end of technology is the customer, he says, who doesn't really care about technology. He or she just wants “What I want, when I want it, how I want it. And inside that, the 'it' is still product and price.”

The ability to initiate voluntary, two-way communication with customers through digital channels is going to be very important for the retail industry, Powell feels. He's excited about the ability to link customer data to transactions so that retailers can understand what customers are buying and where they're buying it, although he is careful to emphasise that such contact should be “cool, not creepy”.

Retailers are still finding out how far they can take the use of customer data, he says. And he believes those who remember to respect the customer as an individual and keep in mind their own reactions to brand contact can't go too far wrong.

“I think we’re all still trying to understand [brand contact] and how it works,” Powell says. “I think you understand it by doing it, hopefully not making too-big mistakes.”

No regrets

Powell's perspective on regret harks back to his dichotomy between the opposing forces of creative destruction and ossification. As the leader of a large, fast-moving retail business, Powell admits he's made a few decisions based on insufficient information, but they don't keep him awake at night. To Powell, such decisions are a natural part of the tradeoff between perfection and progress.

“Perfectionism and procrastination kills things and you’ve got to keep moving in retail.”

A genuinely regrettable decision, for Powell, would have to be made for the wrong reasons.

“I don’t have any regrets that I made any decisions that were motivated by the wrong thing, that I couldn’t look at myself in the mirror or wouldn’t feel I’d been honest to my personal values. I’ve got no regrets in that sense.”

A Baptist pastor with a Bachelor of Applied Theology from Auckland's Carey Baptist College, Powell is straightforward about how his Christian faith informs his corporate leadership. He hasn't avoided discussing the subject, he says, but most media outlets don't like to go there.

Christianity, to Powell, means an explicit and immovable set of moral guidelines: “I believe there are objective values, ethics, that sit out there and guide how one should look to live overall. And so that plays out in the sense of values of beauty, goodness and truth, etc. That seeps into everything.”

In 2014, The Warehouse Group moved to take R18 games and DVDs off shelves across the group. Powell then said in a statement the move was about reinforcing TWG’s family-friendly brand values.

Asked whether other Kiwi businesspeople meet his standards, Powell is generous with his peers. He acknowledges the existence of “excesses and abuses”, but says for the most part, the leaders of New Zealand's largest companies are normal people trying to do their best for a country they care deeply about.

“I think the caricature of rapacious capitalists who just don’t care, leading large businesses, is a caricature.”

In spite of recent headlines highlighting increasing inequality, Powell believes New Zealand remains a very egalitarian country. He still speaks with a marked South Wales accent but feels free from the UK class system here: “To New Zealanders, they probably don’t pick that up. But if I was in Britain, as soon as I opened my mouth, people would place me, boom boom boom. Working class, South Walean.”

Part of Powell's Christian outlook on life is that “might doesn't make right”. He attracted significant media attention in 2014 for describing the $1.7 million salary package he then earned as “ridiculous”.

He believes it's important that wealth is shared widely, although his free market philosophy prevents him from supporting higher taxation - “I don't think the best mechanism of sharing is to give it all back to the state”.

Supporting staff

Powell has spent $6 million of TWG's money each year on the career retailer wage. This programme was introduced in 2013 to promote retail as a viable career path for dedicated staff. It rewards “career retailers” with more than 5000 hours service or over five years service with living wages of over $18 per hour. As of March last year, more than 63 percent of TWG's staff were on board.

Powell is often asked whether the career retailer wage has “paid for itself”. While he says the benefits are largely intangible, he can trace the links between this programme and Noel Leeming's increased performance following its purchase from private equity ownership.

At first, Powell says, Noel Leeming was paying most staff the minimum wage and consequently had huge problems with staff retention.

“I remember when I first went to the stores, we had just bought it and I spoke to someone, I said, ‘How long you been here?’ ‘Three months.’ ‘How long you been here?’ ‘Six months.’”


“Now if you’ve got very low staff morale and high turnover, which is what we saw at Dick Smith in the last few years, you’re not going to give good service,” Powell says. He reports that getting Noel Leeming staff on the career retailer wage has reversed this trend and has been a significant driver behind the company's increasing market dominance. Dick Smith went into receivership at the start of this year.
 

This programme doesn't seem to have earned Powell much leniency from the union movement. First Union organised a series of strikes at various outlets of The Warehouse during the middle of last year over allegedly inadequate pay for those unionised staff who were not eligible for the career retailer wage.

Powell is scathing about the union action. His family background in steel and mining doesn't allow for an anti-union stance, he says, but he's not sure today's unions represent the same values that his grandfather fought for. He believes the First Union is caught in an old-fashioned mindset which has allowed it to justify an unnecessarily antagonistic stance towards TWG.

“That seems to be the only card they have to play: ‘We’ll demonise management and try and make them out to be nasty capitalists who don’t care.’ Well, sorry, our team doesn’t believe that,” Powell says. “We’ve invested $6 million a year because we believed it was the right thing to do. Because we believe in trying to create retail as a career and we genuinely believe that engaged employees will serve customers better... I think they’re confused by that.”

Powell says he's taken to joking with staff that after he's left TWG, he might go into the union movement. He feels New Zealand unions need to reconsider how they can work with progressive companies to achieve social change: “How do we help the aspirations of normal working people while not being idealogically driven from the past?”

Moving on

Jokes aside, Powell's resignation sees him moving to a part-time role with Massey University as its first CEO-in-residence. The role will see him liaising between the academic and business communities, mentoring students, guest lecturing and acting as a strategic consultant to the business school’s executive team. TWG has been closely involved with Massey's new Bachelor of Retail and Business Management, so a strong focus on retail is guaranteed, but Powell will also bring his wider experience in logistics, supply chain management and strategy to the table.

In what little spare time he has left over, Powell will step up his involvement in the faith-based non-profit sector and enjoy some personal development.

Currently, Powell acknowledges that TWG's had “two good halves”, but is unwilling to commit to total optimism.

“It’s interesting – in lots of ways I’ve had some very kind things said by a lot of people in the past few months, but you know, our share price hasn’t gone up,” he says. “Our profitability for our shareholders hasn’t gone up.”

He is proud of the changes he's instigated at TWG over the last five years, however, and feels satisfied with the progress that's been made. Being a listed company means TWG’s leadership team is under significant pressure to think short-term, but Powell has concentrated on the bigger picture.

“My vision is a 100-year company that delivers long-term, sustainable profit growth and helps Aotearoa New Zealand flourish.”

Coming off a $100 million capital investment in refreshing The Warehouse stores, the 92 red sheds remain the strongest arm of TWG, boasting 18 consecutive quarters of same-store growth. In the last financial year, The Warehouse accounted for $79.6 million of TWG's $93.2 million retail operating profit. The group's adjusted net profit after tax for FY15 was $57.1 million.

Powell is still very fond of Warehouse Stationery, his former stomping ground - “great business, lovely people”. The company he refers to as “Blue” was TWG's second-best earner last year with a retail operating profit of $12.7 million. Powell feels Noel Leeming is really beginning to come into its own, with its operating profit of just over $6 million, and regards Torpedo7, with its 12 stores and FY15 operating profit of just $34,000, as essentially still a start-up.

Incoming chief executive Nick Grayston, who has a background in department stores, will be fronting TWG's half-year results and full-year profit guidance on March 11. Despite the effects of foreign exchange movements, an extra week in the 2015 financial year and the loss-making beginnings of the group's fledgling finance arm, profits are expected to be up on last year.

Powell is conscious of the work ahead of Grayston: “We’re allowed to celebrate success and all that but actually it’s not guaranteed... I feel as though we are fighting fit but there’s still a long way to go.”

This story originally appeared in NZRetail magazine issue 742 February / March 2016

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