Avoid the mistakes of fools

  • Opinion
  • December 30, 2016
  • Juanita Neville-Te Rito
Avoid the mistakes of fools

Being a born and bred Aussie (but Kiwi at heart) I am incredibly proud that the Australian system doesn’t allow directors and senior management to simply slink off into the crowd. They need to be held accountable for the havoc they have wreaked. In the case of Dick Smith, thousands of employees have lost their jobs and many suppliers, landlords and other partners have been left in the lurch with hundreds of thousands of dollars owing to them.

To give you an example of just how incompetent these fools were, what twit would allow a stock order to be placed which would see holdings of ‘Dick Smith private-label AA Battery 40-pack’ at 141 month’s stock and ‘Dick Smith AAA Battery 30-pack’ 131 months cover? My favourite: the report from the liquidator McGrathNicol found as sales fell, Dick Smith purchased even more product to achieve rebates rather than serve customer demand. Plonkers.

Growing up in retail, there was a belief that any idiot can sell something if they make it cheap enough. But even Dick Smith has demonstrated that this is patently not true. Competing on cheap prices without a best-in-class supply chain, or overstocking on product there is little demand for, makes no sense. Bottom line? It’s hard to sell junk, even if you are practically giving it away.

But it is a lesson to us all. Even I have been guilty of making decisions within retail businesses based on short-term KPIs rather than driving sustainable outcomes for the ongoing performance of the business.

If you are a retailer who wants to operate a business that is not only successful and profitable, but one that connects with a shopper’s heart and mind, the obsession with top line sales growth needs to be tempered. So, to avoid the mistakes made by the likes of Dick Smith, Valley Girl and Pumpkin Patch (just to name a few) you need to think hard and long about some critical strategic imperatives.

What is your ‘onliness’?

Creating an onliness statement has had a profound impact on the retailers with whom I have worked, as it really makes them think about why the heck they are in business. Developed by Marty Neumeier, essentially you fill in the following blanks:

“My brand is the only _______ that ________.”

To create an “onliness statement,” six components must be defined:

  • What: the only (category)
  • How: that (differentiation characteristic)
  • Who: for (customer)
  • Where: in (market geography)
  • Why: who (customer need statement)
  • When: during (underlying trend)

In an environment where customers can purchase anything at their fingertips and with global retailers lifting the benchmark on what is available, you have to have a reason for being. Where do you fit in the landscape? Think about the New Zealand supermarket landscape and how Pak ‘n Save, New World and Countdown battle it out while the likes of Farro Fresh, Huckleberry and Reduced to Clear has carved their own space.

What is your pricing strategy?

The current obsession with retailers offering the cheapest price to customers is at the core of many business failures. Many lack the internal capability to get beyond reducing costs and passing it on as reduced prices becoming experts with only one lever to pull. I recall a critical time at Noel Leeming (10 years ago) when some bright spark decided that reducing labour costs and putting the savings into price was going to be the golden egg. It doesn’t take a genius to figure that the role of the staff was to help inform, educate and provide knowledge to customers to help facilitate a purchase. No staff, no sale. Simple.

Look out for the warning signs if you are falling down a slippery slope and remember….

Price is the full stop at the end of the sentence. It isn’t the first word. (I love that statement and I have shamelessly stolen it). Customers don’t buy price. Price is simply part of a benchmark shoppers use to equate to value. And yes, nobody has ever wanted to pay more than they have to for anything, but giving it a way is unsustainable.

There are an increasing number of retailers on the brink of being wiped out unless they think long and hard about their reason for being. Many of these retailers lack the ability to move beyond being cost focused. If you don’t have the ability to develop a strategic plan that creates competitive defensibility, then find someone who can help you. Avoid the mistakes of fools. 

This story originally appeared in NZ Retail magazine issue 746 October / November 2016

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