BIO: Gavin Culmsee is the general manager of bedshed and has more than 20 years of experience in senior executive roles in the retail sector. Previous to his role at Bedshed he served as the retail operations manager at Freedom Furniture for 9 years. Gavin is also a fellow of the Australian Institute of Management. COMPANY PROFILE: Bedshed Franchising Owned by ASX listed Joyce Corporation Ltd. Bedshed Franchising Pty Ltd has been a specialist bed retailer since 1980, when their first store was o
pened in Perth. Since then the Bedshed brand has expanded to a franchise network of more than 30 stores in Western Australia, Victoria, Queensland and ACT. The company is now offering an incentive package for an impending NSW expansion.
Inside Retail: You’ve been working in large format retail, particularly in the furniture side of things for more than 15 years, how has the industry changed in that time?
Gavin Culmsee: It’s changed in a lot of different ways, the GFC was a big change in terms of making sure that the good operators were the ones that survived and flourished over that time, and the weaker business models were the ones that struggled through or didn’t make it at all. There’s that side of it, then there’s the digital age and what the internet has done in terms of making shopping easier for consumers. Now consumers do research at home, or at work, or wherever. What we see driven into our stores is that consumers are far more educated with regards to what they’re looking for, rather than the age of window-shopping.
IR: How have those changed affected the franchising model specifically?
GC: Franchising is growing year on year, and it did so through the GFC as well. Like everything, sound business models flourish when times are tough, particularly in retail. That’s when good retailers come to the forefront; everyone can make money when everyone’s spending money. When you look at Bedshed for example, we’ve been franchising for over 30 years, we’ve seen ups and downs over that period of time and have weathered those storms, but the business continues to flourish, and we’re probably in a stronger position now than we’ve ever been.
IR: There are obviously a lot of other franchising retailers out there, and even some much bigger players than Bedshed, how are you differentiating yourself in the market to maintain those strong results?
GC: Our franchise leads are far more aligned with what we’re doing. We involve our guys in the process from start to finish. Today, we were in the middle of what we call a merchandise council meeting, where we’re electing our ranges and our promotional products for the next 6 months. We’ve got a group of franchisees here from all over the country, who are working with us to make those products. They know what’s going on, they’re involved from the start, whereas what you find in other franchised networks is that either the franchisees aren’t involved, or they don’t know what’s going on, or they want to run their own race. Our guys are very much aligned with where the business is heading, and that means everyone’s successful.
IR: What’s the consensus at those product meetings at the moment? What direction will Bedshed’s product range take?
GC: We travel a lot as a group, so with franchisees we travel twice a year overseas to trade shows in Asia. We travel to the US and Europe as well. You have to get an idea of what the trends are; everyone’s involved from the start of that process. Right now in bedroom furniture you see a lot of retro furniture. We’ve been seeing that at shows we’ve been travelling to for probably 3 years and we’ve put a range in place 2 years ago to reflect that. Since then we’ve been growing that range and seeing the sales grow. Now we’re looking for the next trend after that.
IR: Bedshed is looking to expand its brand into Sydney over the next few years, what motivated you to move down that line?
GC: To be frank, it’s population, 40 per cent of Australia’s population lives in New South Wales and most of them live in Sydney metro. If you want to be a true national player, you need to play in Sydney metro, and for us we see that opportunity as huge. We opened a store in Canberra just before Christmas and we’re shipping bedroom furniture and mattresses up to Sydney every week from Canberra. Consumers in Sydney metro want to buy the product, they’re buying it even though we’re not advertising in Sydney. They’re finding us on the web and buying our product. We think we’ve got an opportunity in terms of what the market’s telling us, but we also see we can open stores without cannibalizing our existing stores in the New South Wales market.
IR: Demand is high in NSW, but store supply is typically a minefield for Large Format Retailers, how are you approaching that?
GC: You’ve got to be patient, and you’ve got to work with the right agency to get into the right property. When you’ve been in business for a while and we’ve probably learned to spend more time making the right decisions rather than rushing. I think there’s a lot of property opportunities that are happening off-market right now that you don’t see advertised, there’s opportunity in bulk leasing right now in Sydney metro.
IR: Would you perhaps be referring to the Home Consortium deals for Masters sites that are currently going on?
GC: Certainly, that’s made a big difference, what those guys are doing. I think there’s other activity as well though, the smaller players that are still finding the market difficult.
IR: Bedshed have created an incentive package providing licensing discounts and marketing support for people looking to go into business with you in Sydney metro, what impact do you expect that to have on franchisees?
GC: We’ve reduced the cost of entry. What we’ve also done is come up with a marketing package which supports a business over its establishment phase, businesses have the hardest time in the first 12 to 18 months, and that’s the reason we’re putting $100,000 a year into additional marketing for each store, to get them over the hump in terms of brand awareness. Our franchisees are really financially satisfied, so they get a good return on our investment. We did an external survey not so long ago, and that showed that our franchisees were 84% more financially satisfied than the rest of the sector. The ROI’s there.
IR: Are there any other targeted expansions on the horizon in Australia for Bedshed?
GC: We still like to keep reinforcing our network, we’ll open a new store in Victoria in the coming days, and we’ve probably got a couple that will open in Queensland before the end of this financial year. We’re starting to see further growth in terms of Sydney metro, that’s obviously important, giving us access to the largest population base. I also opportunities around regional areas within the context of our expansion into regional areas.
IR: A lot of retailers are also looking internationally for further growth, is that on the agenda for Bedshed?
GC: To be frank, I reckon there’s huge scope. When you look at how bedding retail is done in Australia versus in the rest of the world, there’s huge scope. For us though, we’ve got a network plan that still has plenty of gaps in Australia, when I look at the priorities for me, the priority’s filling our network plan in Australia first over the coming few years, before we look further afield. We’ve got the opportunity to probably add a pile of stores across the country without cannibalizing our existing stores, and just taking market share.
IR: Bedshed have been in the business for quite a while, considering that brand is extremely important in franchising, how are you keeping your brand relevant to customers and potential franchisees?
GC: It’s a good question. We embarked about 18 months ago on a full refurbishment of our network of stores. We call it our evolution fit out, which, and I might be slightly biased [laughs], but they’re the best looking bedding stores in the country, and by the end of this financial year we’ll probably have about 90% of our stores fitted out in a new format. All jokes aside, it is a fantastic way of approaching bedding retailing. It’s driven our top-end bedding sales, and it’s driven our furniture sales as well. We’re really pleased with the result and it plays out because when you’re convincing franchisees who invested in your fit out, then they want to make sure they’re getting a return on that and as a result we’ve got almost all of our franchisees on board with that really quickly.
IR: You’ve included touch screen kiosks within that redesign, how have those gone?
GC: That’s been really interesting. What we’ve actually seen is that our consumers want to talk to our sales people more than they want to talk to a screen. We spend a great deal of time doing sales training, getting our guys to a level where they’ve not only got product knowledge, but they know how to advise what sleep service you should be sleeping on. We’ve found that our customers love a bit of technology, and they do spend a lot of time on our website, but in-store they actually want to talk to a person.
IR: When you guys were first rolling that out you were saying that it was a value add, but that human element is obviously important as well. In terms of your website, you also offer a room planning service, how have customers responded to that?
GC: That’s been online for us about 18 months, because in bedroom furniture the question a lot of people have is, ‘will it fit in my room? If I’m moving from a queen size bed, can I fit a king size bed into my bedroom?’ What it allows people to do is to lay out furniture from a particular range according to the measurements in their room. For us, that means the consumer then goes home, lays it out, then they ring and then make the order. We see thousands of completions each month on our website, so it’s a big uptake.
IR: Are there plans to expand the synergy between that web service and your in-store offering?
GC: That’s the next step. It’s certainly about understanding, we currently understand exactly what our consumers search for online. It’s important that customers know exactly what you are selling in store, but it’s also important to know what your customers are looking for online. You then marry the two and ask: ‘are we fulfilling our customer’s expectations and giving our franchisees the best opportunity to make a sale? Or do we have a gap and are we making sure that we’re filling that gap for the future?’
IR: Retailers, specifically in the furniture and bedding space, are rolling out functionality on mobile now that replicates your web-based bedroom planner. Are you looking to ramp up your offering to include a mobile application?
GC: Our website’s currently optimized for mobile and for tablet, the only thing that you can’t do on it is the bedroom planner because it gets down to the measurements. You need a smaller finger [laughs].
IR: Are you looking to find a way to create the service on a dedicated mobile app?
GC: Absolutely. For us, it’s what our franchisees are telling us they need in store for them to operate their business more effectively, and it’s what our consumers are telling us they want to see.
IR: Ikea are rolling out augmented reality within their planning application offering, and a lot of analysts are suggesting that’s where the future is going. What are your thoughts?
GC: We’re probably stretching it a bit further than that in terms of how we see the future. In terms of the web development work that we’re doing, we’ve looked at what’s happening around the world, in particular in the US. So when we look at it we want to see who’s doing the best around the world so we can then make sure that we’re ahead of the game. The Australian market’s not necessarily leading the pack.
IR: Bedshed also has a franchise calculator, which is on the other end of things, how has the reception to that been over the last few years? Has it been successful in terms of attracting business partners?
GC: We’ve had it for a while and we still get pretty solid contacts with people who are inquiring about franchisees. Like you say Matthew, we’re talking to a different person in terms of the consumer or the person who is a prospective franchisee. We get a fair bit of interaction with that, what it allows us to do too is interact and talk to people about business metrics, inquiring franchisees may or may not have a clear understanding of what they expect to get out of the business in terms of return on investment, or might not have an understanding of even what the metrics are. It gives us a good point of conversation.
IR: Bedshed are running competitions on social media by utilising brand advocates, that’s starting to happen more and more now in retail, what’s been the takeaway from that side of things so far?
GC: The digital space allows you to have far more personal contact with your customers, and it allows you to communicate more meaningfully to different parts of your audience. For us, we’ve always felt that our consumers were really pleased with the interactions they had with us. From a social perspective, generally the feedback we get is really positive, and we appreciate the ability to push out a message that suits each customer. It makes our lives a lot easier in terms of wastage as well from a marketing point of view.
IR: We’re approaching Christmas, what are your expectations?
GC: Christmas brings the mother in law rule with it. That means your mother in law’s coming to stay so you’ve got to give her somewhere comfortable to sleep, maybe not that comfortable so she doesn’t stay too long [laughs]. For us, there’s a rush of business up to that. For me, in retail, it’s about making sure you’re working hard and working as smart as you can to maximize what the opportunities are. Retail has never been easy, but for us, I think the market’s actually quite strong and I think we’ll see a good run into Christmas, but in particular a better run out of Christmas, for us peak trading is from Boxing Day onward.