So what’s the game plan now for Myer?
The latest moves from within the Myer camp have indicated they are retreating to their historically preferred defensive ground of ‘glorified Kmart’ – a reflex operating mode that has always emerged out of a position of fear and deeply entrenches the very problems that are killing them.
In particular, margins declining faster than they can cut the cost base and customers deserting them in droves because, let’s face it, Kmart does a better job at being Kmart.
Solomon Lew sits on the sidelines lobbing grenades but even his strategy is no longer obvious. Surely he can’t possibly be contemplating taking on a rescue job this high risk by himself – and he is famous for having an exit strategy planned before he invests in anything. Time will tell on that front.
In the meantime, the real heavy lifting is being delayed. There are a lot of stakeholders who need both Myer and David Jones to be productive contributors to the Australian retail scene. But Myer in particular needs a lot of structural change. The biggest is in its offer. Myer must deliver differentiated, value-adding products and services. It will not survive selling the same merchandise as everyone else at parity or discounted pricing because its model and reason for being, simply cannot compete on cheap price.
Part of the blame for Myer’s predicament is internal. Part of it is a historical systemic issue with retail that is being blown apart by the new era we have entered. And another part also lies at the feet of suppliers who simply don’t understand the consequences of their poor distribution strategies, providing too much me-too product towards too many ‘doors’. When price is the only lever left, it will be played to the death.
Myer will take a decade of disciplined, single-minded effort to fix. Exiting leases. Fixing systems and processes. Getting the service offer right. But most importantly, negotiating and developing exclusive product supply that gives customers a reason to shop with them as a primary choice. None of these things are short-term measures and all of them require capital and time.
We don’t even need to hear the numbers anymore. Firstly – as Kerry Packer once said – “Profit is a matter of opinion”. Secondly, they will continue to show decline no matter how they are ‘spun’ under the current mode of operations.
Discounting in the desperate attempt to stay alive is like watching a drowning man flailing in the water. Lots of noise and energy spent with an inevitable outcome sadly playing out in front of your eyes. Price is never an investment. It is the refuge of a retailer who has little confidence in their offer.
Solomon Lew is right about one thing. Myer needs a fresh, experienced team of merchants who really know how to get them out of the death spiral they have been in now, for what seems like a lifetime. Without it they have little chance of survival. And that would be to everyone’s detriment. But perhaps as is often the case, we won’t know that we’ll miss them until they’re gone.
Peter James Ryan is chief executive navigator at Red Communication Australia, and has 25 years of marketing and business experience.