The common thread in retail failures

ABC emporiumEverything can be taken from a man but one thing: the last of human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s own way.

Viktor E. Frankl

What do Australian Geographic, the now closed ABC retail stores and Dick Smith, to name a few, have in common? That’s right, they are either not with us now or soon to be extinct.

Interestingly, the future of these retailers was not stunted by the rise in online retail. Nor was it the result of retail globalisation. Rather, the fate of these retailers was entirely within the owners control, and this is where they came asunder.

Here are some more commonalities to consider about the three retailers mentioned above:

– Expanded too quickly.

– Didn’t reinvent themselves in a relevant way to brand, offer and product suite.

– Didn’t foresee marketplace trends.

– Lost their key retail differentiation.

– Used old approaches to new ways of competitive thinking.

– Tried to be all things to all people.

– Cost down focus as distinct from investment focus.

– Lower emphasis on innovation.

– Brand attributes diluted and dismantled.

– Increasingly expensive rental and wage overheads in prime locations.

In Dick Smith’s case, we can add some well documented supplier rebates influencing profit and inventory management, although again within the retailer’s control. Perhaps funding became exasperated although largely again within the retailers control?

Sacrifices at the altar of retail adaptation, or fast tracked to oblivion? The suggestions above don’t afford a deeper analysis, however it is interesting to surmise how much of these retailers’ lamentable downfall fell squarely within their own control.

Interestingly, when we look at these companies we see, as true of all companies, pivotal moments in their history, from widening to generic merchandise (such as Australian Geographic) or building a home brand offer, when the consumer was clearly brand conscious in their purchase elasticity (Dick Smith). Again, all board and executive decisions that fell within the retailers’ focus of control.

All these models where on heavy growth trajectory in late 90s and early years of this century, when retail was a far more predictable vehicle with much less of the data driven turmoil and change of today. Yet other models thrive in the same environment, from Lorna Jane to Cotton On to RCG.

So these collapses can’t be referenced as symptomatic or symbolic of a broader failure in Australian retail, nor that a global retail tsunami has hit our shores and these few retailers are the first causality.

Lost its way, undeliverable promises, overgrowth and unable to pull back probably are key things that contributed at a much greater level. After all, these businesses trading in many millions of dollars took a lot longer to rise than to fall, leaving our communities with a ‘Zara-fied’ world as another chapter of Australian retail closes.

Now where can I buy that telescope and speak to a ‘techexpert’?

Comments

2 comments

  1. Figjam posted on July 20, 2016

    Well in my view Brian Walker completely misses the point and leaves out the single most important reason they all ran into trouble. The key reason for retail failures is almost always inventory. Buying the wrong stuff and not clearing it fast, and/or buying too much (esp in Dick Smith case chasing volume rebates). All the other reasons are small-fry.

  2. Brian Walker posted on July 20, 2016

    Thanks for your reply, and for your view. To say that all retail businesses rise or fall purely on the level of inventory they hold is at best a lineal interpretation and at worst simply incorrect. Inventory certainly played a part for Dick Smith, linked to rebate treatments, profile and accounting practices, Not the case in the other examples and to suggest that inventory management is the root cause completely avoids evidenced reality and the resultant article thematic which refers to differentiation and adaptation through strategy and its deployment. Inventory management (or mismanagement ) is an outcome of these levers not the other way round . We have very sound and detailed retail diagnostic methodologies at Retail Doctor Group, which I can share to help you understand the relationships between , differentiated positioning, merchandise mix ,working capital, margin degradation and cash flow, These relationships are integrated and our many years improving retail business performance makes this point consistently. These factors are not the "small fry" rather the very opposite. Best Fit retail Brian

Comment Manually

Inside Retail Polls

Has your ad spend on Facebook and Instagram changed over the last 5 years?
Vote

Twitter

In the latest issue of Inside Retail, we celebrate 20 of Australia’s coolest businesses. Get the free report here:… https://t.co/REjr5LDgoE

1 day ago

Retailer Awards entries close this Friday, 8 November. Choose from 11 categories and enter now:… https://t.co/sSrRYp4iWl

1 week ago

Privacy Preference Center