When the message gets mixed

Napoleon Perdis created an Australian brand that hit the shelves of retailers across international markets. One of the issues in the collapse of the cosmetics business is whether or not the brand actually occupied too many shelves, especially in Australia.

Brand management is a science, and many popular brands have imploded after overreaching and confusing – or even betraying – their customers.

It is interesting to reflect, for instance, on Target’s coup in landing a Stella McCartney range for its stores.

Target has made several attempts to revive its fashion credentials and the McCartney range sold well. But it has done nothing to improve the struggling discount department store chain’s fortunes.

It was surprising that McCartney agreed to the Target deal, but Australia was not a major market for her and the damage risk was low – perhaps even with the upside of introducing her brand to online shoppers.

Failure in the US market

The recruitment of stockists in overseas markets by Perdis was a good strategy but proved costly, especially in the US, a country that has proved a graveyard for a number of Australian retailers, including Country Road, Michael Hill and Peter Alexander.

Perdis abandoned the US in 2015 after losses of $1.75 million over the 2014 and 2015 years, mostly attributable to the overseas operations, which had once included Neiman Marcus and Nordstrom as stockists.

However, the bigger problem for Perdis may well have been a deal with Priceline Pharmacy, which created brand confusion between his classy boutique stores and the tightly packed pharmacy shelves.

Perdis also seems to have made a wrong call in abandoning his David Jones concession stores in favour of a deal with the struggling Myer.

David Jones was a better brand fit, and potentially offered opportunities to expand the brand in the African markets through its parent company, Woolworths Holdings. But presumably Myer offered a better quick-fix deal for the flagging Napoleon Perdis sales.

There are 56 Napoleon Perdis stores throughout Australia as well as stockists, which Perdis desperately needed to generate revenue after the US exit.

The company’s own stores have been struggling as a result of higher rents and occupancy costs in shopping centres that Perdis claims are “dead”.

He also blames “uncompromising bankers” for the collapse of his chain. But another blow for the company was the termination of the Myer concession stores agreement in December.

As other retailers will find if they haven’t already encountered it, banks have also become much tougher on debt and, after the royal commission on banking, can be expected to be even less user-friendly in the months ahead.

Perdis called in Worrells Solvency and Forensic Accountants as administrators on January 31, after the company’s banks became concerned about the viability of the retailer following the Myer deal termination and poor sales.


Seeking a white knight

The administrators are keen to find a buyer, and an optimistic Perdis believes his company is worth more than $35 million.

While there has been little enthusiasm from potential buyers for other failed chains such as Laura Ashley and Roger David, there is a chance that at least part of the Napoleon Perdis business will find a white knight.

The brand is a good one and it has a quality product range that might well attract a purchaser to develop as a cosmetics manufacturer and supplier, albeit at nowhere near the $35 million mark.

The future of the retail stores is more problematic in respect to the future positioning of the brand – boutique cosmetic offer or Priceline range – as well as the rents and overheads of the premium shopping centre locations.

Some of the stores may well attract interest from other retailers as many are well located but a buyer for the entire store network would be wary of the increasing competition in the cosmetics category.

That competition is coming from online vendors as well as chains such as Mecca, international brand Sephora and the goliath Chemist Warehouse group, which plans to beef up its cosmetics and beauty business.

One leftfield possibility for the Napoleon Perdis store network is the relocation of major cosmetics brands out of Myer or even David Jones into their own stores, given the flagging foot traffic and sales momentum of the department stores.

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    Shermalie Suckling posted on February 6, 2019

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