Paul Wallbank – Brilliant Communications

Tag: retail

  • Undoing the untrained workforce

    Undoing the untrained workforce

    One of the notable things about the 1980s way of doing business was how front line workers weren’t valued for their skills and knowledge.

    In call centres, shopping malls and government departments, those who dealt with customers were seen as an unnecessary expense who should be outsourced at the first opportunity or, if it wasn’t possible to hive them off, then encourage them to get more money out of the customer while providing less service.

    An example of this was at electronic superstores where sales staff with little product knowledge were given rudimentary training and then encouraged to sell easy payment plans and expensive acccessories – the HDMI cable scam where connectors of dubious quality earned more profit and commission than the HiFi systems or plasma TVs they plugged into illustrated how lousy a deal this way of doing business for the customer.

    Much of that mentality has been inherited by web2.0 companies that think customer service is an optional extra.

    Some of those companies can’t even be bothered protecting their clients’ data properly, such is their unwillingness to provide service.

    The stack ’em high, sell ’em cheap self service culture of the 1950s and 60s reached its limits in the 1980s and was only given a reprieve by the easy credit boom of the 1990s. With the end of the credit boom, electronic or household goods stores that simply sell cheap tat on interest free terms at a fat mark up without adding value now struggle.

    Gerry Harvey is getting out of electronics partly for this reason – his business model is dead and it’s been difficult for a decade to make the fat profits on consumer computers or electricals without hooking the customers with interest free deals or expensive and pointless accessories or software.

    One of the conceits of management through the last part of the Twentieth Century was the mantra “our greatest asset are our people”, today business have to start valuing the skills, knowledge and corporate memory of their workforces.

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  • Tracking the end of the consumer society

    Tracking the end of the consumer society

    I’m currently researching a presentation about the retail industry.

    One of the things that leaps out when researching consumer behaviour is the savings rate.

    For twenty-five years from the early 1980s to mid 2000s, the savings rate collapsed in Western economies; below are the US and Australian rates.

    The US Personal savings rate shows the rise of consumerism
    US Savings rates 1950 to 2020 – St Louis Federal Reserve
    How did the Australian savings rate fall during the consumer boom
    Australian Savings Rates 1980 to 2012 – Reserve Bank of Australia

     

    The graphs show the same thing; households spent their savings over the 25 years which drove the consumer economy. It’s no accident that period was a good time to be a retailer.

    Being on a deadline, I don’t have time to analyse these number further right now, but one thing is clear; most of the consumer boom from the Reagan Years onwards – or the equivalent from Maggie Thatcher or Paul Keating – was driven by households reducing their savings.

    That couldn’t last and didn’t. Businesses and governments that are basing their decisions on what worked through the 1980s and 90s are going to struggle in the next decade.

    Looking at these figures raises another suspicion – that graphs showing non-real estate investment by businesses and government would show similar declines over the 1980-2005 period.

    It might be that golden period of what appeared to economic success was just us living off society’s collective savings.

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  • Playing with Dragons

    Playing with Dragons

    Chinese manufacturing has been in the news recently with various exposes of factory conditions by the New York Times, the now discredited Mike Daisey and a fascinating look at US store chain Wal-Mart’s supply chain by Mother Jones’ Andy Kroll.

    In his examination of Wal-Mart’s Chinese suppliers Andy Kroll interviews factory owners and managers with a common theme, they are all loath to be identified for fear of incurring Wal-Mart’s wrath.

    This is wall of silence is familiar in Australia; the reluctance of local suppliers to speak about the conduct of the Coles’ and Woolworths’ policies has hobbled enquiries into the domestic retail market.

    Another aspect Chinese and Australian have in common is how the retailers drive down costs with big buyers insist upon regular price reductions from their suppliers.

    This is what happens when your business is a price taker that relies on one or two suppliers; you accept what you’re offered or lose a large chunk of your business.

    With many of Australia’s industry sectors now dominated by one or two incumbents, this way of doing business is now the norm rather than the exception.

    As a nation Australia’s finding itself in that position as well. Now our governments and business leaders have decided Australia will only dig stuff up with a few favoured, uncompetitive industries like car manufacturing being being protected, the entire country is in a position not dissimilar to a Foshan coat hanger manufacturer.

    Having that dependency on one or two major customers is a risk and when the commodities boom turns to bust – commodities booms always do – our relationships with these customers will be tested.

    When that test comes, the clumsy way the Federal government has banned Chinese companies from tendering to the National Broadband Network or blocked investment in mining projects may turn out to be mistakes.

    This is the problem with being a price taker selling a commodity product, you become hostage to fortune and when the market turns against you there isn’t a great deal you can do.

    In the early 2000s computer manufacturers like Dell and HP decided to sell commodity products then watched with despair as Apple captured the premium, high margin end of the market. Neither business has truly recovered.

    Being trapped at the commodity end of a market is not a comfortable place to be, particularly if you don’t have a plan to move up the value chain.

    If your business is currently selling low margin, commodity goods then it’s worthwhile considering what Plan B is should the market turn against you. You might also remember to be nice to your customers

    At least you’ll show you have more forethought than our leaders in Canberra who seem to like to play with dragons without thinking through the consequences.

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  • David Jones’ wasted decade

    David Jones’ wasted decade

    In 2001 Australian retailer David Jones shut down their website.

    Back then, the future was clear; profits were in financial services and certainly not in online sales or investing in improved stores and service.

    Today the company released their strategic review that looks forward to financial years 2013 and beyond. You can downloaded it from David Jones’ investor website.

    On Page 13, they show just how far David Jones has fallen behind their international competitors. Less that 1% of DJ’s sales are online compared to 4.5% of the UK’s House Of Fraser and 13% of John Lewis.

    Australian executives claim they are in a global market for their talents which is why they deserve world standard remuneration. David Jones’ results show how hollow that mantra is.

    The problems start with the board, five of the eight current David Jones directors were with the company when that decision was made in 2001.

    None of them have been held to account.

    David Jones illustrates the weakness in Australia’s business sector – largely unaccountable boards answering only to institutional investors who themselves have grown fat and lazy on clipping the compulsory superannuation ticket.

    One hopes the some of the competitors who are displacing flaccid incumbents like David Jones are based in Australia or the locals may soon find that many of these sectors, not just in retail, will go offshore to better run companies.

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  • Reinventing point of sale

    Reinventing point of sale

    One of the banes of running a business computer support organisation were cash registers.

    Retail Point Of Sale (POS) systems were almost always arcane, clunky and difficult to maintain, at PC Rescue we dreaded a call from a shop, pub or hairdresser having problems with their registers.

    Frequently this was by design, the POS system supplier would try to lock in their business customers into expensive support contracts.

    By making it difficult for anybody without intimate knowledge of the product to actually do anything with it, the retailer was stuck having to hire overpriced custom support.

    To make things worse, many of the POS systems ran on outdated hardware which offered the suppliers another opportunity to hit their customers (victims?) with high support costs.

    Since the iPad was released, I’ve been waiting for an application using cloud services for a back end that challenges the existing Point of Sale systems and today US online payments system Square has announced their Square Register app.

    While only available in the US, Square has been setting the pace for physical payment systems like taxi fares and coffees using online technologies so it’s hardly surprising they are leading this push.

    The iPad as a cash register is a logical step for the device and tied in with a robust Point Of Sales platform behind a simple to use app, it will probably make a huge dent in the point of sale market.

    It may be the Square service won’t be the point of sale leader – Square is more a payments service than retail platform – which means this field is way open for some savvy operators.

    One of the concerns with the Square service, and any iPad based application, is the spectre of vendor lock-in. Being fixed on the iOS platform means there is a risk of being held hostage to Apple’s business plans, also being locked into Square’s payment systems may not be the best choice for many merchants.

    The payments and point of sale industry is another that’s being radically changed by mobile devices coupled with cloud computing. It’s not a time for incumbents to rest on their laurels.

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