Blame the Technology and Australia


Continuing my search into what happened at Whitcoulls and Borders and  generally what’s going on with New Zealand retailers I am finding no surprises, which is a real worry. Two words come up a lot. Technology and Australia. I know a little of both. I live for technology and have trained many retailers over the years (including some who were already millionaires) and while the technology has changed, the principles haven’t. More on this to come.

Australia and New Zealand

As to Australia. In the 90’s many Australasian retailers who had New Zealand operated subsidiary chains based in New Zealand, decided to do away with local country management, local buyers etc.  and to save lots of money by treating their NZ shops as Australian branches. I guess they considered New Zealand as a slightly bigger Tasmania. Not huge, but worth having, especially if they didn’t put much effort into senior staffing  resources.

When performance decreased they blamed the economy, they said that NZ was just an over inflated state and it was always going to be that way, which was how they justified reducing local resources in the first place. The fact is while we may have a lot in common, we are not the same. We are made up of different cultures and history and have subtle differences in our lifestyles. Subtle enough that you can’t treat NZ stores the same as Australian stores and expect the same result.

Similar scenarios happened in many cases with the decades of American Globalisation. It’s funny really that America wanted to change Japan and the rest of Asia Pacific while Japan wanted to change the west. I well remember having discussions with senior management of Casio in Tokyo and Hamura about improving the software on their cash registers. One of the issues was that they hadn’t allowed for people pressing buttons in the wrong sequence. Have you ever been in a retail store when the ECR (Cash Register) is bleeping loud noises no matter what buttons are pushed and the stress it caused the cashier? Their initial response was “They must use the ECR in the right way or you should find better customers”. We ended up beta testing their software in NZ and Australia first and then getting Japan to tweak their software. That was one of the initiatives that helped us get 70% market share in the ECR market in NZ and helped Casio increase theirs around the world. But then of course the company I worked for was sold and I along with my boss and several other great people were made redundant despite the fact that we were doing really well, but because they thought we were earning too much. I’d love to know what their market share is in NZ now. I know it isn’t 70%. Anyway I’m going off on a tangent.

The big thing I noticed in the NZ stores was inventory management. They were carrying a lot of books that I wouldn’t think anyone would buy other than as a joke. I went back to Borders a week ago to jot some of the names down, but it looks like they went in the $1, $2, $5 sale and were gone. They had many dated books especially computing which must have been in store for several years, technical books on how to use software that almost no one has used in the last 5 years.

From what I’ve been told, someone automated the purchasing software to replace books that had sold, so for example if a particular book sold really well, say 5,000 copies, the system would replace with another 5,000 copies. Well there goes the profit from the first lot.

One of the things that makes New Zealand different is our ethnic communities. All over New Zealand, but particularly in Auckland we have clusters of ethnic communities; Chinese, Korean, South African, Indian, Pacific Islanders and more. Brands who fail to take that into consideration waste massive levels of stock by having the wrong product in the wrong locations, which then becomes shop soiled and potentially unsaleable.

Inventory needs to be managed locally by category managers who understand and are at the leading edge of their category and who understand their local market. They need to know weekly what is going on and understand who their customers are and what they are buying. Some books date more quickly than others and need to be moved on quickly, others will hold their value longer, but will still have a rapid half life.

In my previous blog about Whitcoulls and Borders I wrote about how they could follow the example of Amazon and know what their individual repeat customers were buying and therefore their interests and could recommend books to them. Amazon continue to prove that people in NZ will buy based on recommendations along the lines of “You bought these 3 books, other people who bought the same books also enjoyed the following titles”. Not only do we often buy them, but we also pay massive freight costs to get them here, at the same time as local book retailers are discounting stock that people aren’t buying. How smart is that?

One good way of dealing with this is using Business Analytics or Business Intelligence tools such as BIonaMAP, soon to be launched by New Zealand geospatial solution provider, GeoSmart. Fortunately for retail chains, this product will support both Australia and New Zealand, so users can have visibility over both countries.

BIonaMAP

Advertisements

Air NZ Customer Service


I was going to blog about 3D Bio-Plotting today and if this is of interest to you, bookmark or subscribe to the RSS feed. This is going to be a very exciting disruptive technology that has the potential to have a huge impact on our life expectancy and the health industry.

In my last blog I wrote about how John Donahoe, CEO of eBay has a good understanding of what business eBay is in and it isn’t helping people buy and sell things online, or about their recent purchase of Red Laser for comparison shopping.

I wonder if Air New Zealand really understand what their business is at times. If you read their Vision Statement and Guiding Principles, it doesn’t say anything about the travel experience, or about the social relationship with customers or being the facilitator of people’s dreams. In fact a lot that Air New Zealand does is about that, but at times they seem to lose track of that and of course their major focus is on delivering a dividend to their share holders. The bottom line is people do business with people, like me. Individuals who have feelings, not just bums on seats as they say in the hospitality business.

In What Would Google Do, by Jeff Jarvis, still one of my favorite books, this is what he says about airlines:

Air travel’s business model today is based on overselling seats, billing us for checking bags, charging us for pillows and pretzels and just about everything they can think of but air………………. Does that sound familiar. I know it is hard to run an airline profitably, but as someone who has traveled around the world at least a dozen times, there have been many years where I spent 4 months of the year travelling, I understand that traveling is stressful and tiring and little things like being stuck in transit at San Francisco Airport for 8 hours because the Air NZ counter doesn’t open till 90 minutes before the flight and they don’t have an interconnect deal with their partner Lufthansa can be frustrating. They don’t engender loyalty, which I can assure you cost them a lot of money from me from time to time. I have also declined the two invitations to take out an Air NZ Platinum American Express Card. Why would I support an organisation like that, which doesn’t put me first?

Anyway, I started this blog because of frustration over my latest experience with Air New Zealand. Now I have to say that all the people I have spoken to at their service center have been friendly and polite and helpful to a point. But they fall down on some simple things like detail.

So here’s what happened. Last year my wife an I booked flights to Sydney to attend a wedding in Hunter Valley. Prior to the wedding, we were told that my father in law had weeks to live as he had a recurrence of cancer that he was not going to beat. We had to cancel the flight for which we paid $944.20 including taxes and Air NZ said that due to compassionate grounds they would hang on to our money and allow us to rebook at a later date within 12 months, which we thought was reasonable.

I re-booked in January for a trip at the end of this month (I have flown with Air NZ a number of times since then including a trip to Rarotonga in October). I gave my credit card details for the $150 re-booking fee (for 2 of us). Yesterday I went to print off the tickets and organize travel insurance and there was no email. I rang the call centre to find out why and after being transferred and disconnected and waiting a while to speak to someone again, I was told that the flights had been cancelled because they hadn’t been paid for. I was flabbergasted. I gave her my credit card details on the spot, but on checking yesterday, my card account had not been debited. I have already paid in advance for accommodation and we had both applied for leave etc and made arrangements to meet friends over there etc.

Anyway, the nice friendly chap I spoke to went and spoke to his supervisor and apparently, they can still get us on the same flights, but it would now be more expensive for the transfer fee of the tickets. They wanted to talk to the call center person who arranged the booking for us and she is not back until Monday, so they will get back to me on Monday or Tuesday.

So here’s the thing. I have no certainty for one or two more days that I will in fact get those flights and I may have to pay more for my tickets than the extra $150 which in itself would mean that we are paying $1,094.20 for 2 return flights to Sydney from Auckland, at the same time that Flight Center is offering one way tickets for $79 plus taxes (including one bag) at their travel expo.

I can’t believe that the supervisor couldn’t have just authorized the deal on the spot and taken my credit card details once again. What does it cost them for their time to document the discussions, chase the previous consultant who I believed had booked my flights, confirm back to the consultant who I spoke to yesterday and then have him ring me on my mobile to hopefully tell me they will honor the arrangement we had made in the first place. My cost is of course stress for myself and my wife as to whether we will be on the flights booked, that we won’t lose the money we prepaid for accommodation and so on, and it certainly sours our anticipation of a nice little holiday.

On top of that Air New Zealand have had the use of just under a thousand dollars of our money for free for a year. Wouldn’t it have been cheaper and more expedient to just say, sorry, something has gone wrong here, we can’t explain it, but if you will give us your credit card details again, we will send you a confirmation email in around 15 minutes. We hope you enjoy your trip with Air New Zealand. Then I would be writing a blog saying how wonderful and caring Air NZ was, even after they had clearly slipped up. It’s been my experience that often its not the problem but the way it is dealt with that makes all the difference. Frequently when a company has a problem and deal with it well, they will end up with more loyal clients than they would have had if the problem had not occurred in the first place.

OK, I’ve had my vent and will let you know if Air NZ fix things for me or not.

In the meantime, what about your experiences with airlines. What do you think of their visions and their customer service? Do you feel they have a good balance between customer service and shareholder satisfaction? Are you loyal to a particular airline? Why?

New Zealand Banks told not to reduce fixed mortgage break fees, I say think again


On Page 5 of this morning’s New Zealand Herald I read a story with the headline Stick to guns on fee, banks told. Now I’m the first to stand up and say I don’t understand the banking economy as well as the bankers and the politicians, the educators and maybe even Liam Dann, who says we are all behaving like whingers. No I have bumped into Liam many times over the years and the experiences have all been good, but in my mind something isn’t gelling for me. Maybe he or some others can explain where my thinking is going wrong.

First, we are in a global economic crisis and times are tough all over. I totally agree with Liam’s assertion that when I signed for a fixed rate, I signed a contract which is a legal document saying that I would pay the rate for the period on the contract and it would cost me to break it. The banks are saying that they can’t afford to subsidise the cost, but they quickly gobbled up the guarantees provided by the government to help move the economy.

Now I said at the start, that I don’t understand exactly how the banks work. I know that when I borrowed my $165,000 the National Bank didn’t rush out and borrow that sum, they would have signed contracts for millions at really good rates and my loan would have been part of a bundle which allowed them to hedge for a profit. Now I understand that the Official Cash Rate is a major influencer in mortgage and deposit rates, but a large part of the borrowing by the banks is in other countries where the rates are much lower than ours.

As to becoming whingers, I’d like to ask Liam if he thought (irrespective of the contract that was signed) we were also whingers when we saw the gap increasing between lowering oil prices and the retail price of petrol. It was public pressure that almost overnight reduced the retail price of petrol, people whinging that they thought the profits weren’t fair.

When I took out a new fixed loan of $165,000 I based my decision on the advice of bank staff, even though they were careful to say that I shouldn’t take their information as an official position by the bank, the decision had to be totally mine. But the thing is they did give me advice, and I do accept that no one saw the crash coming. On the other hand the banks also said after the problems in 1987 that they would tighten up their lending criteria, which they have obviously loosened as time went on.

So here’s the thing. While we were all struggling with how to afford our petrol, New York Times International Tribune told us that Shell Oil increase their profit by 33%! They said their profit rose to US$11.56 BILLION! Around the same time The Guardian reported that BP Oil increased their profit to 6.7 billion POUNDS. Liam did you whinge about the oil price?

Businesses have clout. In my world of business, contracts get broken when companies have the power to break them. They sign legal contracts all the time, but if they decide that their supplier is making too much profit, the implied threats come out, saying that they have a choice and even though they have a contract, often it is only as good as the money that a business wants to throw at it to defend it. This is something I do know about it. When you try to defend your contract, you use meet and discuss the situation explaining both parties points of view and try to find a common ground because you need that business relationship. This is called negotiation in my book, although some people might call it whinging.

Now I’m all for businesses making profit, it is essential for their survival and I want my bank to survive, but I want them to be fair too. The NZ Herald themselves reported that while ANZ – NATIONAL took a huge drop in profit, they still made almost $1 billion after tax. That means after all expenses were paid. The NZ Herald also reported TODAY that BNZ’s profit is up 15% on last year, so forgive me if I don’t stop and give them a minute’s silence in respect of their tough times.

So I’m trying to figure out why Liam has this perspective. Here are some things I have heard about or personally experienced about contracts in the last several years: before they

  • A company agrees to buy products manufactured in New Zealand at an agreed fee for a contracted period of time and a contracted price and volume. The buyer then discovers they can buy equivalent product from a Chinese manufacturer and despite the contract and the money the Kiwi manufacturer has invested in staff and plant, breaks the contract and says I can’t continue this deal because the prices were too dear. Never mind that they were already making an extremely healthy retail profit prior to breaking the contrct.
  • An overseas company buys a NZ company complete with its staff and operations and agrees to maintain all the contracts. They then go through the payroll on a spreadsheet and decree that all staff earning more than $X will be made redundant, but can reapply for new positions where the specification might be modified by 5% at a 3rd of what they used to do, irresepctive of their contribution. The good news for me is that they kept the people who weren’t contributing and areas where they made staff redundant and replaced them with people who were prepared to work for way less, reduced profit and revenue by in one case almost 80%. I think that strategy was illegal, but who wants to burn bridges or be seen as a trouble maker or a whinger.
  • I’m sure if you are reading this you know of similar situations where businesses break contracts with other businesses all the time. They get away with it because one business has more power than the other and the losing party either can’t afford the cost or the consequences of fighting for what is right. If you know of cases like this, or indeed if you think I am wrong, please comment on this blog. As long as it isn’t spam or blatant advertising, I will publish your comment.

So here’s the thing. Banks used to be community organisations. You used to be able to walk into the bank and talk to the Bank Manager. They would know you buy name. They would give you advice and show an interest in you. They introduced technology that people said would turn them into machines, and in many cases it did, but the machines were of benefit to the consumer and business, such as EFTPOS (which I helped in a tiny way to introduce), ATM’s, Internet Banking and more. These investments saved them and their customers in time and money, but particularly made the banks more profitable by reducing overheads and staff.

When I first wanted to borrow my current fixed loan from my bank, with whom I had banked for almost 25 years, I actually got a better deal through Mike Pero Mortgages than I could from the bank directly. How’s that for 25 years of loyalty? I had to get a broker to get me a reasonable deal from my own bank!

So I’ve had my whinge Liam. It seems it ‘s ok for businesses to break contracts with each other and to fight for them, but it’s whinging if a consumer, a customer for many years of a bank that is making big fat profits out of their dealings with them, and gets a helping hand from the government which in many cases is as a consequence of imprudent lending, which after 1987 they said they wouldn’t do to expect a little help as well, well I’ll accept the title of whinger.

Just as a footnote, my local grocer is going back to India to look after his elderly parents after running his store here for 24 years. For all of that time, he has shown a real personal interest in every customer, he knows most of them by name. He has helped many of them out if they needed something and didn’t have the cash on them. I won’t go through all the little things he did for local people, but here’s the thing. The supermarket is much cheaper and for many people closer, but they still buy from him and he is selling a highly profitable business. Profitable not because it is a Four Square, or because of his location, but because he cares, because he is a person doing business with people and we as his customers want to do business with him.

If the National Bank doesn’t look after me, perhaps go halves on the contract difference or something that shows that they care about my business, my family and my future business (because I intend not only to be around for a long while, if the creek don’t rise, I won’t be whinging, I will be moving with my feet.

Now I am not wealthy, I live in a very average neighbourhood, far from affluent. Having been made redundant twice and suffered badly as a consequence and having little faith in the government to give me any sort of lifestyle when I retire I am being prudent. I have a small savings account (which has helped my kids from time to time with studies, with medical costs, holidays and other interests), I have a modest term deposit, suffient to cover 2-3 months of income should I be so unfortunate as to be made redundant again as is happening to many people right now. I have a mortgage on my home and a mortgage on my rental property which breaks even without paying a cent off the capital (and of course in recent times means that it is worth less than the loan (but this is for the long haul and it will come right.

Sorry, if I’m rambling, but this post is personal. If the National Bank doesn’t come to the party, I will go back to Mike Pero Mortgages who have looked after me so well in past. I will ask them to find me a new bank that will take over my term deposit, my checking accounts, my 2 mortgages, my Internet Banking, my EFTPOS account, my credit cards and will tell everyone who will listen. Liam, mate, I’m not being a whinger in my book, I believe that people do business with people. We have a choice and I will be looking very closely to see if one of the banks realises that a short term sacrifice will amply pay great dividends in the long run. I suspect that the bank that does this and continues to recognise that their profit comes from their customers will grow and thrive while the others wonder what happened.

Liam, this is starting to sound like I am having a go at you. Frankly I was annoyed to read your column in the Herald today. Factually you are on solid ground, a contract is a legal and binding document. But consumers do have power and if they don’t use it, the corporates or anyone that can will walk right over them. Over recent years Kiwis became so PC (politically correct) that they let everyone walk over them. They thought  people like Americans and Australians were rude if they complained about a dirty coffee cup in a cafe. The contract was for coffee, there was never discussion over the cleanliness of the cup.That made them whingers. Now more and more people are realising that it not just about the contract, it is about standing up for what is fair, ethical, moral and just. The laws of economics are changing and people have a choice.

If anyone is still reading this soap box and agree or don’t with me, please leave a comment and tell me what you think. I would also appreciate you telling other people about this blog if you think it is worthy. Let’s remind the banks and everyone else that those who recognise and respect their customers will in future grow and thrive, those that don’t might be sitting at home reading reading the situations vacant and wondering what happened and thinking how unfair life is.

While this blog is starting to get a good following, I would love to get more readers and encouraging me to keep writing. If you feel that my blog is interesting I would be very grateful if you would vote for me in the category of best blog at the NetGuide Web Awards. Note that the form starts each site with www whereas my blog doesn’t and is of course https://luigicappel.wordpress.com.

Thanks so much for your support:)