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

I’ve been thinking


Do what you do well, is advice that is often given. Get back to basics. So let’s think about this for a moment from a New Zealand perspective. At the moment our economy, like many economies is looking grim. We are borrowing lots of money to stay afloat. We look to electronics, bioengineering and other things that we are good at, but aside from a few exceptions we don’t seem to capitalise on it. We are great with ideas, but not so good at doing something about it.

We have some success stories sure, wine does ok, lamb was doing ok until they invented food miles and we are pretty successful at controlling segments of milk and fruit, particularly apples and kiwifruit. The legacy of people like Angus Tait (who I had the privilege of working for 7 years) continues, but without his innovative attitude. We have some success stories, but they are really far and few between.

Many years ago, when we all took it for granted, we were an agrarian economy and very successful at it. We’ve been successful food exporters, right back to when the Dunedin, the world’s first refrigerated ship left New Zealand full of frozen meat carcasses, back in 1882.

New Zealand fed many parts of the world for over a hundred years and life was good. Live sheep have been exported for over 100 years, although a number of incidents where thousands of sheep died have had a negative impact on this. My biggest argument, besides the inhumanity of keeping live animals penned up for so long, was that much of the stock was exported for breeding purposes, which of course reduced the demand for our own product.

But I digress. In today’s economy, we seem to have turned our backs on some opportunities, such as creating large call centres to look after communications needs of other English-speaking countries in other time zones, a market that South Africa has made a huge industry out of. We aren’t doing enough in areas such as science and medicine, possibly because the people with the smarts go offshore.

So lets look at what problems the world is going to face in the near future, in fact many parts of the world are facing right now, food! Scarce water resources, growing populations and growing tracts of land that are becoming so dry and depleted that nothing will grow on them. Then of course we also have oceanic dead zones, which are killing fish and other sea life.

Is this something we could look at with a different De Bono Hat on? Oceanic Dead Zones thrive through a combination of fertilisers and nutrients that leach into rivers and down to the sea, causing large algae blooms. These compound as the phytoplankton absorbs available oxygen and pretty much kills everything off.

Could this be another opportunity? When I need some extra energy before a run, I swallow a pile of Spirulina. Spirulina is actually algae. Of course the algal blooms often contain toxins, but there are many algae that can be used as a food source. Perhaps we could turn a bad situation into a good one.

In New Zealand, since we signed the Kyoto protocol, it has become relatively economic to grow forests (which while gobbling up Carbon Dioxide also use up a lot of water). We have lots of land, a good climate for agriculture and a need to find new sources of income. In fact I have heard that NZ can no longer feed its population without importing food. So why don’t we start looking at ways of growing bulk food?

If we want to do the right thing, we could look at product that has low cost to grow, that we can export for a profit and help countries that have problems at the same time. More than 1 billion people (1 in 6) suffer from food deprivation.

Food Science is something we are very good at. Most universities have food science and biotechnology majors and there is even a Food Science Institute. Many people have a problem with GE Food. I don’t personally know enough about it, but one way or another we either have to put production into overdrive or accept that hundreds of millions of people will die soon through malnutrition and starvation.We have a food crisis now. Grain is scarce and with oil running out a lot of people are now growing grain to fuel cars, creating even less food source.

Whilst human population growth is slowing, there were still 74 million new mouths to feed last year. A large chunk of these are in countries where soils are eroding, water tables falling and wells going dry.

Water politics is becoming a new issue and it could be that future wars are fought between countries that share water sources. This is especially likely where low lands are reliant on water coming from highlands. Think Europe, where many of our recent wars have begun. But again I digress.

Can we go back to agriculture as something we are very good at and the world needs? Dairy is currently our biggest export and apparently Fonterra’s income represented 25% of New Zealand’s total export revenue 2 years ago!

So we are good at growing crops, but could we do more? I think so. First, we should be self sustainable. We can’t afford to rely on other markets, especially when things get to a crisis where 1st world countries start fighting over resources. Then we should look at how we can feed the world and get paid for it. As a country surrounded by sea, we do not face the extremes that occur with countries that have large land masses, including our neighbours Australia.

As to Food Miles, I’m all for sustainability, so lets look at this is an opportunity. This can mean focussing on closer markets such as Australia and Asia, but also on biotechnology to get more for less.

Sometimes I think we try to be too clever. Faster computers, cloud computing, cars, planes, rockets, 3D TV, all things I want to continue to enjoy, are meaningless to the ever rowing numbers of starving and malnourished people around the world. Because of our geographic isolation, we became very good at food. Let’s look for more and new ways to exploit this. Lets make sure that if everything turns to dung, we can still feed ourselves, then lets look at how we can help feed the world and pay off our national debt at the same time.

I’ll leave the last word to NASA who have remote sensing technology to monitor conditions affecting food resources and their management:

The collapsing world economy


I recently blogged about what happens when consumers can’t buy anymore and predicted trouble for the retail industry and retail finance, specifically mentioning GE Money. At the end of this week, announcements have been made about GE Money laying off staff in several countries around the world including Ireland, Australia, and New Zealand.