Retailer Shuts Shop – Why Retailers Fail

I was sad to read a story in my local newspaper, North Shore Times about a Glenfield hardware store McPherson’s Hammer Hardware, which is going to close in a couple of months. Firstly I as going to share a link with you, but the aforementioned newspaper has a system that requires you sign up to their digital version if you want to share a story, and likewise, probably if you want to read from a link. I do not provide links for my readers to sites like that.

I used to live in Glenfield and visit this story and I remember asking them how they stay in business. The owner, John MacPherson told me it was about community, having those little things that the big stores make you buy in bulk, advice on how to do things, friendly service, remembering people’s names, the little things that come with community retail.

The newspaper story goes on to quote that he has probably hasn’t been making a profit for 6-7 years, but hung in there. He points out that the DIY super-stores and Internet have changed the game and that even the major stores/chains suffer from sluggish consumer spending.

He’s not wrong, but the key word is change. I love the world of retail, I used to have the privilege go to the NRF in New York and FMI Connect in Chicago and bring back ideas to write about in retail magazines, share with my resellers and speak about at conferences around the world. This was important because many of our retailers couldn’t afford to go to those conferences, but learning new ideas, particularly from people who have proven experience, is how business evolves.

It doesn’t really matter what business you are in, you have to evolve to meet the demands and opportunities presented as society evolves. As John said in the North Shore Times article, “In Glenfield we had a haberdashery (incorrectly spelled in the newspaper, I had to look it up to find out what it was), greengrocer, butcher, it was a great mix”. It went on to say they were boom times.

So here’s the thing, it is still boom times for those businesses that want to keep up with the times. The problem that retailers used to tell me was that they didn’t have time to keep up with the times. They were too busy starting early in the morning cleaning the shop, doing stock takes, placing and chasing orders, talking to merchandising reps, ringing customers to say their widget had arrived, preparing the float and a myriad of other things. In hindsight, those retailers, from John McPherson’s Hammer Hardware in Glenfield, through to Borders and other retailers should have found the time to look at how some businesses were thriving, while others weren’t.

When they went on their holidays, they could have combined them with visits to businesses and conferences that showed how some retailers were managing in the new world of mobile and tablet, of connected customers. They could have seen new products that aren’t available in NZ, they could have combined bricks and mortar with online themselves. I appreciate how hard it is to run a business, I have run several businesses over the years and worked in companies from small to multinational and the common thread is that those who looked ahead continue to do well, those who looked to their original training and just repeated what they had learned, which may have been best practice in the 70’s or whenever, will have done well for a while, but aren’t there any more.

People still want to have experiential retail, they still want to see and touch, ask questions, they even want to see people like John McPherson stick around and stay in business, but they can’t advise him on what to do to stay in business and get back into the black.It’s tough, but the time to get ahead in business is when you are ahead and you have the resources to go and do some training, bring in a consultant, go attend a conference. I used to speak regularly at retail conferences in New Zealand and what was really frustrating was that the people attending were those that needed it the least, because they were looking ahead and staying up with the times. The ones that needed it the most didn’t go, probably didn’t read the specialist trade magazines, ask their suppliers for knowledge or go to the trade shows. They were too busy. Now they are either out of business or heading out. Is it too late, not necessarily, but it will be much harder, even to change the mindset. When things get tough, many go even farther back into doing what they used to do, even doing it harder. That’s not the answer.

Back when business was booming for people like John McPherson, Bob Dylan was singing The Times They are a Changing. He was so right. “You better start swimming or you’ll sink like a stone.” Listen to the lyrics, they are prophetic. But this is no different to 200 year ago. The times are always changing.

We are still buying all the things we used to buy and more. Some business models have been and gone, but others are growing in a big way. We are still a DIY country, that’s why we have the mega stores, but there is still room for specialists, room to be a community and have community involvement in business, there are so many opportunities. Whether it is classes at the back of the store teaching people how to do things, or a new section selling 3D printers and teaching kids how to make things, using location based mobile services to find people who are looking for what you have, supplementing your business by selling items you can’t afford to stock, online.

I’ll finish with a question. Why is it that I can buy a set of my favorite guitar strings online from a retailer in the USA, 75% cheaper than the same product in New Zealand? The local retailer will say that’s because the guy in the USA doesn’t have a shop to run. But the fact is they do, Elderly Instruments has a bricks and mortar store in Lansing, Michigan, they have bands playing in it, they have workshops for musicians, they just supplement that with online sales. I recently contacted them because I couldn’t get help from local retailers to fix a broken part on my Dobro. I had personal emails, just the same service that John provides in his hardware store and I’ve managed to repair it myself with the parts they sold me. Doing business with them was so easy. If I lived in Michigan, I would go and by from their store and I’d even be prepared to pay a little more, heck I’d buy more anyway just because I like doing business with them and they like what they do and know what they are talking about.

So I’ll finish on a saying that is one that has killed many a good retail business. “If it ain’t broke, don’t fix it.” Have a look around you right now and ask yourself how many of the things you take for granted would be there if everyone had said that back in 1970, let alone 1870?

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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