Me-too Dick Smith sees NZ sales fall

Dick Smith Holdings blames market competition and weak consumer sentiment for poor New Zealand sales. Businessdesk reports the result in Dick Smith’s NZ 1H sales fall in competitive market.

There’s another possible reason for the drop in business and it isn’t something businesses like to talk about.

Dick Smith’s Australian business saw sales rise 12 percent to a shade over A$600 million. Australian profits jumped 122 percent.

In other words, Dick Smith’s Australian business surged while the New Zealand business slumped. Yet Australia is in an economic slowdown while New Zealand’s economy is strong.

Trouble in dairy land?

What’s going on? Dick Smith explained the result by talking about flagging New Zealand consumer confidence and trouble in the dairy sector.

These may have had an impact, but there’s something else.

Last year Dick Smith changed its business focus. Out went the electronics components, the geeky build-your-own-radio kits, all the ham radio stuff and so on. While these products may not have been as popular as they once were, they were precisely what the company’s long-time core customers associated with the brand.

Techsperts

In place of geekery, Dick Smith rebranded as, “The techsperts”. A horrid word, but you don’t need to think too hard to figure out what the marketing whizzes were thinking.

Clearly the market reposition worked like a dream for the Australian business. On the face of things, the change went down like a lead balloon in New Zealand.

For those of us living here it’s not hard to see why that happened. New Zealand already has plenty of high street retailers wanting to flog TVs, iPods, computers and other electronic goodies. Our cities are awash with Noel Leeming, JB Hi-FI, Harvey Norman and so on.

Too many electronics stores

If anything New Zealand is oversupplied with electronics retailers.

It’s not just the specialist, big name stores. Pretty much the same kit is on sale at appliance warehouse stores and places like The Warehouse.

Because they all sell the same range of electronic goods, often the same brands and there’s an over supply of outlets, retailers are left with little room to compete except price.

And that’s what they do. They all discount like crazy. Margins on core products are wafer thin. This, incidentally, explains why they are so keen to sell extended warranties and over-priced accessories.

It’s friday, let’s have a sale

It’s a rare week when none of the major electronics stores advertise a sale.

Any savvy buyer knows they only have to wait until someone discounts the gadget they want to buy. No-one ever needs to pay full retail price for these gizmos any more. OK, maybe with Apple gear, but that’s a different story.

While this applies in Australia, the competition and over abundance of stores is nothing like as intense. Dick Smith’s move worked in Australia because there was enough room in the market.

In New Zealand the change of strategy saw the brand become yet another me-too electronics retailer in a crowded market. It also disconnected with its earlier core market. If the company wants to improve New Zealand profitability it needs to start closing poorly performing stores and possibly focusing on regional towns where it faces less competition.

Australia über alles

This is simply another tale of what is right for the Australian market is not necessarily right for New Zealand. We’ve all seen this before. It may work for fast food franchises like McDonalds, but in general a one-size-fits-all business template across all of Australia and New Zealand can be a recipe for disaster.

I’ve worked for companies reporting to Australian headquarters where angry execs don’t even want to hear that things work differently in New Zealand.

Dick Smith will have seen some unpleasant trans-Tasman phone calls over the past year. Even if the local management were able to tell their bosses what needed doing, they wouldn’t have been listened to. Not properly. And anyway, New Zealand often doesn’t get the management attention it needs from executives sitting in Sydney.

Dick Smith Holdings faces difficult choices over how it operates in New Zealand. It can go on following a plan that works in Australia but here means barrelling down a barren track towards low-margin retail or it can attempt to find and own a niche. If that doesn’t happen, you can expect to see stores closing before too long.

6 thoughts on “Me-too Dick Smith sees NZ sales fall

  1. I worked at when it went from NZ ownership to Australian ownership a number of years back, and a similar thing happened. The listening stopped, and things started going badly for them. The overwhelming feedback was ‘it works in Australia, therefore it will work for you too, so make it work’. IIRC, the Australian owners sold it back into NZ hands at a loss after a few years.

    The same thing happens in NZ with Auckland/rest of NZ as well for companies I’ve worked for. Listening to people at the coal face is something that tends not to happen but I suspect could make quite a difference in a lot of cases.

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    • One of the stores I like is Jaycar. The other day I was in one of those stores and I was thinking, this is a bit like Dick Smith used to be. When I am in the office lunchroom and there is a Jaycar brochure, everyone wants to see it. When there is a DSE flyer, no one cares.

      As to Dick Smith here’s my experience https://luigicappel.wordpress.com/2015/01/24/kindle-buyers-at-dick-smith-beware-if-you-want-to-read-library-books/ and btw I went back to the store in Downtown recently and to the Albany store, which may be the last time I bother at all. I wanted to buy some gear as I frequently do, the Albany store also had the incorrect Point of Sale out and I wandered up and down the aisles and not a single person was interested in talking to me, they were busy talking to each other. I went up the road to Noel Leeming the staff left me for about a minute to see if I was browsing or buying and got a $300 sale in 2 minutes. They were totally happy to open packaging and show me what I was looking for and I bought. There is imho something intrinsically wrong at DSE.

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  2. Except it chopped out an important piece of my comment. It should say “I worked at Noel Leeming when it went from NZ ownership to Australian ownership…”

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    • Though it doesn’t explain why Australia is so different, I can think of a good reason why sales are dropping at Dick Smith: competition from Chinese mail order sites Deal Extreme and AliExpress who sell postage free. eBay is also entering that space with goods ex Hong Kong being sold cheaply and freight-free. Then there is TradeMe – whose prices are on the high side, though still cheaper than Dick Smith. Dick Smith’s electronic gizmos and accessories are far more expensive – their prices are usually double or more. I was once a good DSE customer, but now I only go there for things I need straight away.

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  3. Totally agree with the sentiment here, but I’ve stopped going because the service in my local store is totally lacking. Too many instances of trying to get the attention of someone who is just not interested, even when you are talking about a catalogue special. Nothing special about the Downtown Auckland store at all IMO.

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  4. I agree with this. I’ve been a Dick Smith customer since the Tandy/Radioshack days. Been into Dick Smith a few times over the past year since I arrived in New Zealand and each time walked out empty-handed. I can’t really figure out what they’re offering now. Not selling components means the old reasons I had for going to there has gone. Consumables like cables and memory seem overpriced. I’ve had better luck at Jaycar and PB Tech. Still not sure where to go for components.

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