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Bill Bennett


When Dick Smith Electronics lost the plot

Private equity firm Anchorage Capital Partners bought Dick Smith Electronics for A$94 million in 2012. A year later it floated the business in an A$534 million public listing.

Those numbers rang alarm bells at the time. At the NZ Herald, Hamish Fletcher quotes Matt Ryan of Forager Funds who says Anchorage pulled off “the greatest private equity heist of all time”.

Now Dick Smith is in receivership. Most of the analysis looking at the failure focuses on finance: too much debt, stock write-downs and so on.

All of that is real. Anchorage sold off much of the inventory forcing the new owners to restock at great expense.

Yet it’s not the whole story.

There have also been comments about Dick Smith’s inability to compete against the likes of JB Hi-Fi.

In truth, the entire electronics retail sector is a mess.

Harvey Norman has struggled in recent years. And it’s not a great place to shop. Noel Leeming was losing money when it was purchased by The Warehouse. Before that Noel Leeming acquired troubled Bond and Bond.

None of the companies mentioned here is special or unique. They offer a similar set of products in similar stores. They are, despite expense advertising campaigns and loud claims, undifferentiated.

This leaves the chains with nothing to compete on except price. Which means wafer-thin margins.

How thin? I’m told margins on many of the most popular products are between five and 10 percent.

This focus-on-price strategy also leaves them exposed to competition from online retailers who don’t have the burden of expensive high street rents and wage bills. Someone can always sell cheaper than you.

Dumb, dumb, dumb.

The sad thing is that prior to the float two years ago Dick Smith Electronics was different. It had a distinct approach to the market. You could go into a Dick Smith store and buy a transistor, resistor or capacitor. The shops sold soldering irons and geeky build-your-own-gadget kits.

The clever, clever managers who took over the company dropped all that to create yet another me-too electronics retailer. They described the new look business as “the techsperts”.


Sales dropped. Well duh… 

This reminds me of advertising guru David Ogilvy who said “don’t tell, show”. He was talking about the art of writing advertising copy, but the logic applies to Dick Smith Electronics.

For years the company demonstrated its geek credentials to customers. All those weird components shouted the message that this was a shop for in-the-know technology buyers. It implied the sales people might know a thing or two about technology in a way that adding the word Techspert to advertising material did not.

Dumping the geek business was stupid. Maybe it wasn’t lucrative, although the success of the Jaycar chain suggests otherwise.

More likely, the idiot marketing types running Dick Smith thought it wasn’t glamorous enough.

As if being in receivership is a fashion statement…



3 thoughts on “When Dick Smith Electronics lost the plot

  1. It was actually techxpert. yep. a word that contained the unique consonant chain chxp. Another misstep.

    1. That’s funny because I tried Googling some varieties of the word with no success, I’d never have thought of spelling it that way…

  2. I totally agree Bill this is exactly the same as the stories I wrote about companies like Borders and Sounds Music. I used to really like going to Dick Smith stores, but they became less interesting and also less price competitive. Basically irrelevant. There is still a gap in New Zealand for stores that sell cool gadgets, the sorts of stores I love visiting in the USA. Jaycar while they don’t do a great job themselves will benefit, otherwise I doubt this receivership will be much noticed by the CE retailers and wholesalers other than a far of some product dumping. The smart thing for wholesalers would be to take product back and redistribute it.

    When you have an entrepreneur like Dick Smith setting up a business, you have innovation. When it is taken over by bean counter driven boards, the customer is forgotten, including the reason why customers graced them with their money in the first place. To me this is mostly a sign of a disconnect between the boardroom and the customer, not a lack of business opportunity.

    If I had the backing and the inclination, I would have come back from 2016 CES with products that would have customers breaking the door down of a smart retailer with their credit cards. I feel for the staff of DSE, but the writing has been on the wall for a long time.

    The question is who is next?

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