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 per cent to a shade over A$600 million. Australian profits jumped 122 per cent.
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 dairyland?
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 hardware 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.
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.
Dick Smith Electronics -“Talk to the techsperts”, my arse! Another example of high quality corporate bull-dung.
— Robert Lee (@voicework) December 19, 2010
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 oversupply 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. If Dick Smith’s move worked in Australia it was probably 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.
Many who have worked for a New Zealand company reporting to an Australian headquarters know their senior 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.