Digital & Mobile / Editorial
Myer: The Opposite of Innovation
- 13th April
- Grant Arnott 7
Anybody hoping for 21st century retail leadership from Myer will be sorely disappointed with the CEO’s dogged adherence to a strategy that snubs e-commerce.
March 2011: Myer’s Half Year Results Announcement raised more than a few eyebrows in the business world. Revenue was down 3.5 percent, net profit down 8.8 percent, with a raft of plausible explanations offered for the decline in performance. For one, the revamp of the institutional flagship store in Bourke Street Melbourne over the past year impacted sales to the tune of $80 million less. That, plus the impact of what CEO Bernie Brookes described as “severe headwinds since the global financial crisis” (floods, interest rate rises, locusts and petrol prices) have made sales revenue growth tough.
However, with the Melbourne flagship store once again open and fully operational, plus two new stores in New South Wales and Queensland expected to contribute $30 million each, Mr Brookes will need more than excuses to appease shareholders next time if sales don’t lift.
Widely publicised earlier in the year, Myer joined the chorus of a number of major retailers including Harvey Norman, David Jones and Borders seeking a “level playing field” by lowering the GST threshold on imported products bought online. The big retailers’ campaign exploded in their faces – not only was the federal government unmoved, but the resulting public vitriole exposed the widespread disdain the Australian people felt towards retailers they perceived, rightly or wrongly, as overpriced dinosaurs.
The message from consumers was clear – do NOT mess with our ability to save money and gain access to wider ranges by purchasing online. The backlash was overwhelming, and the major retailers quickly retreated from the public debate.
It’s still a sore point with Myer, with Mr Brookes saying during the half-yearly announcement, “We have overseas companies such as John Lewis coming to Australia to compete online, because there is no GST to collect on items under $1000, and they get a free kick in not having to pay duty.”
Well, if sporting analogies are to be used, Myer needs a new game plan.
The foundations of the current strategy lie in rolling out more bricks and mortar stores – two more stores in 2011-12, four more in 2012-13, and six in 2013-14. This flies in the face of global trends, where institutional bricks and mortar retailers like Sears and Macy’s in the US are closing stores a lot faster than they’re opening new ones. The capital once reserved for new store openings is being funnelled into e-commerce talent, online marketing initiatives and optimising fulfilment.
Sure, the retail economy has been hit much harder in the US than it has in Australia, but both these major retailers have been unequivocal in their ambitions to grow their multichannel businesses. That is where they see the growth – in multichannel, not bricks and mortar.
Macy’s chief Terry Lundgren said in 2009 that its research showed every dollar spent online at Macys.com influences $5.77 spent in store (within 10 days following an online purchase). In the UK, John Lewis, who has announced intentions to enter the Australian market this year, said multichannel customers spend twice as much as in-store customers.
At the Myer half-yearly briefing, one senior analyst asked Mr Brookes to make comment on the company’s commitment to online. This was his response:
“Our main game is to hit a home run with Myer Melbourne and to do a good job with our 15 new stores and 3-4 refurbishments – that is our main game, we are bricks and mortar. For us going forward, the opportunity to add some icing on the cake by stretching our ability to have e-commerce sales is secondary, it’s not our main game. The most I can get it to is 3-4% of turnover in Australia and therefore it’s something that we’ll continue to watch, we’ll continue to play in and we’ll continue I think to be pretty good at – particularly with our myer.com site – but it’s something that takes a large amount of capital and a large amount of management time.
“In regards to MyFind, unashamedly, we’ve said we’d produce the site by the end of February. It’s GST free, it’s duty free – we’ll get the fulfilment right and then we’ll explode the number of lines. We’re actually on track. I understand the criticism of the site from the point of view with the number of SKUs available, but it’s exactly in line with our plans.
“I’m really pleased with the fulfilment capability that we’ve got so we’re on track but to answer your question more fully, it’s only a small part of our business.”
That statement flies in the face of global retail trends, which Myer appears to dismiss. In the US, Sears, JC Penny, Macy’s, Kohl’s and many more continue to focus their marketing efforts on e-commerce.
Sears, in particular, has taken the extraordinary step this year of appointing a tech veteran with no retail background as its CEO. Their Chief Marketing Officer also hails from a digital background. We’re not suggesting Myer is ready for this move, but the retail landscape is shifting, and traditional retail models no longer apply. To state openly that e-commerce is only going to be a small part of Myer’s business should have shareholders bristling – retail is flat, and staying flat, except for one segment – online shopping. Yet Myer appears to want to ignore the potential for this market, ignore the shifting sentiment of its own customers, and pour more money into costly physical stores. This flies in the face of global retail trends, where reducing bricks and mortar spend and increasing e-commerce spend is paying dividends across the board.
Mr Brookes is taking bad advice, and making bad decisions. Claiming that e-commerce requires too much capital and too much management time is a head in the sand claim that ignores fact. It certainly would have cost a great deal already. DTDigital, an OgilvyInteractive company, has had more than enough time to produce a quality e-commerce offering for Myer, but the custom-built sites for Myer.com.au and MyFind are well below modern best practice standards. It reflects nothing of the globally proven triggers for optimising conversion rates. It doesn’t utilise social media effectively (no ratings and reviews, a proven sales converter), and the merchandising is way below the standards one should expect from a flagship retail brand – it will never compete.
Interestingly, Mr Brookes says he is happy with the fulfilment for MyFind, which is good news – it should be used to advantage, as that is one of the most difficult challenges facing large multichannel retailers. But the online stores are simply not reflective of the consumers’ expectations of the Myer brand.
My advice – scrap the current sites, bring in some proven e-commerce talent who understand the channel’s job is to sell merchandise, and take advantage of the Myer brand while it still has major value. The clock is ticking. There was no doubting earlier in the year what people thought of this once-revered institution – directors need to take note.
Aside from a raft of new store developments, Myer is banking on its unique lines to see it through the challenging road ahead. Mr Brookes revealed exclusive deals with international lines like Catherine Malandrino, Matthew Williamson’s Escape collection and Vivienne Westwood’s Anglomania and Lee collaboration. The bad news is that Australian shoppers can buy all of these via international sites like Shopbop and Net-A-Porter – without leaving their chair. Indeed, the online shopper can buy anything he or she wants anywhere in the world, except through Myer.
MyFind is not up to the job, despite Bernie’s optimism. He says it will be a whole lot better in time and we can expect an explosion in SKUs as Myer’s new China-based sourcing plan takes off – that’s when he expects Aussie consumers to rush to MyFind to bypass the GST and grab the exclusive products not available anywhere else.
It won’t happen. The lack of SKUs isn’t the problem, it’s the soulless, unimaginative and uninspiring framework that will deter customers.
Like its bricks and mortar counterparts in the US and UK, Myer needs to be an innovator in a radically shifting retail environment, but it’s not. The current strategy to largely ignore the online shopping revolution condemns the retailer to mediocrity for the next five years.
While Bernie and co “continue to watch”, the rest of the e-commerce-savvy retail world has a window of opportunity to invade. Take it.
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