Last week Westfield sponsored an early morning weekday conference in Auckland, with addresses from individuals who spoke on the evolving JCPenney department stores in the USA, and then the evolving online retail market. All very interesting, particularly the methods adopted by JCPenney to recapture customers with an offer of price reliability, and a “no coupons” approach but rather a “just fair and square” approach to retailing. It reminded us that we haven’t got that method of retailing in New Zealand. In fact, it would be fair to say that most of us are of the view that if we miss that bargain this week, then it will be available again soon. Maybe there is a tip here for the national retailers to adopt a similar approach to that of JCPenney. Rather than continuous discounting, give the customers a period of stability as to pricing, thereby ensuring that the retailer has the interests of consumers at heart, and that fact is communicated.
As for online retailing, we were a little bemused that Westfield offered no answer to the threat for retailers. Westfield is a company that houses retailers in bricks and mortar, and any threat to its longevity should be robustly defended. This all came on the heels of an announcement from Pumpkin Patch that they see their (global) online earnings beating those from their New Zealand retail stores within the next two years.
There’s a few things to note here. Firstly, Pumpkin Patch is talking about earnings, i.e. profit, and not sales. The company obviously expects their online business to be making good coin within the next two years. Pumpkin Patch thinks their online sales will reach $30 million this year, compared to around $60 million from their New Zealand stores. That said, at the rate the online business is growing, sales might outpace New Zealand store sales in a couple of years too.
Secondly, NZ retail stores only account for a small part of Pumpkin Patch’s business. Ignoring Patch’s UK and US retail operations, which have now closed, the New Zealand stores accounted for around 18% of sales and earnings in the 2011 financial year. Patch’s Australian retail and international wholesale operations are much bigger than the New Zealand store operations. So, although the media gave it a lot of attention, the announcement that Pumpkin Patch’s global online business will overtake their New Zealand retail business is not as severe as it appears. Pumpkin Patch are just making a quite reasonable comparison, saying that online sales will become just as important to their overall business as their New Zealand stores.
Thirdly, Patch’s announcement shows how online sales, to some extent, are simply replacing catalogue, infomercial and other remote retail sales. The company points out that “Pumpkin Patch started out as a catalogue business… so the concept of taking and fulfilling orders remotely is in our DNA”. It’s the same story for companies like Ezibuy. Online sales, though, are getting bigger than catalogue sales ever were in the past.
Fourthly, the announcement shows the opportunities for retailers who go online. Selling to an international customer base is an excellent strategy – after all, it’s a great big world out there and New Zealand is a very small market by comparison. There’s money to be made for retailers who can tap into overseas markets.
Online retailing is definitely a significant development, and there are both threats and opportunities that will come out of it. We are not of the view that this new phase is going to wreak havoc on traditional retail businesses throughout the country, but it’s increasingly important to remember that we have to be on our toes to match the competition, regardless of any form our competitors take.
SHAREWATCH – THE WAREHOUSE
The Warehouse Group has fronted up to the fact that its “red shed” stores have not performed to expectation over the last few years, with an “unacceptable” level of customer experience and “poor execution of retail basics”. This is probably the strongest admission we’ve heard from the company, and one that should be welcomed.
The company has now embarked on a major program of investment and brand repositioning. The Warehouse sees “early signs that [their] long term sales decline is starting to reverse”, and time will tell if the brand can regain its dominant position in New Zealand retailing.
IN THE PRESS
LOCAL AND INTERNATIONAL MEDIA HIGHLIGHTS 12 – 19TH MARCH 2012
Pumpkin Patch puts the E in earning
Despite overseas closures, Pumpkin Patch’s online business is anticipated to outdo those of its New Zealand retail outlets within the next two years, furthermore, the brand is seeking to expand in new international markets using e-tailing as its platform.
(Source: NZ Herald)
USA’s secret recession buster
Pet stores have been found to be a highly recession-proof retail genre in the US, as proven in a study released by IbisWorld. While many a retail category suffered in the GFC, especially apparel, US pet stores stood out as having positive revenue growth.
(Source: Inside Retailing)
Warehouse knocks on Internets door
The Warehouse revealed its Internet revenue rose 60 per cent on the prior comparable period during the six months to January 29 this year. The company is currently in the process of making its entire product range available on its website.
(Source: NZ Herald)
Westfield peeps on customers
New Zealand’s biggest mall owner, Westfield, is seeking new ways to map its customers journeys and may consider electronically tracking their movements through its 12 malls here.
“With bricks and mortar, we’re looking at how we connect to the shopper. We have invested in fibre optics and we are investing in Wi-Fi, mapping and GPS in malls and investigating the shopper journey,” said Justin Lynch, Westfield New Zealand director.
(Source: NZ Herald)