David Cohen, managing director of Matchbox, says finding suitable franchisees is the single biggest challenge facing the expanding kitchenware company, followed by cautious consumer sentiment.
And while Cohen doesn’t believe his upmarket customers are reeling from uncertainty over the carbon tax, he throws his weight behind Westpac’s predictions for rate cuts rather than rises over the year.
He also reports on positive developments at DFO shopping centres over recent weeks, as new owners bed down their purchase from Austexx, and delivers his best advice for dealing with franchisees.
Cohen, whose parents rescued the company from administration in 1996, expects eight new stores to be opened by Christmas 2012, after Matchbox lifted revenue by 21% to $36 million for the 2011 year.
David, at the end of last week Westpac forecast rate cuts of up to 100 basis points. Do you think that this is what the economy needs or do you think things are tracking along okay?
No, I think it would be very helpful, especially in the retail market and especially for the perception of people I suppose more than anything. I think the rate cut would be very useful for us as retailers.
And do you agree with Paul Zahra’s assessment from David Jones that the carbon tax is weighing on customers?
No, I probably don’t.
We’re a lot smaller than David Jones. Our figures have tracked along alright, especially in the last few months, so from my point of view I can’t say that it’s had much of an effect on us at all. It might have more effect, it will be interesting to see what happens when it actually does come in but at this stage for us I don’t think it’s had a large effect.
What are the biggest challenges facing Matchbox then?
Finding franchisees I think is the big one. That’s probably the case just given that we’re placed in a pretty good brand and the category that we operate in at the moment is a pretty good one, and I think people really appreciate what we’ve done with the brand in the last year or so.
Last week the Spencer Street Fashion Centre [in Melbourne CBD, owned by shopping centre group Austexx] fell into administration and I know some of your Matchbox stores are in DFO outlets.
That’s not a DFO outlet.
I know it changed a couple of years ago. So how are those DFO stores going in general, and has it changed over the years?
No, they’ve sort of kept the status quo over the last couple of years. Obviously, they’ve changed ownership which has taken a little bit of time to bed down and I’ve sort of noticed in the last couple of weeks the new owners [CFS Retail Property Trust] have started marketing the centres again and pushing the brand into the public space so we’re anticipating that that will have a positive effect on those centres.
So in terms customer numbers though, it wasn’t an issue that there weren’t enough customers, perhaps more the margins just weren’t high enough and I guess the debt was too high for the parent company.
At Spencer Street?
Yes.
Look I would be guessing but that would sound like a fair assessment. I’m not really sure.
Why did you decide to change your branding from the black and white to the gift bow to the green colour?
Because the customers told us to, I suppose is the short answer. We started off looking not so much at changing the brand to be honest. We were looking at what we wanted to do in our shops. We sort of started thinking that the look and feel of our stores was a bit generic and it was maybe looking a bit tired and also quite similar to lots of other homeware-type shops in the marketplace.
So we did some research about what we could do with the stores and we did some work with a sort of brand-based consultant. The first thing we did, which was a great idea, was we did some consumer research. So when I said the customer told us, we actually did. We surveyed customers, we did some focus groups and research with those groups and we were able to sit back and look at what the results of those were and from that the brand evolved I supposed and it went a lot further than what we initially planned in terms of just looking at the shopfits.
People are looking for something to differentiate us in the marketplace. They were looking for innovation and thoughtfulness in what we were doing, they were looking for interesting product and product knowledge and also they wanted to walk into our shop or any shop and know that they were in that shop rather than just something that sold the same thing as half a dozen other people. So that’s probably where it came from.
The green colour as such was just something that was a little different from what was out there. The tagline was really important because Matchbox originally did suggest small gifty type products. It didn’t really align itself with what we do, which is mainly cooking, kitchen accessories, that kind of thing. So we added the “the secret recipe” tagline and we use that for lots of stuff.
Like we have secret cooking demonstrations, we have secret cooking classes, we have a secret cooking club which is the loyalty program. So we use that for sort of everything so it really does a lot to demonstrate what we are as a brand rather than just Matchbox I suppose.
In terms of your cooking demonstrations and in-store classes, what kind of flow-on effect are you seeing from these and how long has that been going on for?
I think the first kitchen we put in was some time in 2009. It probably took a little while for people to get the hang of it but we’ve probably been going full steam with that in the last eight or nine months. It doesn’t change our sales or figures overnight; it’s more about adding some value to people’s experience with the product and being perceived as an expert in that marketplace and not just the cheapest necessarily. So it’s probably taken since the idea was first sort of discussed and then implemented, a year or so for it to really start kicking on. Now it’s a pretty regular thing in most shops and the franchisees have really embraced it which is really good.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
