Brigg’s says Anchorage is “fanatical” about doing the basics of business well. A big part of the plan is to “fine-tune the engine” – from supply chain management to the look of the stores, pricing, how inventory is managed, merchandise displayed and how staff interact with customers. “We want the whole interface with the customer to be as good as it can be,” says Briggs.
However, Abboud and Briggs insist there is no pre-existing plan for executing the turnaround.
Says Briggs: “We don’t go in to a situation – and never will – with a fully-developed plan. Think of the impact on management! That is clearly is not the way to go. We have a huge number of ideas we would like to do in the business, and we will work with the management team and get them involved. They have a whole bunch of ideas, too. They know the issues.”
Abboud says the new ownership has already restored some energy and enthusiasm in the staff, and he and Briggs have started briefing staff, and visiting stores already. “There is very good support at store level, and staff are excited that there has been a decision made [on new ownership]. They are focused on that decision, and on serving their customers well,” he says.
Abboud says there are no plans to close more stores – 74 unprofitable stores were closed before the chain was sold.
Abboud stated a goal to lift online sales, which were 2% of last year’s $1.5 billion revenue, to 10%.
A report today suggests such a goal is modest. Online spending at domestic retailers rose by 40% in the year to July, according to analysis by the Commonwealth Bank of Australia (CBA) reported on by The Australian Financial Review.
Abboud says it is too early for details of how to improve the online business. Successful retailers around the world achieve about 10-12% of sales online, he says. “We have a large amount of SKUs (stock keeping units) online today – 4000 – but we need to get it to a certain level,” he says. “And when you go online it has to be easy.”
The British department store, John Lewis, is one that inspires Abboud to stay in the game of bricks and mortar retailing. “We have 325 locations and people want to come in and experience products and knowledge. You can’t get that detail online.”
Abboud says that if traditional retailers provide “end-to-end” service, they can prevent customers using their stores as a showroom, and then buying cheaper online.
Briggs says: “It is fair to say we see the online thing as an opportunity. Dick Smith, with its retail network and the trust in the brand, is ideally placed to build that omni-channel marketing strategy.”
The Anchorage model of investment is to be very engaged and involved in the companies in its portfolio, Briggs says.
Anchorage paid a bargain-basement price for Dick Smith: $20 million. Woolworths paid $24 million for the much smaller operation 30 years ago, and then reportedly spent $420 million building up the network of stores and restructuring the company before its sale.
On its board is Bill Wavish, a former finance director at Woolworths, who once oversaw the Dick Smith business, and worked with Abboud at Myer.
Establishing a close, strong relationship with the CEO is a crucial part of the Anchorage process, in Briggs’ view.
“We see that, not as meddling with management or undermining their accountability for delivering – got that, Nick? – but more as supporting and bringing to bear our considerable experience,” Briggs explains. “We have a number of techniques to significantly improve results, and processes to help drive that through the business. Nick will have his hands full with the day-to-day running in the early days to make sure there is momentum to changes we put in place.”
Not all private equity managers take the same approach, says Briggs. “My advice to any management team thinking about private equity is to try and understand how a private equity firm works. They each have their own approaches, and a management team needs to understand how is it they are going to interact, their decision-making time, and how formal are they going to be about it.”
Abboud explains what his experiences with TPG at Myer taught him. “You learn to stick to your plan, and measure everything you are going to focus on to ensure there are rewards for the team in achieving those goals. There will be formal communications processes to cover that.”
Private equity partnerships create better leaders, he says. “Private equity allows for the development of people within the management teams. They will become better leaders, and that is the exciting part. I went through to be part of an IPO, and for a lot of the management team, at the end, they look back and see how much they learned.”
Kath Walters is the editor of LeadingCompany and an award-winning journalist of 15 years’ experience. Kath was previously a senior writer and editor at BRW magazine covering management, strategy, finance, entrepreneurship and venture capital across all industry sectors. In 2006, Kath won the Citibank Award for Excellence in Journalism (General Business). Follow her on Twitter.
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