Last week, we had almost blanket “shock at drop in retail sales” stories appearing in the media, with the assumption that shoppers were cautious in December due to rising interest rates and the end of government stimulus payments.
Against these headlines I thought it worthwhile getting under the ABS numbers, and then looking at two case studies of where two very discretionary income retailers have had strong sales results in what was reportedly a tough sales period.
The ABS reported retail sales falling 0.7% from November to December. Two things: firstly, November 2009 was a great month for good retailers. Bad retailers don’t get helped by higher retail sale stats from ABS, because the good sale stats measure what shoppers spend, and they spend it in good retailers. Secondly, retail sales in Australia have grown every quarter for the past five quarters, up 1.1% and in line with all the experts’ predictions. No wringing of hands needed yet.
I know many of you, having read my opinions or spoken with me at various speaking engagements, think of me as an eternal optimist. I am not! My views tend to be those of a realist. However, I do believe that in any “big picture” what really matters is that what you actually do in your business, in your life, in your family, defines how you perform. In bad times people who hunker down, and “press on” in the words of one US President Calvin Coolidge, stay afloat or get ahead as others drop back. In good times, “pressing on” translates into business and personal growth.
Two very different retailers have performed very well in 2009 due to the “how they do, what they do” principle. Both operate in truly discretionary spend environments which were very badly hit by the GFC. Both have grown in that time because they are very good retailers, with great service and great products and they kept the product and their retail brands in front of shoppers all year long.
ARB manufactures, distributes and sells accessories for 4WD motor vehicles, including differentials, bullbars, lights, snatch tsar, winches, camping and suspension products. It’s ‘daddy’s Myer and DJs’ rolled into one. There is nothing in ARB that a daddy, or the family, actually has to have to survive. Very much like mummy in a department store, daddy is there because he wants to be there, likes to be there and will drop nothing less than a “hunjie” while there.
I know Andy Brown, one of ARB’s founders through motor sport. Andy has run a very successful business over many years, and is still amazed that every year the business has grown because shoppers come in and buy expensive things that they want but don’t need. For me that’s the true mark of success of a “discretionary” income retailer. The great service, innovative products, trusted brand values and the communication is so good that shoppers keep coming back to you even when things get tough.
ARB is a public company and reported that first half profit will double because it achieved sales records in the lead up to Christmas. How far up were sales? ARB reports for the six months to December 31, 2009 sales increased by 15.5% on the previous period. Sales only went up 15.5% but, as with all well run retailers, more profit falls through the bottom line. So in this case the reported profit was actually up almost 100%.
The team at ARB put this growth down to the stimulus package, but no-one told us shoppers to spend our stimulus package at ARB. If we did, we did because we wanted to.
Along the Eastern seaboard there is a very innovative private jewellery chain that has weathered the GFC very well. The jewellery sector was slammed in 2009 as mum stopped spending on herself and focused on the family.
Butterfly Silver is a 21-store retail jewellery chain based in Queensland. It’s only eight years old and its first store opened in Morayfield. It has innovative designs and very high quality products using good quality sterling silver and stones. And it does all of this at very attractive prices.
What makes this an interesting case study is that the majority of businesses fail around the seven year mark, and almost universally due to a “big picture” issue, a recession, major hikes in interest rates, a major increase in input costs, to name but a few. Faced with the seven year scenario, the owners of Butterfly chose to brief a retail communications agency to re-brand in the middle of a recession with stunning results.
I know the guys at UNO, a small specialist agency in Sydney that has done great work in the retail space for a long time. They and the owners, to their credit, knew that the product had a great value proposition, but accepted that brand image cheapened the product offer. UNO re-designed the whole communication piece from out-of-store advertising to create footfall, to in-store after the sale to keep the branding alive at the point of sale.
The results? Well, Butterfly Silver is not a public company, but my understanding is that sales have grown in all 21 stores, during the worst recession the jewellery sector has seen 20 years. By getting ahead in the tough times it been able to push through the “deadly seven year” mark and can now open more new stores to capitalise on growing demand.
Both are true testament to well run retailers being ‘good’ even when it’s ‘bad’.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
