Is Dick Smith turning around?

Back in June I thought Dick Smith was a Dead Brand Walking, given the cruel suffering and ineptitude that is a visit to one of their stores, but since then I’ve had a number of opportunities to eat my words. The Business press is crammed with Hero worship for the genius of Anchorage Capital, the Private Equity firm and majority owner of the once iconic retail brand, also for Nick Abboud, the no-doubt brilliant retail CEO.

But I’m not convinced that the PE miracle is anything more than a slick PR mirage engineered to rake in a massive return for Anchorage Capital on the back of their very own ABM (this Alan Bond Moment came at the expense of Woolworths’ Shareholders).

Cut through the awesome David Jones deal, and the fashion tech store concept Move, and you’re left with the same old same old at the vast majority of Dick Smith stores, maligned staff all too few in number servicing a similarly slight customer base. Even if Dick Smith managed to look just like JB HiFi, which it won’t, it still won’t BE JB HiFi and it will lose all the same.

It’s said that growing a business means doing what you do so well that the Market DEMANDS that you get bigger, you get bigger only by being better. Doing deals and launching concept stores helps to create a perception of doing better, but the P&L is geared around the 300+ unprofitable stores that look just like they did when Woollies owned them, setting out a blueprint for a rocky ride on the ASX if they can get it there.

No, I suspect the miracle turnaround begins and ends when Anchorage offloads its investment in Dick Smith in record time to Retail Investors through a listing, or to the management team beforehand, and for as much as 20x the $20m they paid Woollies!

Maybe Anchorage’s ABM is more of a GGM for the Dick Smith team?

Every business needs a Flywheel

From tractors to Ferrari’s and everything in between, engines of all sorts are incapable of functioning without a heavy disc of spinning metal known as a Flywheel. The more you know about the role of and characteristics of the Flywheel, the more you may see parallels with your own organisation.

First, some basics about the operation of an engine when used to generate enough energy to move things.

Strip out all the fancy from an engine, and you are left with a few basic principles;

  1. Fuel is injected into a chamber along with some air, the chamber or Cylinder has a rod or piston at one end.
  2. The fuel mixture is ignited by an electric spark causing the expanding gasses from the explosion to push the piston outward.
  3. The other end of the piston is attached to a shaft, which turns as the piston moves, converting the piston’s outward movement into rotation
  4. A number of ignitions are timed in a number of chambers creating a continuous rotation of the shaft
  5. The end of the shaft is attached to a Flywheel which is hard to turn at first due to its weight (hence why engines have electric starter motors to get the flywheel turning)
  6. Now that the Flywheel is moving, and it has momentum, it has much more energy than any individual ignition could produce, meaning that the Flywheel is storing up the energy from hundreds of individual sparks, ready to move the wheels
  7. When you want to move, the clutch plate is allowed rub against the Flywheel transferring the Flywheel’s energy out to move the wheels and overcoming the vehicle’s inertia.

Like an organisation, the engine needs to be in balance to perform as a whole, and it also needs to be optimised for the function it is intended to perform.

The amount of fuel and the size of the spark, the timing of ignition and in which order. And finally, the size of the flywheel are critical in order to get the balance right between the need for agility (lighter is better) versus the need for power (heavier is better).

I love the concept of a Flywheel because it is so critical yet so often ignored, and so much of the of an engine’s power comes for the energy stored in the Flywheel. Kids debate number of cylinders, capacity, etc, but never the size of the Flywheel!

Organisations of all sizes need to have a Flywheel function too, a place to store the sparks of innovation ready to release them at the optimal moment. Sure, a powerful Flywheel can be the enemy of Agility, but that’s about right-sizing the Flywheel to make sure an appropriate trade-off is made between power and control. But like engines, if the Flywheel is too small the whole thing will grind to a halt when things get tough, too big and it will be hard to alter the speed of the engine easily.

Crankshaft (red), pistons (gray) in their cyli...
Crankshaft (red), pistons (gray) in their cylinders (blue), and flywheel (black) (Photo credit: Wikipedia)

When I think about a Flywheel Function, I think about Finance, IT, Project Management Office, HR and other corporate services. The rightsizing of those functions is essential if the business is to perform, both to ensure that momentum is maintained when new ideas are scarce, but able to respond quickly when innovation emerges.

Why is online feedback so broken?

service on yelpConsumers have changed in the past 5 years, now they do more than consume, they create too.

Facebook, Pinterest, Twitter, Foursquare and others have trained their Billion users combined in the art of publishing. The pursuit of Comments, Likes and Shares are at the heart of Consumer Publishing, and getting those Likes can sometimes be more important than being truthful.

When it comes to feedback, trying to write a sharable review is at odds with the needs of the business being reviewed. Constructive feedback is great for the business owner, but isn’t all that sharable. Controversial, sensational, emotional, hateful and provocative are better. Combine this with an unhealthy disregard for issues of liable, with Online Ratings and Reviews sites perceived to be a Safe Harbour for the reviewer, and your business can suffer very badly indeed, with little or no recourse.

Yabbit provides a channel for consumers to give feedback that is both discrete and constructive, giving the Business Owner the chance to follow up and diffuse any issues before they become public. By promoting Yabbit you encourage your customers to channel their feedback to you in a constructive way, saving your business from expensive long term brand damage.

It isn’t all about surprise and delight, keeping customers is about getting the basics right

Today’s customers are more sophisticated than ever, sampling the wares of more brands in more locations than ever before, happy to journey to a café in the suburb next to the next suburb for a cold drip, encouraged to buy from overseas by far flung Friends’ waxings on Facebook and keenly eyeing the swings in their local currency for macroeconomic bargains. This Neo Consumer is older and richer than before too, more thoughtful, more discerning and always ready to Switch.

The Neo Consumer is empowered, in control and they know it.

Informed and empowered Neo Consumers are hard to impress too. Battling for their business is harder than ever, and the dangling of ever-oranger carrots has become an increasingly important part of the game. 3 Hour delivery, 100 day free returns, free international shipping, and super slick omnichannel blah blah have apparently become the battleground. But too much emphasis is lumped on the need to differentiate from the competition with whistles and bells at the expense of profit, and worse still, at the expense of consistent, good service that’s required to keep the hard-to-win Neo Consumer coming back.

With that empowerment also comes a willingness to walk away at the slightest hint their expectation won’t be met. And for the Neo Consumer, switching to a new provedore is easy come easy go. No warnings and no second chances, one slip, and they’re gone.

Why Dick Smith Electronics is a dead brand walking

Dead Brand Walking

Less than a year after Woolworths (WOW) sold DSE to Anchorage Capital (after 20 years of ownership), and the basics of retailing seem to be all but gone at the struggling Electronics retailer.

It was always hard to imagine that the specialist Private Equity firm could do a better job than WOW at shaking up DSE’s retailing fortunes, suggesting that their focus may be on the DSE Website. But try as they might, they will not build an online profit pot big enough to counter the millstone effect of a failing retail chain.

Get face to face with one of the DSE crew in any of the 325 stores (that’s Harvey Norman and JB Hi-Fi put together) and you will more than likely abandon any idea you once had of purchasing some battery powered thingamy.

My third trip to DSE George Street Sydney in so many weeks has left me agape at the ineptitude of the floor walkers, scarce as they may be.

Here’s an example. “hey” I said, “can you tell me about this Kensington GPRS device”, “no”, he said, “I don’t know anything about it”. “ok, well, what about this Jawbone UP?”, “no, sorry”.

Where is “Let me find someone who does”, or, “let’s look it up on one of the 200 effing PC’s we have in the store”, or “give me your email and I’ll send you something”, or ANYTHING FOR THAT MATTER – SHOW ME YOU CARE, SHOW ME YOU GIVE A SHIT! This is about care for your customer, which is an attitude. JB Hi-Fi seem to solve it with hiring and incentives, but failing that getting the culture right is a good place to start.

I may have been unlucky. Three visits and three checked-out check-out workers. But that’s all it takes to kill your brand once and for all – and after 45 years on the high street, that would be a tragedy.

The serious side of Gamification

A steady stream of retail innovation exists online; some effective, some less so. But most claim to centre on a perennial problem in Retail:

How to drive sales through incentives without destroying long term brand value…

Group Buying and other Daily Deals sites were built to address this issue, and they’ve done a pretty decent job if their multi-billion dollar revenues are anything to go by! Though, to some extent they are a victim of their own success in that it’s hard for a brand to discriminate on price discretely when so many of its regular customers are Daily Deals customers.

Further challenges with Daily Deals include the fact that the Brand doesn’t typically control the creative, meaning they are often a Supplier to the Daily Deals Site not a Client. And, the Daily Deals site will leave a permanent record of the Sale in their back catalogue which will appear in Search and therefore undermine brand value. Further, the Brand owner is asked to give away quite a lot, more often than not the Retail price is discounted by more than 50% and a further 20% – 30% is given to the Daily Deals site as a commission.

Clearly there are a number of scenarios where this channel works well for a business. The unit sales volume can be significant with no marketing effort from the Brand Owner hence they are appealing in a lot of ways, especially if owning the customer is unimportant.

A radical new tilt at the problem is Entertainment Shopping, where the retail price is used only to describe the Size of the Prize, but is otherwise irrelevant. One example of Entertainment Shopping is Penny Auctions, where users purchase Bids which they use to win items, theoretically being able to win and items for a single bid, which may cost less than a dollar. TPlay for Winhe reality though is that these Auctions are super competitive and the likelihood is that you will lose many more auctions than you win, yet the bids you used on lost auctions still cost real money – in that sense it’s more akin to gambling than shopping. For the Auction site this means the overall yield per item is greater than the retail value, thus favouring the Penny Auctions themselves more than the Brand Owners or the customers, albeit customers may choose this purchasing route for the sheer joy of the Auction!

In the Entertainment Shopping category Australian Statup Wynbox has a much more evolved solution for Brand Owners. The genius of the Wynbox solution is that they provide their Buy-to-Win platform as an integrated shopping engine for an existing website, meaning the retailer retains end to end control of the user experience.

Buy-to-Win involves the retailer setting a ratio of free items to full paid items, meaning anything from 1 in 2 to 1 in 10 or more may be free, equivalent to a direct discount if that number are purchased by a single customer, or a lucky dip if you are buying just one.This is a simple way to provide a strong purchase incentive without discounting the product, and it can be fun too, so it ticks the box for the user who plays Candy Crush between shopping missions!

There are a number of interesting scenarios that underline the power of the Wynbox platform, such as in the sale of concert tickets for instance. As sales begin to lag for a concert, the ratio is introduced. The ratio can be cranked up to 1 in 2 if necessary to drive sales, but at no point is the ticket price discounted, meaning the customers who purchased the concert tickets at full price never feel cheated and the Talent and the Promoter are happy.

In fact, Wynbox works in a number of scenarios, including Fashion where margins on Full Price products are high but the vast majority of purchases normally occur at a substantial discount, with Buy-to-Win the discount can exist without an overt discount.

All retail businesses should be thinking about the entertainment value of their shopping experience as consumers explore less boring ways to shop for discretionary items. Wynbox offers a fresh solution that can be “plugged in” to an existing site, meaning a fast track to an Entertainment Shopping experience that would otherwise be very hard to achieve.

The pursuit of great service begins and ends with love.

Service begins with love

Some businesses will never get it, never.

I couldn’t be more passionate about great service, my adult life has been peppered by the pursuit of the perfect service experience, delivering it or it being delivered. So far I’ve found that it’s massively hard to give, and sadly rare to get.

A key milestone in that pursuit happened two weeks ago when Yabbit.com launched, Yabbit is the new feedback platform in partnership with American Express [Amex have made it available free and exclusive for American Express merchants in Australia]. Each day the Yabbit team are talking with businesses about the chance to hear from their customers, directly and one to one-ly about their service experience, the good and the bad, the great and the sad. Awesome, sounds good, they say. But they don’t always mean it. Like, really mean it.

And it struck me.

It’s not about service, it’s about love.

What’s love got to do with it?

Love is – Doing things you don’t have to do, but want to do, just because. Smiling because you can’t help it. A spring in your step. Caring about everything you do. Keeping things fresh and new. Doing what you say you will do. Surprising and delighting. Being spontaneous, early, eager, attentive, gracious, careful, thoughtful, even thankful. Just like great service.

Service isn’t about being fast or efficient, it’s about love. Giving your customers a little slice of you, showing how much they mean to you, and finding a team that will behave the same way, not because they are following a blueprint but because they also love to love. Did you show your customers any love today?

Some businesses will just never get it. Never.