Is Dick Smith turning around?

Posted on by Billy Tucker

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?

Why Dick Smith Electronics is a dead brand walking

Posted on by Billy Tucker
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.

Click Frenzy, in spite of the massive failure it was an unprecedented success!

Posted on by Billy Tucker

Sneeze and you may have missed it.

The Click Frenzy frenzy came and went in a matter of days, yet in that time it managed to reach the consciousness of some 20% of online Australians! That’s quite an achievement.

Their PR machine had triggered something in Australia’s uber-price-sensitive media which led to an incredible amount of coverage in the days leading up to the sale – it really did become a frenzy.

Even before the site ran into capacity issues on their woefully inadequate servers, their business model meant they would only ever make moderate returns. Choosing an all-up-front fixed-fee suggested they doubted the results they could yield for their retail partners preferring instead to cover their costs and hope for a modest return.

All in all, they clearly had no idea how ready the Australian market was for Click Frenzy!

Click Frenzy founder Grant Arnott explained in a rare and touching mia culpa that 300k visitors was their top traffic estimate, so the 1.6m visitors they actually saw blew their infrastructure wide open. To be fair, I think only a handful of sites around the world would cope gracefully with 1.6m concurrent users! The fact is the 7pm launch time was a big part of the problem, internet infrastructure hates concurrency!

Aside from the access issues suffered by many hundreds of thousands of bargain hungry shoppers, many found their way to the registered retailers and boy did they spend!

One retailer example I was shown paid less than $3,000 to participate but yielded over $80,000 in sales. An equivalent Group Buying offer would have cost the business $24 – 30k in commissions! A pretty good outcome for the retailer!

The chart below from Quantium shows the direct impact on participating retailers versus non-participating retailers.

160 retailers of varying sizes participated, and Click Frenzy probably netted an average of 3 – 5k upfront from each, meaning 480 – 800k in Gross Revenue. Not bad, however had they chosen to take a booking fee plus a moderate trailing commission, they would have netted anywhere from $800k ($1k upfront, 5% commission on $80k Average) to $2.4m ($1k upfront, 15% commission on $100k average)!

All credit is due to the Click Frenzy team, they were swept along by a frenzy of their own making albeit they we flattened in the stampede. Better luck next year.

Related articles