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Guerrilla Retailing Guru Warns Retailers

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Elly Valas a leading US retail consultant and the co-author of Guerrilla Retailing has warned Australia retailers that despite an economic downturn they must not become complacent and if anything they should increase their level of service and “spend more on marketing”.

Talking to ChannelNews she said “I was in Australia earlier this year and it appeared that you were heading in the opposite direction to the USA so I am surprised to hear that consumer confidence is slipping”.

Valas who has consulted to NARTA, Auto Barn and the Good Guys wrote in an article for Dealerscope in the USA” The government may be afraid to use the “R” word but I know that for many, business has slowed since this time last year.

She said “I’m no economist, but here are the assumptions on which you can base your forecast for the rest of this year.


1. Oil will not go back to $100 a barrel.

2. Food prices will continue to rise because of high transportation costs.

3. Consumer confidence is at a record low.
 
4. Unemployment will rise

5. Whining won’t help.

But there’s also this:

> CEA projects that billions in consumer electronics will be purchased this year.

> 96.0% percent of Australians are working.

Stop worrying about the economy and start focusing on things you can control. If business is flat or down, you’ll have to steal market share from your competitors to stay even or grow. In order to that, you’ll have to be faster, smarter, more creative, and offer better customer service.

She claims that a recent retail study on consumer dissatisfaction revealed the top reasons why customers don’t buy. One third reported they couldn’t find a sales associate; 25 percent were completely ignored by a sales associate, and six said they left because associates were poorly trained.

 

 

According to a study conducted by Bain & Company, 80 percent of companies believed they delivered a “superior experience” to their customers. Customers of those companies, however, only felt that eight percent delivered an exceptional experience. Ouch.

There are consumers who want to buy the products you sell. They don’t want to drive around wasting expensive fuel trying to find good values and exceptional service. Let them know that by coming to your store first, they’ll find wide selection, sales expertise, great values and full service.

Act like a job applicant-after all, you’re trying to get “hired” as your client’s trusted advisor-and create a resume to convince prospects why they should buy from you.

Meet with your team and list the ways your company differentiates your customer’s buying experience. Don’t forget to tout your extended credit terms; delivery, repair, service and installation departments; experienced sales staff; extensive displays; and brand-name product selection. List your no lemon policy and your price guarantee.

Let customers know they can call to make appointments to ensure that an associate will be available when they come in-even if it’s after hours. Tell shoppers your installers are CEDIA certified or that your associates participate in mandatory product and sales training every week. Don’t hesitate to sell your staff as career professionals. Publicize awards you’ve won from trade associations, industry groups or magazines. You only get to be retailer of the year if you know your stuff.

Monitor your customer satisfaction to ensure outstanding service. Tell your clients you’ll be in touch with them to answer any questions that may come up after they’ve used their products for a week or so. Call customers to ensure they are satisfied with the purchase experience. Field any questions they have and ask if they’d buy from you again. Finally, ask them to refer friends.

Customer dissatisfaction happens when there is a disconnect in the experience customers think they’re going to get and what is actually delivered. Warehouse clubs are successful because they deliver on their no-frills, low-price promise. If you’re claiming to be the best, then your store needs to shine and your team needs to dress and act like professionals.

 

 

If you’ve done all of this and you’re convinced the service experience you offer is a reason to buy from you, there’s one more promise that will help drive customers to your store: Offer to refund the cost of the gas it took to get to your store to anyone who feels the quality of service you delivered didn’t match expectation.

When gas is over $2 a litre every customer who comes to your store is a buyer. Your job is to make sure they buy from you and not from your competitors.

Elly Valas is a retail consultant and industry expert. You can reach her at elly@ellyvalas.com. Visit her website at www.ellyvalas.com

LCD TV Moving Into Over Supply

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The oversupply ratio of LCD monitor panels is expected to widen in the first quarter of 2006, as the period is a traditional slow season for the segment and panel supply will continue increasing, according to Chunghwa Picture Tubes (CPT).

LCD monitor panel suppliers will start to face stronger price-cutting pressure this month due to seasonal effects, the company said.

The ratio of oversupply in the first quarter of next year will vary according to the condition of LCD TV demand, CPT said. If LCD TV demand remains strong, the newly ramped capacity at panel makers will be consumed and the oversupply ratio of LCD monitor panels will not be as significant as forecasted, the maker indicated.

Dell has been adjusting its LCD monitor inventory since late last month, with the adjustment ratio reaching 20-30%, as its previous forecast of demand this quarter was overly optimistic, CPT indicated.

Nevertheless, the range is still within acceptable limit and other customers of CPT do not have inventory as high as Dell’s (one to two weeks higher than the same period before), the panel maker said.

Most major Taiwan-based panel makers are optimistic about TV panel demand next year and have forecast that the market will rise to 42-44 million units, according to the companies. AU Optronics (AUO) expects the market to nearly double to 44 million units next year, up from 23 million this year while LCD TV demand will jump from 20 million units this year to 35 million next year.

Chi Mei Optoelectronics (CMO) also expects the LCD TV panel market to grow more than 80% to 42 million next year. The company thinks it unlikely that a serious oversupply of large-size panels will occur in the first half of next year, as the supply of certain key components may run tight.

Chunghwa Picture Tubes (CPT) estimates LCD TV panel demand will reach 44 million units and LCD TV demand will reach 36 million next year.

Market research firm WitsView Technology indicted that if each industry player reached its own TV panel shipment goal next year, the market would total more than 50 million panels. However, WitsView expects the global LCD TV panel market to reach 41 million units in 2006.

Harvey Norman And Flexigroup Slammed By Former Cabinet Minister

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Flexigroup who have seen their shares crash from $3.00 to a low of 0.41c and one of their biggest retail partners Harvey Norman have been slammed by a labour party MP and former cabinet minister who has accused the retailer and their finance partner of using unethical practices to deceive customers into buying goods way beyond their capacity to pay.

According to the Age newspaper in Victoria the former state cabinet minister Christine Campbell says some vulnerable customers are being hit with interests rates on overdue credit of up to 34%. Ms Campbell, the Labor member for Pascoe Vale, said banks and finance companies were refusing to take responsibility for selling credit to shoppers who could not afford it.

Flexigroup who for more than a decade has had a financial arrangement with Harvey Norman is currentlu on the skids with their shares crashing in value during the past few weeks.

She called on the State Government to investigate the credit lending practices of the big retail chains and insist that they declare all fees and commissions.

“Credit providers are not philanthropic charities and they should be stopped from masquerading as such,” Ms Campbell told the Victorian Parliament.

 

“Harvey Norman credit providers are failing to perform credit checks on customers, preferring to simply hand over retail goods and a finance contract that is likely to become a millstone around the neck of the unsuspecting.”

Ms Campbell said staff at stores such as Harvey Norman were failing to tell customers the details of contracts, or the overall price of goods.

Flexigroup shares are currently trading at 0.66c

Harvey Norman Starts Stationary War

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A stationary war is set to break out in Australia with Harvey Norrman set to take on OfficeWorks with a new chain of stores called Ofis now going live.


A stationary war is set to break out in Australia with Harvey Norrman set to take on OfficeWorks with a new chain of stores called Ofis being rolled out. A passion of Harvey Norman boss Gerry Harvey the stationary market was one that he claims he should have got into years ago “When I went to the USA I saw chains like Home Depot and knew that we should be in that market”. he said.


Now the Harvey Norman has group has launched the first of its stationery store chain, with the opening of two outlets in Albury and Sydney. The new stores are divided into four areas – print shop, stationery, IT and office furniture. They offer around 7500 stationery products and 2500 IT products, and the online store is scheduled to go live by mid-year to compete with both OfficeWorks and JB HiFi who are currently taking share away from Harvey Norman in the IT and home office market.

PR Company For Intel And Blackberry Slammed

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The web site for Spectrum Communications, the PR company for Intel and Research in Motion makers of the Blackberry phone, is still displaying false information on their clients and directors 36 hours after we first revealed the issue.

Yesterday the company, who describes themselves as being IT experts, and a company who “prides itself” on accurate information, told ChannelNews not to call their company again after admitting that our exposure of their web site had “done a lot of damage”.
See original story here.
Earlier in the week we revealed how the company was still claiming Acer and Google as clients of their organisation despite losing the accounts more than 12 months ago. 
We also revealed that Michael Henderson was still being shown as the company’s Group Managing Director despite the fact that Henderson quit the company months ago to take on a role at a rival public relations agency.
An online web developer and manager of web sites, Toby Lucas, said it would be extremely easy to change the web site to only displaying an index page or single message while the problem was fixed. “It would take only a few minutes”.
Several other web developers we have spoken to have said it would only take “seconds” to fix the problem.
A senior executive of a major Sydney based PR company said: “Their actions are poor and reflect a poor culture in the company. They compete in the IT industry and to not fix this problem immediately reflects on the image of the entire PR industry. Fixing up the web site should have been an immediate priority”.

Shares Rise As Telstra Dealt Back Into Broadband Bid

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Telstra shares rose nearly 5 per cent this morning after the telecom giant was let back into the building of a $43 billion dollar national broadband network by the Federal Government .

Telstra shares rose nearly 5 per cent this morning after the telecom giant was let back into the building of a $43 billion dollar national broadband network by the Federal Government .

Telstra Chairman Donald McGauchie welcomed the Government’s announcement claiming  “We look forward to having constructive discussions with the Government at the earliest opportunity. There is a lot to absorb in the Government’s announcement and we will consider every aspect in detail.
Mr McGauchie said the company would immediately review the Government’s proposal.

“Senator Conroy has said today that the Government does not have a pre-determined view on regulatory matters. Telstra welcomes the opportunity to provide input on the regulatory reform discussion paper.

“Telstra has publicly advanced the need for high-speed broadband for a number of years and shares the Government’s strong desire to make high-speed broadband widely available to all Australians as a key enabler of economic growth and social development.
“Telstra supports the Government’s objectives of investment in world-leading broadband infrastructure, an innovative telecommunications sector and healthy competition that provides real choice for customers.

“We will work with the Government to assist with the implementation of its strategy, but will remain at all times committed to ensuring the best interests of our shareholders, employees and customers.

“The new NBN will have little short- to medium-term financial impact on Telstra’s business as it would take at least eight years before it is completed.

“This announcement does not change our forecasts or our guidance for financial years 2008-2009 or 2009-2010.”

iPod Phone For Cars Coming Soon?

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Speculation is mounting that Apple and Motorola plan to unveil a mobile phone and music player next week that will incorporate Apple’s iTunes software a phone and up to 3 Gigabytes of storage.

One insider has also told SHN that Apple and Motorola have been talking to car companies including BMW about the possibility of the devices being incorporated as an OEM product into several new automotive models.

According to the New York Times the development marks a melding of two of the digital era’s most popular devices, the cellphone and the iPod, which has become largely synonymous with the concept of downloading songs from the Internet or transferring them from compact discs. Now Apple wants to go one step further by incorporating the device into an automotive loom that delivers both music and a phone service for the car.

Roger Entner, a telecommunications analyst with Ovum, a market research firm, said he had been told by an industry executive that the new phone, to be made by Motorola, would be marketed by various telecommunication carriers. In Australia SHN believes that Apple has held talks with Telecom and Vodaphone. 

Mr. Entner said it would include iTunes software, which helps power the iPod.The software will allow people to transfer songs from a personal computer to the mobile phone, then listen to the songs, presumably through headphones. “It’s a deluxe music player now on your cellphone,” he said of the device.

Apple, Motorola and Telstra declined to confirm or deny the report. But Apple did announce on Monday that it would hold a major news event on Sept. 7 in San Francisco that it indicated was music-related. Apple is routinely tight-lipped about pending product announcements, preferring to make a splash on the day of the event.

The plans outlined for an Apple phone are consistent with recent announcements by Motorola, which said in July 2004 that it planned to develop a device that would include a phone.

Earlier this year the UK Register wrote:

Apple has declared itself “very happy” with Motorola’s attempt to build an iPod-style mobile phone that can play songs downloaded from its iTunes Music Store.The two companies announced an agreement which will see Apple develop a version of its iTunes jukebox for future Motorola handsets last July. At the time, the partners said the phones would come to market sometime during H1 2005.

Click Here
In an interview with Forbes, Apple’s iTunes chief, Eddy Cue, reiterated that release timeframe but teasingly noted that “hopefully you’ll be able to see more about it soon”, seen by the magazine as a hint that CEO Steve Jobs will whip one out at Macworld Expo next month.

We might add that Motorola has an announcement scheduled for 6 January at the Consumer Electronics Show in Las Vegas, which could possibly cover the same subject. It could also be entirely unrelated.

Either way, they don’t want to hang around. iTunes rival Napster is already touting a service aimed at Windows Mobile 2003 Second Edition-based smart phones, such as the Audiovox SMT5600, better known in Europe as the Orange SPV-C500, in Australia as the i-Mate Smartphone 3, in New Zealand as the Qtek 8020 and in China as the Dopod 565.

“What we’ve talked about is a something that is valuable for the mass market,” Cue said. “It has to be a phone in the middle-tier of the market, not a $500-tier phone. It has to be very seamless to use. And we’re very happy with the results.”

‘Seamless’ presumably means an easy cable or wireless (Bluetooth) link to a host PC or Mac running iTunes. While the possibility of over-the-network downloads is there, Apple and Motorola appear to be focusing for now on positioning the phone as an adjunct to a computer in much the same way the iPod is, rather than as a music download device in its own right, not least because of the speed factor. There’s also the cost of GPRS downloads, but that’s less of an issue in the US than Europe because unlimited-access price plans are more commonplace there.

Would such a device compete with the iPod? Of course it does, but for now it’s appealing to an audience more keen on the upcoming Flash iPod – assuming this device and the handset aren’t one and the same, of course – than on the traditional hard drive-based player. Phones with hard drives are already here, but they’re a long way from matching the iPod’s capacity.

COMMENT: Why ASIC Needs To Move On Dick Smith Today Before Information Disappears

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Serious questions are now being asked as to how financially viable the Dick Smith retail chain was when Anchorage Capital actually floated the Company.

Insiders have told ChannelNews that same store sales were propped up with creative accounting and that Dick Smith management that included CEO Nick Aboud and Marketing Director Neil Merola went out of their way to accelerate the float of the Company back in December 2013 before serious questions were asked as to the actual performance of the retail chain.

ChannelNews believes that the Australian Securities and Investment Commission needs to take action immediately to secure financial data, former employee statements as all financial records relating to the Companies accounts in both Australia and overseas. 

They need to question manufacturers of Dick Smith house brand products as to where goods were actually shipped.

They also need to qualify the information that was provided to potential investors prior to the float as ChannelNews understands that information relating to same store sales and information provided in the Companies balance sheets were not 100% accurate.

Forage Funds Management has already labelled the float of Dick as one giant “heist”.

This is what they wrote in a report to shareholders last year. 

Back in 2012, Anchorage set up a holding company called Dick Smith Sub-holdings that they used to acquire the Dick Smith business from Woolworths. They say they paid $115m, but the notes to the 2014 accounts show that only $20m in cash was initially paid by the holding company.

Forage Funds Management claimed that the time that this didn’t look right and we agree. 

It doesn’t look like they even paid that much, because they acquired the Dick Smith business with $12.6m in cash already in it.
 
Dick Smith Sub-holdings was formed with only $10m of issued capital and no debt, and that is most likely Anchorage’s actual cash commitment.

So if Woolworths got paid $115m and Anchorage only forked out $10m, where did the rest of the cash come from?

The answer is the Dick Smith balance sheet, and this is always the first chapter in the private equity playbook: pull out the maximum amount of cash as quickly as you can.

In this case, first they had to mark-down the assets of the business as much as possible as part of the acquisition. This was easy enough to do with a low purchase price. You can see in the table below, that $58m was written-off from inventory, $55m from plant and equipment, and $8m in provisions were taken.
The inventory writedown is the most important step in the short term. They are about to sell a huge chunk of inventory but they don’t want to do it at a loss, because these losses would show up in the financial statements and make it hard to float the business.

 The adjustments never touch the new Dick Smith’s profit and loss statement and, at the stroke of the pen, they have created (or avoided) $120m in future pre-tax profit (or avoided  losses).

Now they can liquidate inventory without racking up losses. And boy did they liquidate.

At 26 November 2012, Dick Smith had inventory that cost $371m but which had been written down to $312m. Yet by 30 June 2013, inventory has dropped to just $171m.
That points to a very big clearance sale, and the prospectus confirms that sales in financial year 2013 were exaggerated by this. The reduction in inventory has produced a monstrous $140m benefit to operating cash flow, basically from selling lots of inventory and then not restocking.

The cash flow statement shows that Anchorage then used the $117m operating cash flow of the business to fund the outstanding payments to Woolworths, rather than funding it from their own pockets (note that the pro-forma profit was only $7m during this period).

And that, my friends, is a perfectly executed chapter 1: How to buy a business for $115m using only $10m of your own money.

Chapter 2 involves selling a $115m business for $520m, and it’s a little more nuanced. The good news is that, while private equity are focused on cashflow, equity market investors aren’t really focusing on how much cash has been ripped out of the business. All they seem to care about is profit.

So the focus now turns from the balance sheet to the profit and loss statement, and it’s time to make this business look as profitable as possible in the year following the float (allowing them to sell it on a seemingly attractive “forecast price earnings ratio”).

The big clearance sale in financial year 2013 leaves them with almost no old stock to start the 2014 year. That’s a huge (unsustainable) benefit in a business like consumer electronics which has rapid product obsolescence.

Remember that marked down inventory? Most of it was probably sold by 30 June 13 but there would still be some benefit flowing through to the 2014 financial year.

Remember the plant and equipment writedowns? That reduces the annual depreciation charge by $15m. Throw in a few onerous lease provisions and the like, totaling roughly $10m, and you can fairly easily turn a $7m 2013 profit into a $40m forecast 2014 profit. That allows Anchorage to confidently forecast a huge profit number and, on the back of this rosy forecast, the business is floated for a $520m market capitalisation, some 52 times the $10m they put in.

Anchorage were able to sell the last of their shares in September 2014 at prices slightly higher than the $2.20 float price and walk away with a quiet half a billion. Private equity are renowned for pulling off deals, but if there’s a better one than this I haven’t heard about it.

Chickens home to roost

Of course, all of the steps taken above have consequences. By the end of 2014, inventory had increased to $254m, with new shareholders footing the bill for repurchasing inventory. This should have resulted in poor operating cash flow, but most of this was funded by suppliers at year-end, with payables increasing by $95m.

Come the end of 2015 financial year, however, it really comes home to roost. Operating cash flow was negative $4m, as inventory increases further and suppliers demand payment, decreasing accounts payable. The business is required to take on $71m in debt to fund a more sustainable amount of working capital. As the benefit of prior accounting provisions taper-off, profit margins fall, and the company reports a toxic combination of falling same-store sales and shrinking gross margins in the recent trading update.

This float, as we pointed out in Dick Smith Takes A Bath, Comes Out Nice and Clean, smelled funny from the very beginning. Sorry Dick Smith investors, you’ve been had.

Castel Could Lose SED TV From Toshiba

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Castel the Australian distributor of Toshiba CE products could lose Toshiba’s SED TV range.

A senior Japanese Toshiba executive has told SHN  that the new SED TV’s that are due in Australia mid 2007 may not be sold via Castel but via Toshiba Australia. the executive who did not want to go on record also said that Castel would need to invest a lot of marketing dollars to compete in the SED market and that this may be a problem for them.

Also talking in Japan  Yoshihide Fujii, Senior Vice President of the Toshiba Corporation. and President of the Digital Media Network Company claims that there is no hurry to launch the SED TV onto the Australian market. Speaking at a conference in Japan he said “There will be no other TV device than the PDP, LCD, organic EL and SED panels in the market over the next ten years so we don’t have to rush”. He insisted that Toshiba can fully impact the SED TV by launching it after establishing a volume production line at its Himeji Operations, instead of prompting the market release using the minimal amount of panels currently manufactured in a pilot line at a Canon plant.

Commenting on the delayed marketing schedule of the SED TV, which was initially slated to make a debut in late 2006, Fujii said, “We have not fixed the launch schedule yet. We are against a 2006 launch because the LCD and PDP TVs’ pricing is lowering and performance is improving faster than initially forecasted.

Fujii describes the SED TV’s picture quality as “significantly better than any other TV panel technologies,” and expects the pricing to have “a 10-20% premium on the price of PDP and LCD TVs.” On the other hand, to realise a panel with the SED’s genuine picture quality and a low cost that allows no more than a 10-20% premium on PDP and LCD TV prices” he said.

In a bid to cope with the faster-than-expected lowering of prices and advanced performance of the PDP and LCD Toshiba is revising its manufactured volumes., “We are currently revising the manufacturing process, panel structure and other factors,” said Fujii. He believes that it will not be too late to enter the SED market in or after 2007, in which Himaji Operations is slated to start operation, considering “Even as of 2010, prevailing screen sizes in the market will be those covered by the current LCD TV.” He seems to bet demand for the SED TV will grow greatly in and after 2010, in which demand for large screen TVs is predicted to rise further.