The department store is embracing new business models, trialling new things and using the internet to its advantage. It seems to be working — profits and sales are up. Go figure.
It turns out the internet hasn’t eaten Myer, nor have those nasty foreign invaders (think Zara) stripped the business bare with their single-sector focus. In fact, it seems Myer is experiencing a few green shoots of its own, in both its online business and those unfashionable analogue stores. Quelle surprise!
The interim results for Myer yesterday refuted quite a few crazy notions from commentators about the future of department store retailers. The same people have consistently forecast the end of analogue newspapers and free-to-air TV (if anything, analogue print papers are in greater danger than department stores). That’s not to say the digital world isn’t going to continue to pressure analogue retailers such as Myer — but the survivors will succeed by co-opting the internet, not denying it.
Among the highlights for Myer were a better-than-expected profit of $88 million for the six-month period, and sales rose (top-line sales were up 2% for the six months, with a 1.7% first-quarter rise becoming a 2% second-quarter improvement). On a same-store basis (the best way to compare performance), they were up 1.4%. That doesn’t sound much, but that was after two years of falling sales (top-line and same-store). Myer now has had three quarters of positive same-store sales growth and is on the way for a fourth if the rebound in sales continues through the current quarter.
And profit margins widened, not contracted, a sure sign of improvement. CEO Bernie Brookes stated:
“Operating gross profit increased by 2.3% on last year and reflects the success of a number of our long-standing strategic initiatives, including growth in Myer Exclusive Brands, improved sourcing, reduced markdowns and shrinkage, as well as the contribution of sass & bide.”
What’s changed? Well, the sharemarket is up sharply, house prices are rising, consumer confidence is at two-year highs, car sales are rising strongly, unemployment remains low (with jobs growth continuing) and superannuation accounts are seeing positive returns after a couple of years of negative to weak growth. But the internet hasn’t gone away, nor has the high dollar (and that $1000 limit on internet purchases and duty). And it is interesting the small improvements in growth are coming despite consumers continuing to save and a small decline in personal income in the past year as our terms of trade fell.
Instead of moaning about the net and how the $1000 limit should be lowered and overseas mail monitored, Brookes was talking about the successes of its online operation, although no sales figures were given by the retailer:
“We now have over 2 million email addresses from members who have opted in to receive MYER one targeted emails, as well as over 3.2 million mobile phone numbers for SMS communication … Online sales continued to grow strongly and accelerated over the Christmas and Stocktake period. Over 8 million visits and 90 million page views during the past six months … A monthly digital Emporium magazine was launched in November 2012, distributed to 1.3 million MYER one members, including interactive content and the ability to shop direct from pages.”
Well, strike me lucky, here’s a retailer mining its customer base for sales leads and new business. What a breakthrough.
On top of this, Myer had better stock control, with inventories falling by $25 million in the first half of this year compared with the first half of the previous year, while sales of its own brands jumped 10% — or more than $30 million — to $343 million. And Myer is trying out new ideas, on top of its experimenting in the online world:
“We continually seek to improve our customer proposition through innovation by testing new ideas and concepts. Examples of initiatives adopted in the first half include a smartphone app that enables real time delivery and redemption of MYER one rewards and exclusive offers to members, and the Commonwealth Bank pay-with-points at point-of-sale (POS). In addition, we trialled pop up shops with a dynamic product range and we will continue to employ these innovative formats in high traffic areas such as CBD railway stations and shopping centres.”
In other words, it’s easier to stop moaning about the economy, cautious consumers, two-speed economies, the internet and competition and go back to reworking your format, embracing the web and all the strengths and threats it brings, and a bit of trial and error on what consumers respond to. And when the mindset switches from negative to positive, along comes the economy — and everyone looks a hero.