Where to for Smiths City?

By Steve Bohling October 01, 2015 Industry features & issues

Smiths City is less than a handful of years away from celebrating its centenary. In challenging times, how does its new CEO, Roy Campbell see the way ahead? Steve Bohling reports.

To view a PDF of the complete feature as it appeared in Wares magazine, click the download button at the bottom of this page.

I meet up with Smiths City CEO, Roy Campbell, towards the end of August, just four months into his new role and the day after what by some accounts was a slightly tense Annual General Meeting, mainly thanks to the sale and leaseback of the iconic Colombo Street store (which went unconditional in early October).

Almost exactly 12 months prior, Smiths City Group Chairman Craig Boyce had been saying goodbye and good riddance to an uncertain market. But, in August 2015, he was alerting shareholders to a probable economic downturn and that “change must happen” for Smiths City.

“In all sectors of the economy, change is accelerating and companies are having to re-examine their business strategy and operating model. At Smiths City we are no different and change must happen to be profitable and successful in the future.”

Boyce nevertheless showed confidence in the Smiths City Group’s core business – furniture and appliance retail – and, with strength in customer finance, said there was “much to be positive about”.

Despite a retail loss and a tougher post-Christmas quarter, same store sales were up 2.5%. What’s more, the “core” of Smiths City – the South Island, accounting for 80% of sales, the “foundation rock” of the business – was ahead of the previous year and would be “the focus for improved margins”.

 

WHAT'S IN STORE FOR SMITHS CITY?

Incoming CEO, Roy Campbell, followed his Chairman to the stage and proceeded to preview activities “designed to ensure we realign our brands to the market”.

Among the changes that must happen, he flagged change for the Powerstore and LV Martin operations in no uncertain terms – “if we cannot return them to profit we’ll cease to operate them,” he said.

He also cited the need to continue to “reinvigorate” Smiths’ core furniture and appliances business and to get its digital footprint up to date (and said he would be recruiting to enable this).

On top of paring back costs to offset slim whiteware margins and upping efficiencies in the Smiths City supply chain, with the opening of the 28th Smiths City store in Taupo this month, he also signalled the retailer’s intention to continue looking north for expansion.

Bottom line? Roy Campbell was “not anticipating or envisaging a business as usual approach to retailing going forward” and indeed was “challenging all areas of the business to look at how we currently operate and seek to identify smarter and more cost effective ways of operating.”

Bringing Smiths City in line with modern retailing best practice in other words.

 

BUILDING ON YOUR STRENGTHS

So, having set the scene, I ask Roy Campbell in person to sum up his outlook on Smiths City. He may be under no illusions about the task ahead but he’s nevertheless highly positive about what’s already in place.

He responds: “If you look at the journey that Smiths City has been on for the last 97 years, there have been some fantastic highs and some fantastic lows, but our tenacity, resilience and desire to offer our customers a great retail experience and ensure we foster a long standing relationship with our customers has never left Smiths City.”

He continues: “It’s a fantastic company with fantastic potential. The people I have met in our team are a sensational asset to Smiths City. So too are our valued and respected relationships with our suppliers – we have a unique partnership with them that brings real value to our customers.”

When asked whether the current product mix was up for a major rehash, he responds: “I think our product mix overall is very credible. I think it resonates with parts of New Zealand in a way that no other retailer does and I am very happy it does this. So, no I don’t see any major changes to our product mix.”

One of Smiths City’s “core strengths”, says Roy Campbell, is the diversity of its product range. Take its seasonal and leisure sections. “While there are certain segments of our mix that we would not, for expample offer in Auckland, they remain entirely relevant and important to other catchments throughout New Zealand.

“Supporting the local community by providing product that could be otherwise challenging to get, is a great strength of Smiths and allows us to form deep and important relationships with our communities.

“We have a diverse range of products that I hadn’t expected to see when I joined, and I questioned the relevance of why they were ranged in our offer. . Having gained an understanding of the business, I do see that diversity as a competence of Smiths City, not easily replicated. Something which I think is perhaps lost on external observers.”

 

ABOUT CORE BUSINESS

There has been much emotive coverage of the closures of all but two of the Powerstores and speculation around the future of LV Martin. I ask Roy Campbell to clarify on those fronts.

“I’m from Wellington originally – I grew up with LV Martin – I would love to see that brand grow and provide strong traction in the market; that said, operating a division that has two stores is not a sustainable strategy, particularly when viewed against the strength of our Smiths City brand.

“The core driver of our business is the Smiths City brand and that’s the brand we will like to focus on going forward. So, as part of that strategy, it’s logical to assume that you may well see the LV Martin and Powerstore brands roll into the Smiths City format.”

 

GO NORTH, YOUNG MAN!

We move on to issues of achieving scale and further expansion in the North Island. Nothing has changed in this respect: “Clearly we need to have a national presence and the sales we achieve out of Auckland without having a physical presence indicate quite strongly that the Auckland customer is looking for a credible trusted alternative in the marketplace – which fits with our stated desire to make sure that our footprint expands through the whole of New Zealand.

“We’re opening our 28th store in Taupo in October and we have a good strong footprint in the lower half of the North Island – we just need to address our presence in the core Hamilton & North catchments.

Doing this well is more important than just doing it, according to Roy Campbell: “We need to make sure that whatever we bring to the north is a credible and compelling offer.

“We know that we already have a credible and compelling offer because of the traction in Wellington, in Gisborne and Whakatane, Kawerau, Tauranga and now Taupo so I believe we definitely do have an offer that will resonate with the market.”

 

EFFICIENCIES BRING CUSTOMER SATISFACTION

With scale comes the need for efficiencies and, as indicated at the Smiths City AGM, supply chain changes are definitely on the agenda and a key goal for Roy Campbell.

“Having the supply chain and logistics perform at its most efficient is key to our success. “By being more efficient, we can concentrate on enabling our business – that’s what matters – getting the right product to the customer, making sure our customer has a fantastic experience. Anything that doesn’t do that is a detraction.

“At the moment we are doing a supply chain review and that is simply to make sure that we can have the most efficient route to market and the most efficient communication with our suppliers on how we move through our supply chain.

“It is fair to say that this is overdue and I think that we can be much more efficient in our distribution, supply chain planning and logistics, enabling us to be much more effective when supplying our customers.

“The way I look at it, we have one job and one job only, which is to satisfy our customers’ needs in the best way, whether it is from a bricks & mortar or a digital perspective.”

 

STILL RELEVANT A CENTURY LATER

If we were to encapsulate Roy Campbell’s task ahead, it might be summed up thus. In his own words: “Our goal is to satisfy our customers and retain them through their lifetime journey. We want to engage with them like no other retailer currently does in New Zealand.”

His LinkedIn profile may note “over 25 years’ expertise in change management” but his role is not about change for change’s sake. “Smiths City is a wonderful business. Heritage, iconic, legacy – all of those descriptors are appropriate.

“We’ve been there for 97 years and I believe that we’ll be there for another 97. That is why we are trying to make sure everything we do is about serving the customer, making sure we are relevant and that we are in the right locations.”

Rounding off this article, and offering a useful summary of his outlook, I include below Roy Campbell’s conclusion to his presentation to shareholders in August:

“This is a fantastic time to be in retail… Smiths City is well placed to capitalise on the tightening market that I believe we currently face in New Zealand. We talk and resonate directly with the majority of New Zealand every day, providing a value proposition to them that is real. I’m proud of the value we bring to New Zealand.”

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