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A year ago, Myer set out an ambitious plan to win back customers. Assia Benmedjdoub reports on the progress.
At the funeral of Sidney Myer in the 1930s, the streets of Melbourne were as well traversed as his namesake department store.
So beloved was the retailer and philanthropist, 100,000 people lined the city for his funeral procession.
Today, the rebuilding of goodwill is at the core of a turnaround strategy at Myer.
As with all modern business stories, this process commences with a less sentimental investor briefing.
Myer chief executive Richard Umbers, together with his deputy Daniel Bracken, took to the podium to face 400 analysts a year ago.
In fiscal 2014, the department store had announced its fourth profit fall in as many years.
Full year profit had tumbled 22.6% to $98.5 million, with sales down 0.6% cent at $3.14 billion.
The expectation of a turnaround in 2015/16 was high.
“We talked about the need to change,” Bracken recalls.
“We talked about the previous Myer strategy, very much a strategy built around the notion of expansion.
“It was a solid strategy when it was laid out ten years ago but a lot has changed.
“From that we set out a new strategy. We said ‘well, why not try giving the customer what they want?”.
Bracken says it became a case of maximising existing assets. Myer records 130 million in store foot traffic annually, another 50 million online and five million in loyalty card members.
“We have some of the best retail assets and we play in a $60 billion market in the categories that Myer sells,” Bracken adds.
“We’re $3 billion of that, we are only 5% of the market we play in. That was the upside of what we explained to analysts: think of the other 95%.”
To find the missing majority, Myer enlisted research groups Retail Oasis and Roy Morgan to analyse every single catchment it operated in.
Coupled with Myer One loyalty card data, three customer cohorts were identified and a new road map for the business was developed.
At the centre of the journey: Eva.
“Eva is the most important customer to Myer,” Bracken says. “She is $13 billion of that $60 billion market, so the good news is we’ve already got 7% of her wallet. We’re winning with Eva.”
Her customer profile is an AB demographic shopper, aged 30-45, generally married with a family. In order to capture her brandcentric wallet, Myer detonated its store floor space.
“It absolutely has been the biggest brand overhaul in living memory at Myer,” Bracken says. “We’ve now rolled out almost 1000 shop-in-shops in less than 12 months.”
The figure peaks higher per capita for Brand Bank brands such as Seed, Nine West and French Connection.
“We rolled out 170 shop-in-shops from those brands across a four month period,” Bracken says.
Myer has also unveiled 20 Veronika Maine concessions, after winning the account in March, and now commenced the rollout of newly returned top seller Industrie.
Ten Topshop Topman concessions opened last month, with another 16 installations across men’s and women’s already in operation.
The catchment data extracted by research partners has accelerated this.
“Localisation is really important and the best example we’ve got is our new store in Werribee,” Bracken explains.
“Werribee is not a top 30 store for Myer, but we’ve put Topshop in there because from a localisation perspective, that is a brand that will resonate with the customer demographic.
“We recognise Werribee as one of the biggest youth growth corridors in the state of Victoria.”
This level of customisation will transcend through to product, with early dividends secured in a Christmas campaign last year.
Myer dedicated 15,000 square metres of real estate across every store in the country to holiday gifting, with a focus on personalisation.
“We sold 400,000 jars of personalised Nutella in the six weeks leading up to Christmas at a 50% premium of supermarkets,” Bracken says, laughing.
“In the last two weeks, we sold more per week than Coles and Woolworths put together at that premium. We are going to go with probably twice as much personalisation in the business this year.”
This will be backed by much-needed investment in customer service, Bracken confirms. Myer has added 80,000 additional labour hours across Sydney and Myer flagship stores in the first half of the trading year.
At Myer Chatswood, 30% of staff now speak fluent Mandarin in a bid to cater to the high catchment of Chinese locals.
“That’s us putting labour back where the customer wants the labour,” Bracken says.
“We have a list of initiatives we’re trialling and testing. My favourite is Smile On The Tiles, which basically means get out from behind the POS and engage with your customers.”
In February 2017, a more complicated internal training school will roll out its first phase. Myer will spend the next few months building content with a focus on store team members.
The retailer will also increase investment in store technology, with 2500 iPads available across national stores.
“We are trialing a new gadget at the moment - the shoe runner app,” Bracken says. “This is housed on the same iPad but basically, it allows the customer service manager to stay on the shop floor.”
When a customer presents a pair of shoes, the item is scanned on the app.
“It tells them immediately if there’s stock. If they want it, the customer presses ‘yes’ and it immediately sends an alert to the stock room to get that size.”
While the app is currently being trialed in two stores, early indications point to a broader roll out. This is just the beginning of the technology journey.
“We’re currently in the process of building an app to take in-store fulfilment problems away,” Bracken says. “Our stores will be mapped out like a distribution centre so our staff will actually know in-store where to go and find specific items.
“They’ll get an image of that on their iPad and they’ll do it that much quicker. But it’s a challenge. We recognise the cost of fulfilling being higher from store far outweighs the cost of distribution under the old model.”
Under the former distribution model, which saw orders despatched from a dedicated warehouse, four out of five orders were shipped interstate and seven out of ten were split shipment.
“The cost of operating that was unfeasible for us,” Bracken says. “By using our store network to fulfil, we can run an algorithm that looks for a store in the same state and has all the items of that order.”
These savings will prove crucial for Myer. While the department store posted the strongest same-store sales growth in 1H16 since 2009, net profits still slipped 4% to $59.7 million.
“It’s about productivity across every single asset of our business,” Bracken says.
“The area that analysts and media picked up on last year was the notion of productivity step change.”
Bracken is referring to the broader closure of underperforming stores, with 20% of its network slated as out of line with its new strategy.
“Does that mean we are closing 20% of our stores? No,” he says. “It does mean some stores will close and we have announced four. When we reopen our Warringah store later this year, it will be a new model of productivity standards.”
The store, located in Sydney’s Northern beaches, will not only stock international brand partners such as Topshop and
John Lewis, it will feature food pop-ups, social extensions, activations, workshops and personalisation services.
“This will be the first true embodiment of new Myer,” Bracken says.
Time will tell if the new Sydney opening lives up to the legacy Sidney set over a century ago.