Dick Smith: a brand battered one too many times
As retailer Dick Smith hunts for a white knight to rescue the brand, Simon Canning sees real parallels with the death of Ansett more than a decade ago.
There is something about the events that have surrounded Dick Smith over the past few months that screams Ansett.
It is a tale of a brand smashed from pillar to post, reinvented, reimagined, reinvested and finally, retired ignominiously. A historical case study already being cited as one not to repeat even before the life support has been turned off.
As news of the company going into receivership reverberated around the nation, receivers Ferrier Hodgson made sure that any consumer confidence in Dick Smith that remained was completely undermined by announcing that gift cards would not be honoured and people who had paid deposits for lay-bys would not get refunds. The social media reaction has been predictable.
Just as Ansett went through the throes of collapse, rejuvenation, reinvestment through a new ownership strategy, a major marketing push and self-inflicted wounds before finally crashing in a heap, bringing a merciful end to the story of an Australian aviation pioneer, so too Dick Smith is a tale of many causes ending in the same result – the passing of a pioneering brand.
If a buyer can be found for Dick Smith – and that is a big if – the business will be faced with one of the more challenging marketing briefs of the year, if not the decade.
The first issue facing anyone wanting to market Dick Smith out of the mire is the current experience. In a massively competitive sector the brand is already hamstrung by the fact it has gone from having an overwhelming surplus of the wrong stock (in November) to not being able to afford to stock its shelves with the right stock (now).
Having missed the millennial shoppers with poor product choice while attracting older shoppers hunting bargains, the clearance sale late last year added an air of desperation to the brand that, while increasing foot traffic, failed to deliver the cashflow boost that would have enabled the brand to restock with the right product mix.
Administration and receivership are problematic but not insurmountable challenges to the brand. Indeed, after Woolworths had massively downsized the business before offloading it to private equity for $90 million, the brand, refreshed, appeared to have turned around. It was, it now seems, The Emperor’s New Clothes.
Since then marketing has played a vital role in getting people into the stores right when the retailer needed them. But once there, they discovered an offer far from compelling both in terms of stock and experience.
Faced with competitors such as JB Hi-Fi, often located cheek-by-jowl, the chasm between the retail experience looked even greater.
The real Dick Smith has had nothing to do with the brand for years other than to be trotted out on regular occasions by the media as it has made each transition, and this time he has slammed the money-making venture capitalists who saw the business float for half-a-billion dollars.
Smith believes the brand has a future and while it is an iconic brand, it has been battered one too many times.
The model might survive but a string of different marketing campaigns and shop models over the past several years means much of what it stood for has been watered-down, even without accounting for the loss in consumer confidence.
In just the past two years we have been treated to Clever Dick and The Techxperts, as the business moved its account in with Ideaworks and Atomic212, while the Powerhouse model developed under Woolworths is but a memory.
With the queue of creditors growing there will be nothing in the kitty for advertising.
And Dick Smith, as a man and a brand, is largely irrelevant to the the millennial market it needs to tap into.
Even the leases on its stores may not be of much use, replicated by competitors in too many places.
Ansett was a brand whose time had come – unable to market its way back to success and lacking the agility and finances to compete with new players and new ideas in the market.
In the end the experience was so tattered there was nothing.
Ansett? Dick Smith? There is something very familiar going on.
- Simon Canning is marketing and advertising editor at Mumbrella
The Forager Fund kids have a different take on this: “Dick Smith is the Greatest Private Equity Heist of All Time”. Incredible read: https://foragerfunds.com/bristlemouth/dick-smith-is-the-greatest-private-equity-heist-of-all-time/
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As a DSE veteran, I’ve sat through several reinvention attempts. PowerHouse was obviously Woolworths attempt to turn the company into something they could understand (high volume big outlets).
In the end, its a bit sad because JB ran around them. The JB store in Bourke St has all the electronics at the front and DVDs at the back – they became the new Dick Smith without the legacy (niche gadgets, CB radios etc). DSE just moved too late on dumping the old stuff.
Now if people would just stop quoting Gerry Harvey, I could move on from this sad saga.
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They never made up their mind if they wanted to be a competitor to JB HiFi or Jaycar. In not defining a specific segment of the market they became neither fish nor fowl. And subsequently failed to make an impact in either space.
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This is a classic trick – write down the value of your assets (stock, fixed assets mainly), create some provisions (doubtful debts, leases) – this will boost your post acquisition earnings through lower charges going through the p&l.
Then create forecast 3 to 5 years) projections off these new p&l’s and suddenly you have created value.
As always, buyer beware. If you don’t understand how a business makes money and there is no medium term track record of sustainable growth, then best to walk away.
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Perhaps the seeds of destruction for the Electronic Dick were sown back in 1982
Go to:https://www.youtube.com/watch?v=JbCr15KkBxY … Hands up who the agency of record was back in the day
All the cheesy kids must be those ‘older shoppers’ you mentioned Simon !
https://www.youtube.com/watch?v=JbCr15KkBxY
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Being Jaycar comes with its own risks – low customer levels, limited growth, need to lease low cost locations. It would never survive as a publicly listed company.
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I miss the old Dick Smith Electronic stores where you could buy individual components such as resistors, capacitors, LEDs, etc and build devices from assembly kits with a soldering iron. Call me old fashioned but you actually learnt how the device worked while building it. Kids today just buy everything off-the-shelf without learning anything.
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Product mix was changed, overpriced cables and things which people could buy at Kmart for $9.95 were $29.95 for the same thing at Dick Smith. Not carrying the things people wanted and what they did carry was overpriced. I would say that they have the people at the top to blame. As per usual, people at the top do not talk to the people at the forefront..the sales staff…..what would they know. I have seen in the public service also……………….the managers are promoted for how good they do their job…..not how good they are at managing people. These people who are good managers have the ability to talk to their sales staff, they know what the ordinary customer is saying and they know how many times people walk out of the shop after declaring things are too expensive. These good managers are able to convey the messages to people who are their superiors……………now do they listen………no so the chain continues. Jaycar would not want to get any larger but maybe a mix of good products, good prices and welcoming staff, staff who were into their stock, knew what the products could do instead of just reading off the side of the box.
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Jaycar makes more money than God, don’t worry about them
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Not everything is marketing. This was a shameless pump and dump scheme, plain and simple. A flock of vultures descending on a still-breathing target until it’s not worth Dick.
Cue the man with a hammer, “Oh look it’s a nail!”
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As a veteran of Tandy Electronics, this is very familiar. A sad attempt by the folks at the top to compete in a market far too saturated rather than the niche it had almost to itself. Jaycar is the new Tandy / DSE.
Tandy’s death was by a double edged sword though. In one blade was IBM who killed the very lucrative computer biz and the other was the likes of the the electronic appliance stores where Tandy tried to compete also believing it had the footfall.
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Anonymous nailed it, just another heist. When you steal $100 you go to court, when you steal $100 million, you go to the Bahamas.
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The investment bankers don’t seem to mind: con artists defrauding shareholders… money makes the world go around, afterall. Epilepsy Action Australia, voucher holders, etc… who cares about them, we say http://www.anchoragecapital.com.au/team/
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I worked in the industry for almost a decade and everybody hated Dick Smith. Too cheap, too crappy, bringing down prices in the industry and eroding customers’ mindsets about technology. Just let it die!
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