Lessons from 57 years of retailing

Graham Evans

Weekend and 24-hour trading. Wine and beer in supermarkets. Online shopping.

Vast changes in retailing over the last 60 years have revolutionised the way we work, shop and live.

But are we better off?

Retiring Warehouse Group chairman Graham Evans was at the forefront of some of these changes as head of Woolworths New Zealand.

He helped to assemble a lobby group to get wine into supermarkets when Sir Robert Muldoon was prime minister and introduced “milk-flavoured milk” so supermarkets could sell it.

Speaking to NBR ONLINE from his home at Millbrook Resort, near Queenstown, he says the changes have been led by societal changes, with retailers pressured to meet the needs of busy consumers – especially with the breakdown of the sanctity of Saturday for sport and Sunday for religion.

He admits to doubts over some changes.

“I questioned in my own mind whether 24 hours was a step too far, at the time.

“But basically in the supermarket industry you were filling the shelves anyway all night, and so you could leave the door open, have a cash register and some security in the store and you might take a few dollars to offset your costs.

“With more and more shiftwork and the population growth in Auckland, there’s no doubt there’s a demand for 24 hour trading.”

Technological boon

Computerisation is the single biggest change he has seen.

When he started in retailing, stock was ordered from paper lists and accounts were highly manualised.

Business owners used to know their margin, sales and wages and not a lot else. With computers, they could quickly look at profitability right down to the individual product line, and quickly. Computerisation also raised productivity.

“You think about an industry where everybody used to have to put a price on a can or a packet – the labour involved, the tickets falling off, the whole shambolic existence that went on and then, suddenly, with scanning through technology, you had sales by the minute; you knew what was going on.”

While Mr Evans lapped up the information from computers he preferred a printout to a screen – so he could write on the sheets of paper and take them onto the shop floor.

Technological change is particularly relevant to The Warehouse. Mr Evans says it now competes with high street retailers in big cities like London.

Warehouse Group chief executive Mark Powell estimates a third of the estimated $3 billion spent on retail sales in New Zealand comes from overseas companies, such as Amazon and Book Depository, and UK fashion store ASOS.

Mr Evans says The Warehouse should consider marketing its website offshore.

As noted in Friday’s National Business Review, despite The Warehouse’s disastrous foray into Australia, Mr Evans wouldn’t rule out a return across the Tasman at the right time.

One of his disappointments is that The Warehouse got to the point it did but didn’t press on.

Its share price slumped from $7.90 in June 2002 to $3.20 in May 2005, as it felt the pain from its loss-making Australian operations. When the plug was pulled in 2005, The Warehouse took a pre-tax charge of $88.8 million.

“If you go into a market, you’ve really got to bring a point of difference, a uniqueness that’s going to work in that market and we didn’t have any of those things when we went to Australia.”

Ready, fire, aim
Mr Evans says The Warehouse has been successful almost in spite of itself, particularly in the early days.

When Sir Stephen Tindall founded the company, variety businesses such as Deka and Cargo King were in decline and lacked initiative, he says, leaving the segment wide open.

The company was sourcing cheap stuff from China and sticking it on a pallet, bound for New Zealand, without much thought.

“It was what I’d term, ready, fire, aim – they just bought stuff and then they’d aim it afterward.

“It really was the Wild West when I got involved and I think it’s true to say Mark [chief executive Mark Powell] has been the only senior executive who has been successfully putting disciplines and processes in place.

“From a company perspective I see a lot of upside – from operating the business better, which is what he’s doing and there’s still a lot to do, but also building on the efficiencies and product opportunities that exist.”

The Warehouse has “milked the cow” of CDs, books and video recorders but consumers have shifted and it needs to move on, Mr Evans says – initiating new products and categories.

The Warehouse is at an interesting juncture, two years into a five-year, $430 million rejuvenation plan for its Red Sheds. Same-stores sales are up but operating margins are on the decline.

The company has been on somewhat of a buying spree recently, making nine acquisitions since September last year, including Noel Leeming and Torpedo7.

Patience plea
Mr Evans – whose last meeting as chairman included a first-half earnings warning – is confident about Mr Powell’s approach.

“The only thing with that business is it takes time.

“We keep saying that but the analysts naturally are only interested in your next quarter – or your next six months.

“That’s the bug about being a publicly-listed company. If it were private you wouldn’t have those issues.

“This is probably the first time when I can say we’re not being put off by the short term – there’s great clarity and focus on the medium to long term.”

By mid-afternoon yesterday, Warehouse Group shares [NZX: WHS] were up 15.9% over the last 12 months – lagging the benchmark NZX50 which, over the same period, has gained 16.8%.

In 1998, when Mr Evans retired as Woolworths New Zealand’s managing director, aged 58, the National Business Review noted his innovative Big Fresh concept earned him the tag as one of the finest merchants in the world.

That tag remains a highlight today.

At The Warehouse’s annual shareholders’ meeting in Auckland last month, company founder and major shareholder Sir Stephen Tindall paid tribute to Mr Evans, for transforming Woolworths from being the worst supermarket chain into the best.

Big Fresh, the first “farmers market-style format” supermarket in New Zealand, opened its first store in Mt Wellington, Auckland, becoming the first New Zealand store to turn over $1 million a week.

When the format was exported to Australia, it became the first Australian store to turn over $A2 million a week.

Sir Stephen also recalled milk was not able to be sold in New Zealand supermarkets until Mr Evans designed “milk-flavoured milk.

“This I thought was incredibly innovative,” Sir Stephen said, as he wished Mr Evans all best for his retirement, on behalf of The Warehouse’s board and its 11,000 staff.

In his self-deprecating way, Mr Evans quickly moved on, saying: “Thank you very much for that, Stephen. Having heard all that, I think it’s best if I do retire.”

However, he’s not done yet.

Mr Evans has been asked by privately-owned pharmaceutical importer Multichem Group, a company of which he is chairman, to stay on for another 12 months – an offer he has accepted.

“I’ve decided to do that because I think it will help me into the next transition.

“I don’t really have a plan and that has been quite disconcerting. Whether I’ll do something in the social area, community area I’m not sure.”

dwilliams@nbr.co.nz

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