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What Renaissance should do next

From the outset, Trevor Grey wants to be clear everything’s easier in hindsight.

The former Renaissance chief executive, who left and sold his shares in the late 1990s and now heads ProjectPartner.com, says it’s easy to be critical of the likes of Renaissance because it’s listed and the books are open to the public.

Technology is changing to an online direct model, putting many parts of the industry under pressure.

“I feel sympathy for them.

“They’ve made quite a few mistakes – in hindsight it’s easy to say that.

“In technology there are a lot of companies going broke and I would think some of the other big distribution businesses are also not doing great, but we don’t get to see that because their records are not public.”

So how do you solve a problem like Yoobee?

That's a question exercising the minds of the Renaissance Corporation board and the subject of a yet-to-be-revealed strategic review.

Bumpy ride
It has been a bumpy ride for Renaissance's retail arm.

The former MagnumMac retail chain is forecast to make an unspecified loss this year, causing Renaissance to miss its earnings guidance.

In 2012, Yoobee made a $374,000 loss, in 2011 a $923,000 loss – excluding one-offs.

In the nine months to September 2010 (after a change in balance dates) it made a $548,000 profit "contribution", compared with a $413,000 loss in the previous period.

That’s a $1.16 million loss over four years.

The Renaissance board went to a shareholder meeting last month without its long-awaited strategic advice from consulting firm Grant Samuel – the same meeting at which director Robert Bijl was elected, not without drama.

Chairman Colin Giffney says the company is considering closing its 10 Yoobee stores, among other options.

Time to get out
Mr Grey, the former CEO, is emphatic it needs to get out of retailing and stop bleeding shareholder funds.

Its re-entry into retailing didn’t make sense and was a "hard ask", he says, because they were jumping into competition with the likes of Harvey Norman, JB Hi-Fi, Noel Leeming and Dick Smith.

“You’d have to ask why would they have thought they could do a better job than those four organisations, which not only have Apple products but also have all the other software and the resources of multiple stores and national marketing and all that?”

Mr Grey says he can’t see how they can compete with the big chains when they are basically doing the same thing.

“What was the point of difference? In fact, the difference was they were a smaller store and generally not in the big, multi-store complexes.

“Gerry Norman and these guys that run the other chains, they know retail’s not about, necessarily, the products in the store it’s about the marketing, it’s about the foot traffic and it’s about store location.”

The Apple store model might have worked overseas but they were run by Apple, with its well-oiled marketing department and the ability to discount.

Renaissance, on the other hand, was jumping into competition with some of their biggest distribution customers.

Without its exclusive Apple distribution agency, which was lost in 2006, the big retailers were able to switch suppliers.

Lost focus
Mr Grey says Renaissance has lost its focus, with forays into and out of retail, into and out of distribution, briefly rebuilding PCs.

The only part of the business making money now is its education arm.

“They’ve got to pick – are they in education or do they want to try to make the retail work?

“I think the only way forward on that would be to sell the retail stores to somebody in the space.

“The trouble is the stores are located badly – why would Harvey Norman buy a Yoobee store in Newmarket?

“They should probably get out of it as best they can and focus on areas they can make a difference.”

Biting Apple's success
Tony Butler hesitates to speak directly about Yoobee, because it’s an Exeed customer and because he says he’s not a retail expert.

But he manages some friendly advice, which seems to lie somewhere between "have a good look at yourself" and "stop blaming others".

Exeed is the company which bought Renaissance's distribution arm, in a messy transaction involving a legal settlement, which Mr Butler bought into earlier this year.

The tech company veteran, who founded Tech Pacific, is happy to reply to Mr Giffney’s recent warning to Apple over margins.

He says Apple has made distribution and channel decisions over the last decade based on its growth from a small niche player to the biggest company in world by market cap.

Yes, it's competitively intense at all levels, including distribution, because Apple is incredibly successful and growing fast.

The trick is learning "how to enjoy it", he says.

The customer decides
“We enjoy the fact that it is also generating great growth and great turnover with every indication that both of those things are going to continue, and continue very well.

“As such, it’s everybody’s job to look at their own business model and work out how come the other guys are having a good time and making money.

“At the end of the day the customer chooses whether or not he values your particular set of expertise and your particular set of things that you’re offering and the customer decides that.

“We don’t decide it; we decide where exactly we’re going to pitch that and the customer decides whether we’re right or wrong.

“So if the customer is deciding that [Yoobee's] wrong, well, then they’re wrong.

"It’s not up to you or me, to be blunt, to decide that – the marketplace will decide and the marketplace does decide."

Mr Giffney said late last month Renaissance's strategic review was in the "final stages" and he hoped it wil be revealed publicly within weeks.

dwilliams@nbr.co.nz

More by David Williams

Comments and questions
2

There is no doubt that Renaissance has been badly mismanaged and the mismanagement has been magnified by the Christchurch earthquake.

I believe Mr Butler is wrong, however, not to lay some blame at Apple's door.

There are some very good reasons why the share price of Apple is down 40% from its peak, and is now trading back down at its October 2011 level.

Arrogance on the one hand and losing its competitive edge are the two main reasons.

Apple's arrogance at dictating terms to its distributors (including what and how much products they can have, which retailer and store can have the products, credit terms and keeping them in the dark about product launches and pipelines) kept the company's mystique high while it lasted. Long-standing and established loyal distributors like Renaissance saw margins cut, credit terms severely shortened and supply of new products limited to 'new' markets.

Well, that arrogance is now coming back to bite Apple big time as distributors and retailers switch to other brands like Samsung, where they are treated as real partners rather than door mats for Apple.

Meanwhile, Apple is rushing products to the market - Maps, IOS 6.1, iPad Mini, iPad 4 - with flaws! All indicative of a company losing its competitive edge and panicking.

So it's the sunset for Apple from here on in, really, just as we saw the best of Nokia, Microsoft, IBM in the past.

In an age of disintermediation I would hate to be a mouth demanding to be fed in an already long and bloated distribution network. Just compare anything Apple in NZ vs its US pricing, including iTunes

Adding yet another layer of complexity is the arrogance of Rennaissance - they long had a reputation as being a nightmare to deal with.

Good riddance to them