Whether or not there is a significant dip in the economy, some consumers are counting their cash more carefully now. So what ammunition will retailers in the lifestyle arena employ in the war of the disappearing dollar?
The executive director of the Australian Retailers' Association, Richard Evans, describes the retail sector as the barometer of the economy. And there are indications of clouds on the horizon. "The current trend is likely to see retail spend coming down from the year-on-year figure of 8 per cent which ended December 2007 to approximately 5.5 per cent for the year-on-year ending the March quarter 2008. We predict this cycle will continue to fall to around 4.5 per cent by the end of the September quarter 2008," he says.
"This drop in consumer confidence is also reflected in the April 2008 SAI Global / ACCI Survey of Investor Confidence showing business expectations being significantly revised down. The survey shows that interest rates and ongoing financial sector turmoil has significantly dented business confidence. Adding to business concerns are costs from wages and input prices which have continued to grow strongly, though price growth is expected to moderate."
So how much doom and gloom do the retailers predict? Craig Steedman has been a Beacon Lighting franchisee in St Kilda for five years and is just renewing his term.
"It has been a boom up to now, and in Melbourne we're doing quite nicely though there has been some sign of slowing down. Retail is a rollercoaster at any time, and it's reached its peak. I find because I'm in a more urban store there is less boom and bust behaviour, more constancy.
"The domestic tread is more volatile but building and commercial trade will take longer to dip and rise. We're seeing a leveling rather than a dip. Sometimes reality is false from talking the economy down.
"The strength of our business is that as a total company we grow in number, we grow in finances and marketing. It helps us. At times like this we need strong marketing. We're the strongest brand in Melbourne, and nationally have the largest network. Strong brands live through tougher times."
Clark Rubber
Coring Vucic, general manager
"The media has beefed up the effects of the global market, which is causing consumers to think twice before parting with their income. The inflation rate, price of petrol and groceries and the fact that people's homes won't be worth as much as they had anticipated is also an effect.
"Clark Rubber will continue to get product to the market first. We'll ensure we have a point of difference in our bread and butter mix and introduce new product to our retail offer. We'll continue to beef up our training and develop our front of house teams to ensure quality customer service and subsequently, repeat customers.
"People will continue to spend their disposable dollar on what makes them happy or improves their lifestyle. We have a product range that can help implement and maintain life leisure at home."
And Vucic believes the broadening of the stores' retail offer -from inflatable toys to the products that assist the mature person with backache – will continue to serve the customer.
"Clark Rubber is continually reviewing the media that we utilize – radio, print and tv. The greatest expansion we'll see is the focus we have on our internet site. We need to review our focus on that market, which seems to rise every year. Public relations has been and will continue to be a key component in ensuring that Clark Rubber delivers the right profile in the market place."
Yes, there will be expansion, she says, but not to the same level of growth as in recent years because of a tightening economy. "We are still planning to reach our 130 store goal within the next five years."
<strong>Beacon Lighting</strong> Tony Fenton, franchise manager
"We have a solid customer foundation in all our markets. Whilst interest rates can effect some, we do not, in the current market, see this being of any significant issue for us. The average light fitting costs less than a dinner out.
"Over 35 years we have built a
lighting franchise brand and we have a position in the market which is quite unique in format, size and range. We also have a pricing structure which lends itself to a solid sales growth. However we must never be complacent and we are continually refining our products, presentation, marketing and ensuring our customer service is of paramount performance."
So how robust is the retail lifestyle arena? It is constantly changing, he admits. "We monitor this in styles from abroad as well as our local market. The key is to be a bit ahead in the styles. Sometimes that can lead to a strong inventory for a little longer than needed but we get the vast majority of it right. At present we have a fabulous product we have developed which we see as a world leader and in the next 12 months will see this become and international item of record. But we cannot say much more at this stage."
The company employs the traditional media of tv, lifestyle magazine, direct mail and incentive programs. But the showroom remains the primary tool. "They are dominant, well presented and have a team of skilled lighting people to maximize the chances for the customer to get the best lighting solution for their need."
The company has 60 outlets nationally and is looking to lift that by 50 per cent within five years, introducing some smaller format stores in regional markets with maybe an additional service integrated to the electrical business. "We see a rosy future in Australia as well as our overseas growth," Fenton adds.
Betta Stores
Ian Brown, general manager
"If you've got a body as strong as the government wanting to reduce spending it will have an impact. It's ironic that when you're up against the big electrical retailers, the Good Guys, Retravision, Harvey Norman, they're all spending on promotions. We have a reasonable budget, and maintaining market share depends on service.
"If you're talking about the consumer dollar spend on electrical retailing, someone will lose. It comes down to your skills and ability to maintain the service to your customer." While Brown admits it is hard to compete on price, he believes his franchisees' service record stands them in good stead. "All stores are owned, and they create a relationship with every customer."
When it comes to expansion he believes BSR is one of the few groups to be aggressively looking for new retailers - and it is retailers he wants, not the inexperienced. "For a franchisee to be successful they have to have electrical retailing experience and have a reputation with the suppliers."
Most of our retailers have been in business for years, some as long as 45 years, so anything that happens, we've seen it happen before."
<strong>Darriwill Farm</strong> Andrew Richards, director
"Our larger target demographic is the affluent baby boomer market. Over the past three years we have seen a large move by this market towards downsizing the large houses that have raised their families. Now mortgage free and cashed up they are choosing to travel more and enjoy the finer things in life."
Which can mean the gourmet food, gifts and wine this Victorian franchise has on offer. Richards is predicting a huge increase in the luxury food market, following overseas trends. This year a further eight to 10 stores are planned with interstate expansion into South Australia, New South Wales and Queensland.
But maintaining and increasing market share equates to more than the right location and product. Providing a focus on service, quality, pricing and product improvement "instead of having to think what we need to slash the price on this month to get the customers in the door" is the solution, says Richards. The result of a large investment sourcing product to keep them mix fresh means greater differentiation.
"Twelve months ago 25 per cent of the products our stores sold were exclusive to Darriwill Farm. This has now grown to over 40 per cent and by mid 2009 we are on target to increase this exclusive and unique product range over 90 per cent. "We will never open stores for the sake of getting stores numbers up. We put the brakes on store expansion 12 months ago and built a back end supply chain and distribution system that can now handle 100 stores. It was important to get the foundations solid and the supply chain leading edge."
The company has added cafes to two stores and this has seen a substantial increase in regular foot traffic through the doors.
"It was customers that suggested eight years ago that w( should sell wine. It was customers that suggested five year: ago that we should add a cafe. We will continue to ensure 1 our business in consumer focused and customer driven," assures Richards.
"We offer all our customers complimentary cappuccinos latter when they enter our stores to make the stores a real meeting place. We send our customers regular newsletters filled with cooking tips, recipes and information on new products written by our celebrity chef Gabriel Gate. We alsc conduct a large amount of in store tastings of both our foot and wines so the customers can enjoy a real experience an try something new."
Backcare & Seating
Michael Anthony, franchise director
This ergonomic
office supplies franchise was started by physiotherapists 18 years ago and has seen the Therapod chair designed, liter globally and become the focus of the business. When he bought into the franchise 12 months ago Anthony took the brand to be re-engineered by Thomas de Marcy (who has worked with Bridgestone and McDonalds) to develop more exclusive lines. This has meant not just updating the show but management, the franchise agreement, company strut product lines.
"We were taking a business that was very tired but had some important factors, like the fact it is in a niche sector good fundamentals but there was no brand translation." People look at it as a furniture business but OH&S legislation drives the business, he says. "There's a point of difference, we sell to business, we sell to government, through workcover, referral business allied health professionals, corporate business. In a cyclical business cashflow and how you manage stock can effect your life. This is very, very stable."
Anthony is looking to reel out 60 stores over the next five years. "Unlike a juice bar or ice cream store we have a longterm lease, a destination base. We need to be on a major thoroughfare not a shopping location. Sixty to 70 per cent of business is referral."
<strong>Howards Storage World</strong> James Brouillard, national franchise manager
"With interest rates and cost of living on the rise and consumer spending anticipated to slow it is certainly a climate that will present a more challenging environment in which to operate any business. However, doing your homework and matching up an opportunity that has a solid operating foundation, commitment to quality and customer (both franchisee and end user) and delivers a product you can truly believe in and get excited about will go a long way in narrowing down choices for prospective franchisees.
"Retail will always be affected to some degree by the financial environment. It is during these times that the truly innovative and driven systems rise to the top while those along for the ride suffer most. For the franchisor, this means really knowing who your customer is and delivering on your mission statement with consistency, efficiency and excellence. "What will set franchisees within that system apart is the passion, belief and attitude they demonstrate in the execution of all facets of the consumer offer. Customers are more willing to open their wallets if they feel they are getting value formoney and service no matter what the financial climate.
"We will continue our Australian and overseas expansions as we always have done, ensuring we recruit the type of person who will best represent our brand. We would rather have five great franchisees then 20 mediocre ones."
Simplifying the way we live with 'everything in its place' is a growing need for many people, says Brouillard, and this has only helped the brand. "We expect that this market will continue to show strong growth and be resilient against economic trends," he says.
Personal service, the expertise of the buying department, and the sales teams' product knowledge put this retailer ahead of the competition, suggests marketing manager, Dominic Panetta. "We recognise that women are the major target market for Howards Storage World
homewares franchise and we tailor our marketing strategy accordingly."
This article appears courtesy of Franchising Magazine.The Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.25-Jun-2008