news Retail giant Woolworths today revealed plans to sell its Dick Smith chain of consumer electronics stores, following a strategic review of its broader assets finished in November 2011. It also plans to close up to 100 Dick Smith stores in the next two years.
The review, according to a statement issued by Woolworths today, concluded that Woolworths’ main strengths were primarily in “larger format, multi-channel, high-volume retail segments with market-leading positions”. In this context, the company said, “the future of the Dick Smith business, which is profitable, experiencing positive sales growth and has a strong brand position, could be better realised through new ownership.”
Woolworths said that its strategic review had concluded that the important consumer electronics category was better delivered through its Big W stores than Dick Smith, and that the investment and management attention given to Dick Smith had been “disproportionate”, relative to its position within the broader Woolworths group. “Following restructure, Dick Smith will be divested as a going concern to an appropriate buyer and will continue to operate as normal,” the company said.
Woolworths chief executive Grant O’Brien described Dick Smith as an “iconic” specialty consumer electronics brand, with a strong team and its own “leading” online presence.
“It has developed into a trusted technology retail and services hub, carrying world-leading brands and with strong market share in several key categories,” O’Brien said. “However, we believe that separating this specialty model from Woolworths is now the best option for the future of both businesses.” Woolworths has already received a number of unsolicited approached in relation to Dick Smith, which it will now explore, with the help of corporate advisory firm Greenhill Caliburn.
Woolworths claimed that Dick Smith staff, customers and suppliers didn’t need to worry about the changes, with business to continue as usual for the chain in the time being. However, it appears this statement is factually inaccurate. In the same media release, the company paradoxically stated that it would be closing up to 100 “underperforming” Dick Smith stores to be closed within the next two years, and affected staff to be offered redeployment elsewhere in the wider Woolworths group.
To me, this whole media release screams “Apple”.
In a year in which Apple’s Australian division announced record revenues, up 36 percent to $4.88 billion, and looks set to grow even more next year, Dick Smith’s Australian stores are “underperforming” and Woolworths is set to sell off the business and shut up to 100 stores. Well, I wonder what could be the problem? Where have all the customers gone? Maybe across the road to the gigantic Apple stores which have been opening everywhere around Australia over the past several years, and are known to be making record levels of revenue?
It is now a matter of public record that Australian consumers are buying less mobile phones, laptops, PCs, tablets, cameras and other devices from Dick Smith stores and are buying much of the same gear from Apple stores instead. And when they’re not buying Apple stuff, they’re going to mega-marts like JB Hi-Fi which sell the hottest stuff and lots of it, alongside 50,000 other things which Dick Smith doesn’t sell.
Sandwiched between this high (Apple) and low (JB Hi-Fi) strategy, it’s no wonder that Dick Smith is failing. A new Dick Smith store opened in my neighbourhood about six months ago, in the busiest shopping centre around. I like going in there to check out what’s on the shelves, but I always walk out, realising that there is nothing there that I actually want to buy. And usually I’m the only customer in the entire store. In contrast, whenever I walk into an Apple or JB Hi-Fi store, I have to physically stop myself from buying something. It’s like a compulsion. And there are always throngs of other customers everywhere.
Dick Smith stores remain locked in the retail paradigm which they helped establish twenty years ago. The chain has completely failed to realise that the consumer electronics market is no longer what it used to be. It has divided rapidly into high-low camps. Most of the market is now highly commodified, while a handful of companies — predominantly, Apple — have occupied the premium and are now entrenched there. And Apple certainly does not need Dick Smith.
Is the end of Dick Smith nigh? Probably not; I’m sure it will stick around for a good half-decade or more. But in the medium-term, it seems likely the brand is going the way of the dodo.