What's going on at The Warehouse?

Tuesday, 28 May 2019

The Warehouse's iconic red sheds have lost some of their pull power.

Between the rise of Amazon, Ikea's imminent arrival and the likes of Bunnings and Briscoes expanding into categories once dominated by The Warehouse, the iconic chain store might have lost some of its pull power.

The Warehouse Group had its watershed year in 2016. Beset from all sides, competitors began to snap at its heels, resulting in a massive drop in profits. The group - which owns The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo chains - reported a $20.4 million profit for the year to July 30, 2016, down from $78.3m the year before.

But the company has not lain down. It has come back fighting with a revised strategy that aims to keep atop the waves of the rapidly changing retail market.

Under the leadership of group chief executive Nick Grayston it adopted a model of every day low pricing and binned its traditional strategy of having a good chunk of stock on special all the time.

* The Warehouse Group looks to digital future after profit drop

* The Warehouse profit buoyed by retail upsurge and trendy homewares**

Chief executive of The Warehouse and Warehouse Stationery, Pejman Okhovat, says it's the company's job to ensure the trust and loyalty of customers.

The change in strategy also included an effort to differentiate itself by increasing its range of home brand products similar to Kmart's model, First Retail Group's managing director Chris Wilkinson said.

'At the same time they've concentrated on their apparel categories, which are strong contributors of sales and margin, and lifting their store environments, which have been dated and tired by comparison.'

The Warehouse's advantage is its 'Kiwi connection,' but competitors Mitre 10 and Bunnings are doing this better, Auckland Business School associate professor Mike Lee says.

But the market has continued to change apace and new international brands are popping up all the time.

TK Maxx, which sells last season's fashion at a huge discount, is expected to arrive in New Zealand, once its Australian foray has bedded down.

But TK Maxx, if it arrives, and Ikea's plans to open a small store, are likely to only target particular areas.

Australia's Chemist Warehouse, which is slowly making headway in New Zealand, is more of a threat to The Warehouse.

Chief executive of The Warehouse and Warehouse Stationery, Pejman Okhovat said the group welcomed competition because it kept the business on its toes.

'It's healthy for the whole industry. It's our job to ensure the trust and loyalty of our customers remains with us,' he said.

Wilkinson said the retail landscape is changing. While The Warehouse has been dominant in the discount market it has been later to online shopping than others, Wilkinson said.

Chemist Warehouse is making inroads in the health and wellness category.

Auckland Business School associate professor Mike Lee said investing in the online experience is now seen as necessary for retailers, but it was hard to see how the likes of The Warehouse could match the user experience provided by Amazon's algorithms and recommendations.

The Warehouse's advantage was in its 'Kiwi connection,' but competitors Mitre 10 and Bunnings were performing better, he said.

'The staff at those shops, on average, seem to be a lot more knowledgeable than the average staff member at The Warehouse.'

Retail NZs spokesman Greg Harford said: 'All New Zealand retailers are having to look pretty closely at their businesses to make sure they are meeting the needs of Kiwi customers.'

'We as a nation are increasingly wanting to transact online, we are wanting a fantastic digital experience and we are looking for businesses that can fulfil all our needs in a one-stop shop environment.'

Consumers also want shopping to be less transactional and more experiential. Somewhere to have a coffee and a space for kids to play, Harford said.

First Retail Group managing director Chris Wilkinson says the Warehouse still has some way to go in lifting customer experience.

All this in aid of our changing lifestyles, where shopping has become a greater part of our leisure time.

'Retailers need to continually reinvent themselves'.

Wilkinson said The Warehouse was working hard on more automation to help improve the customer experience.

'Given the products typically support needs, not wants, shoppers value convenience, speed and a 'frictionless' experience when they visit The Warehouse. It's about … technologies that accelerate interactions.'

Discout fashion chain TK Maxx is described as a treasure trove of clothing and accessories.

The knock-on effects of this new way of shopping comes at a cost to workers, however.

The Warehouse confirmed this week that 150 jobs are in limbo as it proposes to centralise online deliveries to a single distribution centre. It also has plans to move part of its call centre services overseas and to trial a controversial new staff rostering system that has many more worried about their jobs.

Okhovat said the move is in response to its online growth.

'The idea is to consolidate our fulfilment centres into one place so that customers get one parcel for one order.'

The roster changes ensured that staff are rostered on at peak times. 'For instance making sure that at night there's enough people there to close up together,' he said.

Wilkinson said big retailers are increasingly using 'key time' employees which cater to more intense busy times and more frequent quiet periods, and which suit students and the semi-retired.

'Retailers simply don't need the same number of people throughout the day,' he said.

Harford said The Warehouse had a good reputation as an employer that invested heavily in its staff.

'I'm sure they'll be looking for opportunities for some of those people to be redeployed,' he said.

First Union retail organiser Kate Davis said the rollout of the restructure had been poor.

Davis said The Warehouse had not been able to answer simple questions such as whether staff would have to work out their notice if they found another job, or why there was six month stand down before they could reapply.

This was was the third restructure in six months and by now staff should be able to expect a seamless rollout, she said.

'I think we've gone from a company that used to give every worker shares in the company to a company that's now issuing plastic bag platitudes. I don't think they're investing in staff like they used to,' she said.

But Okhovat said a number of avenues were arranged to respond to questions.

'We would like to think that we set up plenty of avenues for the support to be given. It's still underway and we're still working through the process.'