The country’s largest retailer The Warehouse Group has seen its annual profit tumble by 65.6 per cent. Its CEO explains how it’s managing increased costs and crime.
Video / NZ Herald
The Warehouse board fronted up to investors today at its annual general meeting, with some disgruntled and “disgusted” with the company’s customer service, dropping share price and hard-to-access loyalty scheme.
The first investor to grill the Warehouse board gave positive feedback on a “cleaner, brighter” Sylvia Park store, but saidthe retailer’s customer service paled in comparison to competitor Briscoes.
“If you improve customer service, your sales will improve,” she told chief executive Nick Grayston.
Digital discounts
The investor went on to highlight issues with the Warehouse’s smartphone-based loyalty scheme MarketClub, which she said “might be beyond the reach of a lot of your customers”.
Chairman Joan Withers told the investor: “We will download the app on your phone before you leave.”
Grayston added that customers using the programme are the big spenders at the Warehouse.
“They spend more and think better of the store than non-members. We have a swipe card for non-members,” Grayston said, admitting the team ”should do a better job of telling people”.
Warehouse Group chief executive Nick Grayston. Photo / File
Another investor also questioned the board about the loyalty scheme.
“I take issue with what Nick says about [loyalty] cards at the checkout when people don’t have a smartphone,” he told the board.
He quoted stats from the Ministry of Social Development that a majority of gold card holders do not own a smartphone: “It seems like you’re cutting out a large slice of the population just with this.”
He told the board: “I’m concerned because we’re not getting answers.
“Frankly, I’m a bit disgusted with the carrying on… saying, ‘We’ll look into it’. What the hell will you do after you’ve looked into it?”
Withers responded: “It’s not in our interest to have customers who are not able to access discounts.”
She said the ubiquity of smartphones makes the task complicated.
Another investor who is also a Warehouse staff member told the board he had never heard of a physical card for the loyalty scheme, adding that his own smartphone isn’t compatible with the system.
Grayston and Withers agreed they would “look into this”, but the investor told them the MarketClub issue had been raised several times by staff and had not been resolved by management.
“We’ve been getting conflicting information even from the MarketClub staff,” he told the board.
Grayston interjected telling the investor: “We always appreciate you raising these things.
“We have had a lot of dialogue with teams. There is no membership card - there is an override card, but it is important.”
Torpedo7 was one of the Warehouse's poorest-performing brands in the past year. Photo / Dean Purcell
Addressing Torpedo7
Investors were keen to know how the board would manage the severe losses Torpedo7 brought to the portfolio, however, the board said it was still coming up with a solution.
“We know we have more work to do,” Withers said.
One investor told the board: “You talk about holding on to your brands but is it time to make the tough decision?”
Another asked if the board would consider separating the Warehouse’s brand portfolio and listing each as a separate entity on the exchange.
Withers responded: “Our strategy is as a group. We see ourselves as having a robust strategy having all these as part of our portfolio.”
She said the board’s primary focus is “getting trading right among brands and getting the share price up”, but separating the brands “is something the board will look at under certain circumstances.”
Grayston heeded the investor’s advice, saying the board is looking for new ways to approach the market.
He said a global collapse in the bike market drove the brand’s $22 million loss in the last full year.
Chief customer and sales officer Jonathan Waecker told the Herald the Warehouse Group is currently looking at how to manage the failing brand.
“The portfolio approach means we get to participate in [a brand’s] upside, but it means we have to mitigate their downside at the same time,” Waecker said.
“As we go into the next year, we are laser-focused on the two biggest brands, the Warehouse and Noel Leeming, and really making sure that they are the ones that customers are choosing.”
Grayston informed investors there is a global decline in bike sales.
When asked if the retailer would consider dropping Torpedo 7 from its portfolio, Waecker said the focus now is making the business perform.
“We’re really focused on how we make sure those losses are contained and that they reduce while we maximise the growth in the rest of the business. Any choice beyond that we haven’t taken yet.”
Alka Prasad is an Auckland-based business reporter covering small business and retail.
