Myer turnaround on track, but private label brands need some love

MYER is celebrating an incredible turnaround, but there’s one area where the department store needs to up its game.

MYER chief executive Richard Umbers can crack open the champagne.

The retail boss is celebrating a triumphant beginning to his turnaround plan, announcing that the department store chain more than doubled its full-year profit to $60.5 million and grew sales revenue by three per cent.

But while it marks a promising start to Mr Umbers’ five-year plan, there’s one area that’s been holding Myer back: its private label selection.

A focus on “wanted brands” like Seed, Topshop, Mimco, Veronika Maine and Industrie, which operate concession stores within Myer outlets, lay behind the sales boost. And the retailer’s bottom line was helped by the dumping of 150 underperforming labels.

The only downside is that key labels that survived the cull, Basque and Piper, have not been getting much love — and their sales are shrinking.

To turn this around, and tap into the higher margins these label tend to offer, Myer is taking a leaf out of Aldi’s book.

THE ALDI EFFECT

The German supermarket chain is known for its home brand wizardry, and focusing on getting this offering right has been the key to its success.

In a similar vein, Myer is set to roll out a new model of how it treats select private label brands.

Mr Umbers said that the concession side of the business — those sections of Myer that operate like mini-stores, with their own dedicated staff and branding — had experienced “disproportionate growth” compared with its home brands.

“Our Basque and Piper brands are very significant in their own right, with a very strong connection to customers — but in some ways, we feel we’ve neglected them in the past,” he said. “They’ve been short-changed because they get a few racks, secondary to where the large concession players are.”

In a move that’s being trialled in selected Myer outlets, with plans to be rolled out across 40 stores, these labels will get the five-star treatment, with a dedicated fitout and staffing model, tailored visual merchandising, integrated sales and marketing and other support.

“What we will do is run them much more like a concession business in terms of what the customer will see,” Mr Umbers said.

“We’ve rolled out six stores through that new lens and we’ve been very encouraged by the customer response,” he said.

“And of course those brands tend to be a higher margin than the other brands we’re currently stocking. We’re doing it for the customer, but obviously when we model it out at a commercial level, you get a better outcome.”

The new approach is being trialled at Myer Melbourne, Sydney, Southland, Doncaster, Chatswood and Toowoomba

ALL OR NOTHING

Asked if he expected to turn around the profits decline on the private label side of the business, Mr Umbers said this would take time. And he did not rule out making further cuts to the range.

“If a brand isn’t working, the idea is that it goes, irrespective of whether it is a concession or a private label or a national brand,” he said.

“If they’re not good brands, then we’re not wedded to them for any legacy reasons. So over a period of time we do see our private label business growing, but obviously it takes time to put a new model in place.”

Meanwhile, the retailer’s “wanted brands” strategy will continue — with the addition, announced today, of Saba, Oroton and John Lewish homewares.

“It’s more that we’re committed to all the brands we sell. If they make the cut to be in our portfolio, then we’re going to get behind them and that offer to the customer is the offer that they’re looking for,” Mr Umbers said.

“The wanted brand strategy first and foremost, and if our own brands make the cut that’s great, we’ll run them as proper bands and get behind them and back them and win with them.”

EBAY A WINNER

Myer’s online sales have been growing, thanks in part to its new partnership with eBay.

Shoppers who search for items through [our] online retail portal are shown products available at Myer’s website, where they are taken to complete their order.

While Myer received a lower margin on sales made through eBay, Mr Umbers said, the greater benefit was the ability to attract new shoppers.

“One of the challenges with any online business is to grow the customer base beyond the immediate traffic that already engage with your brand in store, and what eBay is able to do is reach to a very large audience for our products,” he said.

“Once a customer is then acquired into our brand and becomes a customer on our channel, quite often they become Myer shoppers, even if only through the online business ... I’m pleased to say that we’re getting quite a significant amount of traffic from that channel, which has expanded the reach of our online offer.”

Mr Umbers said Myer’s five-year turnaround plan was on track, concluding that while “we still have a long way to go, we are moving in the right direction”.

“There is no doubt that as a result of our strategy, Myer is a measurably stronger business today than it was a year ago,” he said.

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