Michael Hill rolled out its rebrand faster than planned during Covid

A year before the pandemic struck Daniel Bracken decided to try and take the Michael Hill jewellery chain upmarket, the timing proved perfect.

Michael Hill chief executive Daniel Bracken said the decision to go upmarket a year before the pandemic struck was a winning strategy. Picture: Richard Walker

One year before Covid-19 forced closed retailers across the board, Daniel Bracken began plotting a strategy of taking his chain of jewellery stores up market.

The strategy was to lean in to the idea that Michael Hill International, the ASX-listed retailer that started in New Zealand and now also operates in Australia and Canada, was the house of diamonds. “The decision we made … was that we were going to reposition the brand in a more aspirational way,” Bracken said.

“We had always sat slightly above the mass end of the market in our brand positioning, we’d always been a house of diamonds. But we really hadn’t lent into that, we really hadn’t built a strategy around that and that’s what we set about doing prior to Covid,” he said.

Then the pandemic arrived. In a way, timing was everything. The Covid-19 lockdowns and other restrictions pushed more customers to celebrate key milestones in ways they may not have thought to before, including with premium jewellery. It proved a winning strategy – with sales and margins rising – although it was impossible to defray the impact of shuttered stores.

The Michael Hill share price has had a more rocky journey through the Covid-19 pandemic. Like many small-cap retailers its shares have come under selling pressure and Michael Hill is down 25 per cent over the last 12 months and down 10 per cent just in the last month.

However, still trading above $1, shares have almost risen fourfold since the depths of the pandemic panic in early 2020 when Michael Hill fell as low as 24c.

The company still fares better than other smaller retailers like City Chic – down 92 per cent in 12 months – and Baby Bunting, down almost 50 per cent.

One question for the retailer, and its investors, was how customers would respond to the change in the strategy. So far, it seems they have followed the retailer up-market.

Michael Hill focused on an improved loyalty scheme. Picture: AAP Image/Richard Walker

“We wanted to move away from price and promotion, we wanted to build an emotional relationship with our customers and I very openly say in that way Covid, in some ways, was our friend because Covid allowed us to change the business and the brand probably faster than we would have done in normal circumstances,” said Mr Bracken.

Those trading circumstances saw mass store closures in the first year of the pandemic, particularly in Victoria and in Canada, where it has a strong retail network and where restrictions were harshest. In the 12 months to the end of June 2021, the extensive store closures in Canada and sporadic closures across Australia culminated in 10,447 lost trading days.

And while many retailers shifted online, this was a harder leap of faith for jewellery retailers whose customers remain circumspect about buying high-priced items through the mail.

Mr Bracken and his team instead focused on an improved loyalty scheme in an attempt to position the brand as somewhere to visit at each memorable moment of customers’ lives.

Mr Bracken, a former Myer deputy chief executive who also has executive experience at luxury fashion labels like Burberry, labels this link with his shoppers “emotional engagement”.

“The key marketing mantra that we’ve been building up at Michael Hill is marking the moments that matter in people’s lives,” he said. “When should you go to Michael Hill? It is for those key milestone moments.

“We’re not here to sell transactional jewellery, we’re here to sell that whole life cycle from the engagement ring to the wedding band, the first anniversary after the first child is born to the second child, third child, to the fifth anniversary to the 10th.”

Its loyalty program’s membership base rose almost fourfold to around 800,000.

“This whole circle of life and celebrating all of those key moments in people‘s lives. And that’s what we’ve really been focused on for the last two and a half years,” Mr Bracken said. “It‘s worked incredibly well, we’ve completely changed our brand messaging.”

Michael Hill, founded in 1979 by Sir Michael and his wife Christine, is listed on both the Australian and New Zealand markets and paid dividends even during the pandemic.

Mr Bracken says the retailer’s average transaction value in the last two years is up 15 per cent.

“We have every intention of maintaining our strategy … and we think that we will be as well placed as anyone to handle a more recessionary environment. If indeed it does come,” he said.