Not everyone has been getting what he or she bargained for from The Warehouse Group of late. Particularly not the shareholders. Last year’s net profit of $61.2 million on sales revenue of $2.244 billion did nothing for the company’s share price which, now at around half its 2003 high of $7.40, is heading for the reject bin.
It’s all Australia’s fault of course. The company’s move to set up shop across the Tasman has, so far, been retailer’s nightmare. Customers have not been flocking to the “Yellow Sheds” of the former Krazy Clint and Silly Solly chains, and consequently the seriously under-performing Australian operations cost the company another almost $40 million last year.
Enter Ian Morrice, an unexpected but perhaps inspired choice of chief executive, to replace the long-since departed former CEO Greg Muir, who is now growing profits for the successfully floated kids’ fashion company Pumpkin Patch. Morrice, Scot with an impressive European retailing pedigree, is devoid of any Australasian-style retail experience so his career record and his charisma must have counted for lot at the board interviews.
Whether as mark of respect for his performance on European turf or as legacy from “CEOs past”, The Warehouse board has also entrusted Morrice with decidedly open brief. He has, he says, neither fixed-term contract nor specific timeline by which the company’s Australian operations must deliver some serious black ink.
The frankness with which Morrice tabled The Warehouse’s problems suggests the board is now more receptive to constructive criticism than it was when Muir vacated the hot seat. It took the board more than year to find the right replacement. And the directors have, says Morrice, been careful not to make him feel that he must resurrect the company’s fortunes at “lightening speed”.
They were, it seems, looking at future retailing strategies and format development – especially innovations like sophisticated discount category management. Morrice’s in-store background would appear to fit the bill.
Open brief
Warehouse founder Stephen Tindall and his board plucked Morrice from the top branches of the United Kingdom retailing tree late last year. What they expect, Tindall says, is an innovative approach to both management and strategy. “The board realised the company needs to adopt very broad brief where there are no givens and everything is negotiable.”
Staunching the Australian losses is now work in progress. Morrice, therefore, is spending time looking at the company’s bigger picture. Since picking up The Warehouse CEO mantle last October, he has concentrated on giving the business complete physical and getting to understand how it runs. The first fruits of his full organisational and strategic review – in which anything and everything is considered – will be revealed to shareholders in April.
Morrice isn’t doing cartwheels over either the company’s recent financial performance or its faltering share price but, contrary to expectations he is upfront in conceding there’s no quick fix in store. It will, he thinks, take four or five years for him to make his mark on the business. He is understandably tight-lipped about what’s in store but he’s equally convinced that he can turn The Warehouse ship around.
Morrice may have been Europe’s Mr Retail, but is his experience and management style right for this particular job? Time, of course, will tell. One of his first conclusions – that store formats either side of the Tasman are incompatible – seems blatantly obvious, but with more than 25 years’ experience covering every facet of the retail business – including responsibility for format development and category market share at Woolworths – he should know what he’s talking about.
Unlike many contemporary CEOs, Morrice built his retail career from the shop floor up. He believes that cutting his teeth with electrical retailer Dixons Stores Group at 17 before progressing to store manager at 19 gives him “grass-roots understanding” of the issues confronting frontline selling. He plans to prove that personal expertise gathered in numerous senior positions in marketing, buying and UK store operations is transferable to other markets.
New format development
After Dixons, Morrice held senior executive positions with Clydesdale Electrical Stores, AA Insurance’s retail operations, Woolworths and finally Europe’s number-one DIY retailer B&Q. Much of his perspective on global retailing is based on his experience in taking B&Q into new markets.
He managed growth and new market entry for B&Q in Asia and Europe and is expected to bring knowledge to The Warehouse – especially in new format development gained through direct exposure to the most competitive markets in global retail. His thinking on global markets is also fashioned by the time it took American retail giant WalMart to adapt to different market after acquiring chain of stores in Germany eight years ago.
Morrice has depth of experience in retail in all formats including “big box”. It seems the format of local DIY retailer Mitre 10’s megastores closely resembles B&Q stores, suggesting perhaps, what future Warehouse stores might look like.
Morrice is also keen to develop The Warehouse customer value proposition, strategy that means continuing to supply customers with the bargains they’ve grown to expect. The process involves refining store format, category management, advertising and marketing. There will also be strong focus on improving the customer experience, while maintaining price leadership.
And then there is product sourcing – both local and global. This is expected to include the development of more strategic supply relationships to ensure mutual profitability for both The Warehouse Group and its suppliers – strategy Morrice drove hard at B&Q.
The retail model has evolved since his days at Dixons, but Morrice says retailing has evolved most in store formats and management ethos. On the other hand, nothing differentiates the local market more than the Kiwi customer’s penchant for constant stream of bargains. With tougher macro-economic environment – including higher interest rates, cooling housing market, and mounting competitive pressures – Morrice accepts that it won’t be easy providing bargains while maintaining margins.
Customers’ expectations lift continually. So it becomes progressively harder to provide bargains and maintain price leadership. But observers who conclude that The Warehouse is moving upmarket are, says Morrice, missing the point. The Warehouse mantra of providing the best value proposition at the lowest possible price “simply hasn’t changed”.
The Kiwi retail psyche may be somewhat unique, but Morrice thinks local customer attitudes are similar to those offshore. New Zealand’s retail environment is at different evolutionary stage to that of more sophisticated markets like North America. But Morrice expects local shopper tastes to become more discerning as the choices about where to spend money widen. The key to remaining competitive lies with sourcing the best quality goods at the lowest possible cost.
And what is the Morrice management and leadership style? On the face of it, what you see is pretty much what you get. There are few, if any, airs, graces or hidden agendas for this canny Scot who got his first taste of management responsibility as teenage store manager in Motherwell, mining town not far from Glasgow.
Dixons provided great training ground for the intuitive and enthusiastic youth. Morrice moved from frontline sales to become regional training manager by his mid 20s. Two years later he was overseeing quarter (220) of all Dixons stores. “I recognised the traits of other successful leaders,” says Morrice. “The first store manager I worked for taught me lot about shopkeeping, hiring and motivating people, customer service and about making profit.”
Participative management
Rather than adopting particular management style, Morrice
