Woolworths is no master

Posted by By at 26 August, at 12 : 54 PM Print



The disaster that is Woolworths’ entry into the hardware market should stand as an important lesson for anyone in business.

Enough has been written about the merits or mostly otherwise of the Coles Woolworths monopoly; even the publisher of this magazine has had a dig on his news site 21stcenturynews.com.au. However for our purposes today, we’ll leave the monopoly debate alone and concentrate on the disastrous attempt by Woolworths to enter the hardware market.

Woolworths should know better. The company’s senior managers should know better. They should have done their homework. They should have understood that the hardware market in America is a far different beast to that in Australia.

You can understand Woolworths’ incursion into a $42 billion market – it’s a no-brainer. But for such a strong business to fail its basic intelligence-gathering smacks of arrogance.

Did they think that resource alone would make them instantly profitable?

Melinda Smith is the chief of Masters and she admits there have been major mistakes.

‘’With a new business as a start-up, a lot of these things, including the stock that you need to order, including every single process that we write… including what does the store manager do with the keys at the end of the day… It’s all built from scratch, and so there’s a lot that you don’t know.

‘’We didn’t know a lot about the seasonal curve. We’ve got a great joint venture partner in America (Lowes) but when it’s Christmas time over there it’s also winter.

‘’Our Christmas time lines up with spring and Father’s Day so it’s quite a different seasonal curve and there’s no doubt there’s a heap of opportunities to better capitalise on that.’’

Masters has been in existence for two years. Its losses were originally forecast at $81 million, which were revised to $139 million, but look more likely to sit at a pre-tax loss of $157 million for the last financial year.

That’s significant money. Perhaps Woolworths doesn’t care. Its group profits are set to rise by approximately 6%, although shares fell 1.1% to $33.32.
Yet, if they wish to make inroads in this market they better do some fast thinking…

 

Excerpted from an article originally published in the Sep/Oct 2013 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your Sep/Oct 2013 issue of TGR. If you are not a subscriber, click here to subscribe.

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