Decline of Empires?

I note with interest the ebb and flow of our marketplace …

Two icons of American consumerism being Harley Davidson and Bose were both returning sales figures around 1.2 Billion $US before the GFC began. The effect on local US consumption of these brands was a decline in the order of 24% of sales locally. Needless to say there was an immediate imposed stringency on the ongoing operations of these companies that have been reflected in their international distribution policies. Both these companies are exemplars of product that is not necessarily technically or experientially competitive but that has achieved an excellent market share through applied marketing for consumer loyalty.

While Harley Davidson dropped Buell and cut production by 30 percent, Bose agressively responded by imposing strict conditions on it's product purveyance including mandating the compulsory acquisition of a prefabricated store design in order for a franchisee to maintain the product dealership. A lot of the better antipodean specialist stores that used to sell Bose refused to comply with these demands and were forthwith sacked as dealers. Having carried that through the fiscal year 2010 they are now opening their own stores that are seen by some of the existing franchisees as being in competition within their demographics. An iron hand approach to a historically loyal dealer network …

Bose have recently launched a Television product that will no doubt do very well through those dealerships that seek to proselytise clients to their own imbued Bose faith. Unfortunately the panel is an old tech 40 inch LCD with no built in HD tuner that will perhaps need the blinkers of faith to be effectively purveyed and purchased in the very competitive and feature conscious TV marketplace. I have observed in the past that there is nothing considered so effective in sales techniques as the sheer evangelism of the “American Way”. It seems that there is a monocultural spirit of sales presentation that is intrinsic not only to companies like Bose and Harley Davidson but is also demonstrated by the Tea Party, Scientologists, Mormons amongst other institutions that basically proclaims “We believe therefore we are absolutely right without reservation and will go forth and inherit the marketplace” … unfortunately those same basic traits were demonstrated by the Branch Davidians in Waco in 1993.

Much of Australian shop floor retailing ethos and practice of consumer electronics purveyance was founded on US sales principles from the 1950’s wherein the salesman would operate on a commission and would be trained in such techniques as “overcoming objections” and “closing” the client. The fundamental premise of this process is that unconditional support for the company and it's product is required of the salesperson and that the “prospect” is an individual that can be manipulated into an emotional condition where they are willing to purchase there and then. Needless to say many of the written tactics preached by the champions of this particular sales approach came to resemble the CIA handbook for interrogation of suspects. Is it any wonder that people are preferring to buy certain categories of goods such as fridges online when the alternative is to deal with an unscrupulous sales warrior trained in psycho active purveyance?

It could be said that the new single store brand formulas as presented by Apple, Bose and Harley Davidson are the logical extension of this into multi channel retailing in the 21st century. They remove the possibility of internally dissident opinions from the staff and present a single coherent message across all lines of communication that is designed to inspire faith in the potential client. In this way they retain the necessary evangelical typeface and are able to transmit it through several media simultaneously. These stores are in high rent locations and for the initial product presentation require little input on behalf of a sales representative. You only have to push a button and there will be a carefully calibrated and timed presentation on a TV/computer screen and through an appropriate sound system. The salesperson need only step in to “wrap up” the purchase after one has been exposed to the presentation material … Welcome to the Machine … Not for nothing does Apple have US $73 billion in cash reserves … Bose isn’t telling as they are a private company …

The new Bose store in Sydney is coincidentally adjacent to the new concept store from JB Hi Fi. In this particular exemplar they are separating their software from hardware under the assumption that people will now be buying their software online and won’t actually want to visit a bricks and mortar store any more. At the same time they are expanding their hardware offer to include … Apple products … and are uprating the ambience of the sales floors to a cleaner, brighter, smilier, style without the dark corners and corrupted carpet interfaces that were the hallmark of JB stores of yore. Intra trade sources suggest that removing the drawcard of software from the hardware is causing sales of he latter to crash ...

At the same time Harvey Norman, who have been seeing a particular decline in profits in the last fiscal period, have adopted an online sales model. They are using a Magenta sales engine with an application sales system whereby the consumer will nominate which store the business is to be allocated to. The customer can then collect from the store or have it delivered direct to their homes.

Here’s the rub though … within a very short time of having an online presence JB and Harvey are feeling the competition from online purveyors not only locally such as Kogan and Catch of the Day but also all the international purveyors with various ... often dubious … offerings of similar brand and model product. In fact if one visits doba.com you can actually setup your own online retail electronics business without needing any actual inventory. So what has happened this week is that JB has now officially started grey importing via it's online presence digital cameras from Olympus, Nikon, Canon et al. This is an ideal product category to carry this out in as the devices are low voltage non C Tick devices that are easily shipped with no installation requirement.

However … how long before the Australian JB Hifi retail outlets that purvey cameras are closed … and how long before their existing 200 odd store network is substantially eroded in favour of the low cost distribution model of dealing direct with overseas distributors … and how long then before JB and Harvey are forced into selling own brand product exclusively as they devolve their relationships with tier one brands and are compelled by internally and externally driven competitive forces into the Kogan model of doing business with consumers?

There are going to be an awful lot of unemployed retail salespeople looking for work. Perhaps if we start them young in the uranium mines that are eagerly gearing up for the new Indian marketplace … say from 10 years old and upwards … we will be internationally competitive and able to save an awful lot of money on providing our youngsters with expensive secondary and tertiary educations … which they won't need anyway … as all that sort of boring stuff involving reading and writing and discernment will be done for us by our iPhones and News Corp.

Meanwhile in Japan the tier one brands are having their own struggles with the marketplace and of course their more immediate geologic and environmental situations. My favourite Denon factory that makes the AVR4311 Surround Receiver is in the Fukishima prefecture and is still operating on fractional capacity. We in Australia have little concept of the scale of this disaster to the Japanese economy. Unfortunately the biggest selling iPhone accessory in Tokyo is the “Geiger Fukishima” that hooks up to your phone with an app and lets you measure today’s background level. Available for c $200 online apparently … perhaps we will soon be able to buy them from JB … and then give them as presents to our kids when they go to work in the mines ...

Regards

Rab Turner