Business

Online sales rose as Dick Smith fell

By Stephanie Baumgartel

One of Australia’s biggest electrical retailers and most iconic brands has closed its doors for the last time.

The end of Dick Smith has been coming since the technology retailer revealed last year that it owed creditors almost $300 million. It was placed in the hands of a receiver soon thereafter.

Univerity of Western Australia Business School senior lecturer Andrew Williams says the company failed to adapt to modern shopping trends.

“Electronics is a hot industry and has been for a while, but even though demand is booming, at the same time you have a big increase in supply,” he says.

“The result is that a retailer who effectively just re-sells these products has to be very, very conscious of costs.”

And that’s difficult for a traditional business that requires a shopfront and all the associated overheads that go with it.

Reif Myers, who owns the surf label Ocean Zone, says a strong online business is essential for almost any retail business.

“I chose to go online with the boardies to reach a larger audience and to capture more profit margin,” he says.

“Essentially [online] just cuts out the middle man. Online shops have definitely put pressure on physical retail stores, as customers are able to search the web for better prices and have it delivered to their door.”

Mr Williams says the company’s failure to recognise the importance of its online presence was a major error.

“At the end of the day, Dick Smith had trouble keeping its costs down, in large part because of its expensive retail shops,” Williams says.

“If they had a good online presence they might have been fine, but because they didn’t, customers saw they could easily get the same product from other retailers for cheaper. So they did!”

Australia’s largest online retailer Kogan, is one of Dick Smith’s biggest competitors and has relied on an e-commerce model to cut out the middle man, shopping products directly from the manufacturer’s warehouse to the customer. The savings have been significant.

Kogan even purchased the Dick Smith online store in March.

“Dick Smith didn’t do [online shopping] very well, whereas you have new competitors such as Kogan who have,” Mr Williams says.

“It is no coincidence that Kogan has bought the brand name ‘Dick Smith’ for a purely online business.”

It is not difficult to see why online shopping is taking over. By using the internet, retailers can offer a more specific, targeted shopping experience for each consumer.

Inbuilt website scanners are able to identify how many site visitors are online at certain times, where these shoppers are located and which items they viewed.

This allows a business to re-work its site to make it more appealing to consumers.

Retailers like Kogan have taken their website analysis to the next level by using technology that tailors the site to the needs and desires of every online consumer. The system can actually remember which items a customer viewed and then promote those items to the same customer on their next visit.

With newer, more advanced technology hitting the shelves on a regular basis, Dick Smith was simply unable to sell enough of the old stock before it became unappealing to the public. A better online entity might have solved this problem. Instead, Dick Smith drowned in surplus inventory and was unable to pay its suppliers.

If Dick Smith had taken advantage of its online platform and cut costs, it may never have suffered such an unfortunate fate.

 

Dick Smith Business Timeline

  • 1968- Dick Smith established itself as a car radio installation business. was founded as a car radio installation business.It soon moved into consumer electrics and, by 1981, Dick Smith had 20 stores. That same year, Woolworths bought 60 per cent of the company, which became 100 per cent in 1983.
  • 2008- A reduction in annual revenue saw the re-branding of Dick Smith with the motto “Talk to the Techsperts”. But this didn’t generate the revenue the company had hoped for, and 73 Dick Smith stores closed by 2010.
  • 2012- Private equity firm Anchorage Capital bought Dick Smith. The business was floated, raising $520 million, and 25 new stores opened. But, by the end of 2014, profits were well down.
  • 2016- The 2015 Christmas sale didn’t provide the revenue the company needed to stay afloat. By early January, Dick Smith was placed into the hands of receivers from Ferrier Hodgson, who put it up for sale.