Woolworths/Masters ignored customer feedback and 63 stores will be no more. By focusing on “sucking the oxygen out of Bunnings” they delivered appalling customer experiences that will cost them up to $2billion.
Firstly, the strategy was wrong. Instead of focusing of their core, profitable customer groups and delivering an experience that meant customers would become advocates – the strategy was to attack Bunnings. Woolworths called the hardware big-box effort Project Oxygen, aiming to suck the oxygen out of Bunnings, and distract Wesfarmers from turning Coles around. Lesson: focus on your competitor and your customers (if you have any) will know and respond accordingly. Your focus needs to be on delivering value for your customers.
When the focus is on beating competitors, you lose sight of the customer, and their value to your business. Not only did this approach wipe out Masters, Coles did turn around with earnings growth that has outperformed Woolworths for the past 25 quarters. (see my earlier post on Woolworths)
With such a focus on beating Bunnings, Masters made poor decisions on site selection and in their rush, made significant mistakes. Such as entering the highly competitive white goods market and not carrying a deep enough range in some of the core categories of hardware, garden care and power tools. They even had the wrong products at the wrong time of year. Apparently the connection with US based Lowes meant that Masters (for the first few years) had the hardware seasons around the wrong way – seriously..! Maybe they were focused on things other than their customers.
People deliver service to other people – Woolworths is known to be a very ‘top-down’ workplace and this produces a “rigid workplace culture”, and this flowed into Masters.
In contrast Bunnings people are encouraged to real – eye contact, helpful and knowledgeable – famous for employing ex-tradies that love to give us tips on what to do, how to fix it…not to mention all the free DIY events for adults and kids alike.
So what was the customer experience like in all this mess…? Here are some customer quotes about Masters from the Canstar Blue survey of 2,460 consumers
- Staff are unhelpful and don’t know their products
- It can be hard to find staff for advice on hardware products.
- Customer service is poor. Not as helpful or available as Bunnings.
- Some of supervisory staff are autocratic.
- Was hard to find a staff member.
- Staff rude — don’t understand sizing.
- Limited range, hard to locate what you’re looking for.
- The stores are confusing
- Lots of cheap and nasty rebadged brands
- Mistakes at check-out with a mistake made on most visits
- The item was delivered at 8pm at night after several phone calls to see where it was — put on the wrong truck.
Masters had a focus of beating Bunnings, not delivering value customers. A fatal mistake which has cost Woolworths (the major owner) $700m so far and a reported $1.6b in exit costs. They were meant to go out of business, it was only a matter of time.
The perspective of management was arrogance, and it will cost them around $2billion. But it also costs the shareholders, the impact on the lives of 7000 staff. But does it cost the exec’s..? Well Woolworths share price went up when they announced they were pulling out, hopefully no bonuses for the exec’s though…
Moral of the story: focus on delivering value to your core customer groups. Listen, finetune and progressively improve, and you will be a profitable, sustainable business. Focus on your competitors and ignore the customer, and you are out of business – it is just a matter of time.
This story is remarkably similar to Target USA (not connected to Target Australia) who decided to enter the Canadian market and made similar mistakes. They were also arrogant, over-confident and unrealistic in their plans, and again did not listen to the customers with the end result costing them US$7billion (see the detailed story on Canadian Business).