Comment by Patrick Avenell
My first interstate assignment as a journalist was to head north to Queensland to learn more about WOW! Sight & Sound. The company was expanding rapidly in the Sunshine State and was about to roll out its first stores outside its home base.
On a blazing hot day in August 2008, general manager of retail Don Mayne walked me through the company’s Underwood store, happily explaining to me why WOW had the recipe to take on its nominal southern rival, JB Hi-Fi.
Whilst its product range was almost identical to JB (WOW also had small furniture and toy ranges), its business model was very different. Queensland WOW stores are primarily located on large tracts of land dubbed “Zones”, which were also owned by WOW’s parent company, SSI Group.
These Zones were so large that SSI Group could lease space on the sites to multiple other retailers, including WOW’s direct competitors, hence creating multiple income streams. But everything that can go wrong sometimes does, and when the confluence of the GFC, low consumer confidence and destructive price erosion started to impact the retail industry, it became much harder for SSI to find tenants for this land.
The Zone commercial property business was placed in receivership in November 2010. At the time, the receiver said the WOW business was “in very good condition and trading strongly”. Yesterday, only 15 months later, the WOW retail business was placed in receivership.
Where did it all go wrong? When I met with Mayne, WOW could not have been stronger. It was the major sponsor of the hugely popular Brisbane Broncos – a club with enormous brand traction in Queensland – and was amongst the first retailers to embrace online trading. Adding to its appeal, there was a distinctly ‘Queenslander’ feel to the business: friendly, no pretensions and with just a hint of a rebel attitude.
Mayne and WOW’s director of retail Con Nicolas were both very enthusiastic about future expansion. Funded by a 2010 cash injection from the National Australia Bank, WOW planned on opening 25 new stores nationwide by 2013. At the time, the group only had 15 stores, nearly all of which were in Queensland.
According to WOW’s website, there are still only 15 stores in Australia. Neither Mayne nor Nicolas returned my calls today, so I can’t ask what happened to all that cash. We do know that new stores were opened outside Queensland, though WOW never got close to reaching ‘nationwide’ coverage, and this has been the root of its retail problems.
Unlike JB Hi-Fi, which likes to open new stores on freight routes, maximising economies of scale, WOW Sight & Sound opened stores in far flung and disparate locales such as Shepparton, Albury, Coffs Harbour and Darwin. Never having more than one store in a region meant there was no way to maximise advertising reach, something the Sydney-centric Bing Lee has done magnificently.
A lack of nationwide coverage meant its once visionary website was virtually useless, with only customers in Queensland able to be serviced at competitive levels. Furthermore, while other retailers explored new revenue streams, such as music streaming, parallel importing and daily deals, WOW was becoming increasingly staid.
In a retail era increasingly characterised by devastating price erosion, companies that fail to move their income away from the flat panel TV market are becoming endangered species. WOW is the third major retail chain to fail during this period, after Truscott’s in July 2009 and Clive Peeters in May 2010.
Truscott’s owner Dr Christopher Starrs blamed the economy for that failure. Clive Peeters boss Greg Smith blamed a staff member stealing almost $20 million. It will be interesting to see where the blame lies for WOW’s demise.