Target customers fuming over axed toy sale (article)

I love this line

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“I’ve got 300 stores that knew how to win in this space about a decade ago. The only difference is a lot of new competitors are there now...

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He's essentially saying that the stores who were winners before were because there was no competition. Now that there is competition, they can't handle it.
Australian retail in a nutshell ladies and gentlemen

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Originally Posted by Sinnertwin

If the majority of consumers actually honoured their part of the agreement and completed their laybys

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The anger I personally feel inside. I never thought I would hear 600 different excuses a day on why they never bothered to make a payment.

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Originally Posted by Mythirax

The anger I personally feel inside. I never thought I would hear 600 different excuses a day on why they never bothered to make a payment.

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I remember working a midnight open toy sale at Kmart. People waiting in the queue for literally hours. Served someone at the entertainment counter at 1am, saw her leave just before 5am. There are multiple prams/strollers in the store, and almost no on me buying outright (hence being sent from the front end registers to the entertainment counter)

Something like 60% of those laybys never had a single payment, and even more were never paid off in full...

That was the last no deposit layby toy sale they ever ran.


Legally when laybys are being cancelled, retailers are allowed to only do a partial refund, to cover the cost of any price change/loss they'd make trying to sell the product again - eg if something was $50 at the time of layby, but on clearance for $20 the retailer is entitled to only refund $20 to offset their loss. I wonder what would happen if the big box retailers started doing this...

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Originally Posted by DaptoDog

The whole lay-by issue is a sideshow. Russo is employing the same play book he did at Kmart. This time it has an even better chance of working because he now controls both Kmart and Target. His methods of using of flat pricing (EDLP) at Kmart has won trust with customers who just used to wait for things to go on sale (previous hi-lo strategy).

It works particularly well in clothing, he cuts the price, lifts the volume and then secures better terms with Chinese etc factories. He then lowers the price again which drives volumes further. The drop in sales is simply a rebasing of the business to set it up for growth. Also, Kmart for the same period posted 8% same store sales growth, so he got some of the lost Target sales back there.

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I'm doubtful if the same trick will work twice. He's turned Kmart into the Walmart of Australia which has stolen business from both Big W AND Target.

It'd be interesting to see how that 8% growth stacks up against Target's losses. Oh wait here's a chart.

http://i.imgur.com/2GQ1ufx.gif

To be fair the large dip in the end for Target is caused in part by exorbitant spending to give stores a facelift. Though keep in mind Kmart have been doing the same thing these past couple of years and have barely bent a fender.

I'm selfishly not a fan of the competent direction Russo is taking these stores. It's going to result in big retailers realising that toys just aren't as profitable anymore now that we are the in 'app' generation and subsequently exiting the market (like DJ's did years before). This means more expensive toys for us.

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Originally Posted by Lint

I'm doubtful if the same trick will work twice. He's turned Kmart into the Walmart of Australia which has stolen business from both Big W AND Target.

It'd be interesting to see how that 8% growth stacks up against Target's losses. Oh wait here's a chart.

http://i.imgur.com/2GQ1ufx.gif

To be fair the large dip in the end for Target is caused in part by exorbitant spending to give stores a facelift. Though keep in mind Kmart have been doing the same thing these past couple of years and have barely bent a fender.

I'm selfishly not a fan of the competent direction Russo is taking these stores. It's going to result in big retailers realising that toys just aren't as profitable anymore now that we are the in 'app' generation and subsequently exiting the market (like DJ's did years before). This means more expensive toys for us.

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You're correct that Kmart has been profiting from Target, in fact since Wesfarmers bought out Coles group it's mostly been a zero sum game.

2009 EBIT
Kmart $109m
Target $357m
Total $466m

2015 EBIT (since 2016 is somewhat distorted as you noted)
Kmart $432m
Target $90m
Total $522m

Mind you, they were being run independently with very different strategies. We will see I guess.

I agree it's definitely not good from a collecting point of view. Target till now has been far more focused on brands, while Kmart is very much private label driven. I can see Target ranging far less Generations line Transformers under the new leadership. Thankfully, Myer and TRU seems committed and we now have PC and other great international online retailers to satisfy our plastic cravings.

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Originally Posted by prjkt

Something like 60% of those laybys never had a single payment, and even more were never paid off in full...

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The no deposit layby has gone away at Big W exactly because of this. The first reaction of customers when I told them was WTF, then when I go on to explain how people were abusing the no deposit layby to do exactly what prjkt explained they realised it was a good thing because then stock wouldn't be held up in layby limbo that legit customers wanted to purchase or layby.

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Originally Posted by Lint

I'm selfishly not a fan of the competent direction Russo is taking these stores. It's going to result in big retailers realising that toys just aren't as profitable anymore now that we are the in 'app' generation and subsequently exiting the market (like DJ's did years before). This means more expensive toys for us.

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Guy's restructuring will mean less product sitting in the back of house, less interest paid on stagnant stock & quicker product turnover. They'll also still have their in house brands in amongst the traditional ones.
Hot Wheels, Lego, Star Wars, Barbie, Monster High, VTech, Nerf, WWE, Monopoly etc... all of these are being sold & haven't fallen victim to the Kmart brand.

You'll still see toy product levels increase to meet demand during the traditional mid year school holiday and Christmas periods -it's the quieter periods in between that'll need to have the store inventory controlled and maintained.

If toys weren't as profitable as they are for Target, the company would have removed them from stores just like they did with the Pets and Luggage departments & utilise the floorspace with clothing and accessories.

Target just need to find their place in the retail hierarchy again and not try to compete with the likes of Myer and David Jones. Cafes, playgrounds, shoe fitters, bra fitters, cosmetic consultants... all they were missing was the car wash and mechanic :rolleyes:

BTW, Kmart didn't exactly do a great toy sale this year, do we know sales numbers for Kmart 2016 sale vs 2015 sale?

Kmart stopped doing no deposit toy sales years ago. I think the last one would have been when Animated was still new... It was absolutely the right thing to do.

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Originally Posted by Lint

I'm doubtful if the same trick will work twice. He's turned Kmart into the Walmart of Australia which has stolen business from both Big W AND Target.

It'd be interesting to see how that 8% growth stacks up against Target's losses. Oh wait here's a chart.

http://i.imgur.com/2GQ1ufx.gif

To be fair the large dip in the end for Target is caused in part by exorbitant spending to give stores a facelift. Though keep in mind Kmart have been doing the same thing these past couple of years and have barely bent a fender.

I'm selfishly not a fan of the competent direction Russo is taking these stores. It's going to result in big retailers realising that toys just aren't as profitable anymore now that we are the in 'app' generation and subsequently exiting the market (like DJ's did years before). This means more expensive toys for us.

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Target seems to have lost their direction.

To me, Target is suppose to be slightly more upmarket then kmart, where their product are more expensive and slightly better compare to kmart with their cheap eletricals, clothing, etc... but when they start to sell the same cheap china made stuffs like kmart and their home brand products, they are like abandoning their own customer base and try to entince Kmart customer base. Kmart customer will always stick to kmart or just pick the cheaper product that suits their need, thus Target is on losing end.

Also the no plastic policy hurt them as well as customers seems to go else where so now they have seem to bring back the plastic bags again.