08 February 2006

What's the real value of the Myer in Coles Myer?

With a mooted $1b sale price likely for mid-tier Australian department store chain Myer, parent company Coles Myer has obviously taken its eye off the game. Its latest “All that I want” campaign launched this week, takes the embattled store (see blog No one will save Myer now) down to an all new low. Competitor David Jones' boss Mark McInnes has described Myer's heavy advertising and discounting campaigns as "irrational"”… but at DIFFUSION we think he’s being polite. With retail turnover continuing to fall in Australia (according to a Australian Retailers Association report in the Sydney Morning Herald 8 February 2006), Myer has obviously decided to continue its “irrational” approach by launching an expensive and brand damaging campaign. The full colour catalogue DIFFUSION found in its weekend paper seemed highly reminiscent of another ‘low budget’ Coles Myer brand, Kmart (see image above). According to Coles Myer, Kmart’s brand position is “low cost, discount department store” while Myer’s is “pleasurable shopping experience/service, great brands”. However, we're struggling to tell them apart. The new owners, whether CVC, Newbridge or Edgars, will not only have their work cut out for them in working out how much of the $1b is brand valuation, but will also have a long and expensive climb back up the slippery slope of re-asserting that value to investors, employees and customers alike, as Coles Myer has done a pretty good job destroying it.

P.S. The Kmart catalogue is on the left.

McKinsey & Co: we like it when the stars align.

McKinsey & Co (www.mckinseyquarterly.com) recently published their ‘Ten trends to watch in 2006’ and DIFFUSION was interested to see how many of their 10-year predictions matched ours, see blog Marketing futures: 10 brand and marketing trends for CEOs to watch in 2006. While our specific focus was on Australia, it is obvious as all Western businesses function in an increasingly global environment, companies here will experience similar challenges and opportunities.

Specifically six of our trends were significantly echoed in the McKinsey report: the separation between personal and work lives changing due to technology (trend 1); the emergence of Chinese brands (trend 3); the increased scale and reach of Government (trend 5); consumers becoming business participants with increased power and the growing importance of business ethics (trends 7 and trend 8); the importance of ritual and community for creativity (trend 9).

According to the McKinsey report they correspondingly identified that: “technological connectivity will transform the way people live and interact”; within the next 20 years economic activity will be equally aligned between Asia and Europe (with China and India being important players); “public-sector activities will balloon”; “the role and behaviour of big business will come under increasingly sharp scrutiny” (specifically the level of suspicion and acceptance from society towards big business will increase); the growing importance of communities, as these will increasingly “become responsible for innovations”.

The McKinsey article sums up by urging companies to look at the implications of these trends, especially in relation to their customer’s needs and competitive developments. DIFFUSION can't agree strongly enough with our colleagues at McKinsey & Co and have gone as far as making some practical suggestions for CEOs to consider. We might be visionaries but we're pragmatists too.