TVNZ-NZ Marketing Awards: Morton Estate Retail, The Warehouse

If you stand still in retail, you’re dead. So, after a long period of declining sales, The Warehouse completely revamped its business and managed to reverse the slide. 

The challenge

In the 1980s, The Warehouse introduced the ‘bargain’ to New Zealand and revolutionised the way Kiwis shopped. Fast-forward to 2012 and New Zealand’s biggest retailer was struggling to compete. 

The global financial crisis had hit hard in 2008. Kiwis became more price-conscious than ever before and shoppers no longer expected low prices to come with a trade-off in quality. This meant retailers were forced to drop prices to survive. 

As the place where everyone gets a bargain, The Warehouse arguably should have been poised for success. But beyond price, there was little that was overly attractive about its offer. The products were seen as poor quality and, due to a lack of investment in the business for the past ten years, it had not kept up with shopper expectations and Kiwis started to shop around.

Discounts were not the sole domain of the Warehouse anymore. Shoppers were surrounded by discount deals, buy-one-get-one-free offers, one-day sales, online deals, pop-up sales and quite a few closing-down sales. Wherever you turned there was another retailer offering another deal that was as good as, or even better than The Warehouse’s and as a result, it became seen as a purveyor of ‘cheap and cheerful’. This led to five years of declining sales. 

The response

Mark Powell, who had worked with Tesco UK, Walmart US and then as chief executive of Warehouse Stationery, was recruited as the company’s new chief executive in February 2011 and he created a restlessness in the business. He was adamant about getting to the root cause of the problems, learning from the business’s mistakes and making sure every staff member was empowered to make the right decisions for the future.

Along with general manager of marketing, Jenni Ryan, planning began to turn the company around, but in order to strengthen the relationship with existing shoppers—and reconnect with those who had lost touch with it—it needed to fix the key fundamentals of retail.

Price is a given at The Warehouse. It was paramount that it continued to deliver to its catch-cry of ‘where everyone gets a bargain’, so it implemented daily price checking. It watched prices carefully and became responsive if need be. But price counts for nothing if people feel bad about shopping there, so it also needed to improve the quality of the product offering; to clear out the rubbish, tidy up the packaging, develop a strong product matrix, delete poor-performing brands and replace them with products that were more relevant and desirable for today. As a result, The Warehouse delisted over 100 substandard products resulting in half a million dollars worth of stock write-offs. Significant investment was made to develop house brands and when national brands couldn’t be secured locally, they were parallel imported.

It also needed to make the instore experience one that Kiwis were happy to come back to. The store needed to be easy to shop, enjoyable and convenient. 250 more staff were employed to work on the shop floor, all while a full re-fit programme worth $430 million was being implemented over a five-year period. 

Once enough of the basics had been fixed, The Warehouse needed to relaunch the communications to show the new offer, all with the intention of attracting ‘cool’ and ‘lapsed’ Warehouse shoppers, without alienating the loyal base.

 To do this it created a big idea that was able to encompass every part of the communications framework and incorporate the 150 sale events housed in The Warehouse calendar, some of which were calendar based, some of which were created to drive foot traffic. 

The underlying strategy was to promote the fact that it had all the essentials for ‘kitting out the Kiwi lifestyle’. And to truly make Kiwis rediscover The Warehouse, it was incredibly important that it showed the transformation that the business was undergoing. A commercial was created to ‘reset’ the business, both in the minds of consumers and staff and its key focus was to say that The Warehouse was changing. It showed there were 250 additional staff on the shop floor, better brands in stock, significant store refurbishments and better bargains for all New Zealanders. This was the circuit breaker, and it was closely followed by the campaign, ‘What Kiwis Want’.

In conjunction with DDB, this idea was brought to life by showing insights into the Kiwi lifestyle, visualising them in a fun, new and interesting way, and reminding Kiwis that The Warehouse was their one-stop shop. 

The insights (which were specific to each marketing event throughout the year) were uncovered through research or through interrogation of its own sales data. With more than 900,000 Kiwis coming into a Warehouse store every week, it had a live gauge on what Kiwis really wanted better than anyone else in the market. For example, it knew that Kiwis preferred hollow eggs to marshmallow ones, that black was the colour of choice when it came to sheets, and, through online research, that people buy curtains mostly ‘to keep the nosey neighbours out’.

While the brand campaign aimed to reconnect with New Zealanders on an emotional and truly Kiwi level, retail executions were used to talk to its trading events, resulting in over 230 TVCs, 180 press ads, 120 mailers and 125 radio executions each year—all while housing specific weekly price and product deals.

The business rightfully became obsessed with monitoring the effectiveness of every event in real time to see if its actions were effective and to make sure it understood the learnings and optimised on a daily basis.

The results 

Through constantly analysing the Big Data it had on offer, The Warehouse was able to make ‘What Kiwis Want’ credible and genuinely reflect this in its offering.

The campaign managed to positively shift Kiwis’ perceptions of The Warehouse and turned the dials on the following communication-related statements: giving you gift ideas; giving you reasons to visit the store; making you feel good about shopping at their stores; and being enjoyable to read or watch. 

And it also significantly increased visitation and basket size, surpassing all set objectives. 

Since the transformation, The Warehouse has reversed the downward trend and has seen period-on-period growth for the last nine consecutive quarters, with sales growing to $1.55 billion. Online sales have now also increased massively, and the online store at thewarehouse.co.nz has grown from nothing to being equal to the biggest Warehouse store in the country.

But it’s not just the Kiwi customers who are coming back. Big Brands like Sony, Apple, Kambrook and Hoover have all endorsed the changes and are returning to The Big Red Sheds.

Put together, these results demonstrate that The Warehouse’s relationship with Kiwis has improved. And with more investment from the company, it plans to continue to do so.

Award: Morton Estate retail

Winner:  The Warehouse

Judge’s comment: “A genuine business transformation, supported by strong consumer insight, use of data, brand positioning and marketing execution. Every element of the business under went change and re-alignment, risks were high, yet the retail turnaround is creating sustained value.”

Partners: DDB New Zealand. 

Finalists: BP Oil NZ ‘Wild Bean Café/The Block NZ Sponsorship’; Foodstuffs New Zealand ‘New World Brand Re-stage’; Hallenstein Brothers ‘Playmates/Will.i.am’.

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