John Fletcher announced today that CML will
close Megamart, yet another failed new venture. This follows World4Kids,
Essentially Me and the upmarket food business Let’s Eat. All were fatally
flawed or poorly executed concepts. Some were victims of internal
politics.

World4Kids was the CML attempt to make life difficult for a
ToysRus entry into this market. But that entry was always going to be
difficult. TRU worked in the US because the toy market was owned by
department stores, selling at high margins but bearing CBD or
shopping mall rents. TRU built huge destination stores in free
standing low rent locations. Because of their lower costs they were
able to undercut the department stores by 10% and win market share. In
Australia, the toy market was not owned by department stores, but by
discount department stores such as Kmart, Target and BigW. They were
already selling at a reduced margin. W4K and TRU were left with no
identifiable point of difference. W4K went first, being swallowed by
Kmart. TRU has followed. In the US the toy market changed as WalMart
began to dominate and TRU has stumbled at home.

Essentially Me was to be a health and beauty
offer designed to peel sales from Woolworths/Safeway. In its original concept
it was to be quite a bit like Priceline and located near Woolworths
supermarkets. Two things happened. Firstly the offer went up market. Perhaps
the Coles buying team wanted to play in the big league of luxury cosmetics and
fragrances. Instead of looking like Priceline, it started to look like the
entry to a duty free store. The second flaw was that instead of locating the
early stores near Woolworths, the CML property people pointed out that they had
a few dead Fossey stores available. So the pilot store ended up next to a Coles
store! An own goal. Did anyone ask why the Fossey locations were
dead?

Let’s Eat was a beautiful offer. However,
that seemed to be the problem. It looked more like a museum than a retail
store. Look, but don’t touch. No theatre. It was rumoured to have only ever
got to 40% of its break even sales.

Now we have Megamart. Instead of getting
the offer right in a single city or market, it was spread as thin as Vegemite
across the country. Advertising dollars, management and market impact were
diluted fatally. CML got Officeworks right. But that was largely due to
Stephen Goddard building an excellent team around him and taking them
away from CML head office to set up the business. He bucked the system.
Stephen encouraged the team the question, challenge, develop,
build trust and not be afraid of taking risks. That early Officeworks
senior management group has largely moved to David Jones.

So we
have the team who built the only really successful new business for CML probably
causing John Fletcher to announce today: “We have begun the development of Coles
Myer’s next five-year strategic plan, which will consider ownership options for
our Myer business, including retention, de-merger and trade sale.”