Bright retail ideas that aren’t …

As retailers reel from the Australasian receivership of Dick Smith Electronics and Woolworths ditching of its Masters DIY hardware chain across Australia, decisions by big players to combine sectors are coming home to haunt them.

It points to one universal truth in retail; stick to your knitting. Woolworths has learnt the hard way in two troubled diversifications from its main grocery and food business.

Dick Smith Electronics was bought by Woolworths, expanded, on-sold to a private equity company and, within a couple of years had collapsed, while the company’s decision to open a hardware chain to compete with market dominating Bunnings has cost it billions of dollars and the chain is now for sale or will be folded.

Woolworths’ forays into other sectors have been damaging examples of a company moving away from its expertise and becoming involved with “lemons.” Tinkering with food and DIY as a joint opportunity has proven again retailers need different skill sets for each, and mixing them up is not a good recipe for success, says Auckland-based retail design and research company RCG’s chief executive Paul Keane.

Woolworths also owns the Countdown brand through Progressive Enterprises in New Zealand. “Some years ago the supermarket chain started to sell a range of general merchandise goods, suggesting the launch of Masters was going to feed into the supermarket chain,” says Mr Keane. “Gradually the level of merchandise reduced, and the test has probably been abandoned.”

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