Sleep On It

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-By John Boley

It’s during a bad time for the economy that people often find it harder to sleep, worries over job security keeping them awake together with wondering whether the stock market will recover, or whether Greece will go bankrupt. Ironically, it’s then that a new bed might help ease the insomnia – but buying a new bed is something many people put on hold when money is tight. “Our understanding is that it fits squarely into the ‘discretionary spend’ category,” says Simon Beaty, Managing Director of Snooze. The company’s average sale is over $1,000 and it is very easy for a potential customer to say that although they need a new bed they will put up with the old one for another half-year or so “because I am not sure if I will have a job tomorrow.”

So selling beds and bedroom furniture is far from recession-proof. However, Snooze is having a relatively good time in these difficult days for the retail industry. “The bedding market is very mature and generally static,” says Simon. “We see traffic numbers (monitoring the number of people visiting stores) marginally on the decline, but at the same time we believe that those consumers are much better informed and qualified,” not least because they can narrow down their search and preferences via the internet. “We believe our process and our offer is certainly attractive, and while our traffic rates are going down our conversion rates are going up. Hence we have been very happy with our retail results in what is for the industry a very difficult period.”

Snooze currently has 73 stores across Australia, nearly all of them run by franchise partners. Simon came to Snooze in January 2008 with a strong track record in retail franchising and an awareness of a brand that was very strong but somewhat “stagnant, from both the retail and franchising perspectives.” There was a need, he says, to reinvigorate both the brand itself and the relationship with the franchisees, as a sense of momentum was missing from a brand that had been established in 1974 with one store in Melbourne under the trading name, ‘Capt’n Snooze’.

It was one of Australia’s first bedroom specialist stores, offering new standards of service, expertise and range. Demand grew, five more stores were added and by 1976, Snooze had successfully franchised stores in Victoria and New South Wales. In 1992 the company expanded into Queensland, merging with the franchised bedding group Bedpost, establishing the company as one of the largest specialised franchised bedding chains in the world. In 2002, Snooze became a wholly owned subsidiary of Freedom Group, a lifestyle retail organisation operating in Australia and New Zealand with brands including Freedom, Bayswiss, Guests and Leather Republic.

In 2006 a makeover for the brand dropped the ‘Capt’n’ component of the name, the cartoon-like cap and the red and black logo. In the wake of these changes it was decided there was a need to brush up the brand. “Our first role was to re-engage with our franchise partners, ensure they had a level of trust in what we were attempting to do as a brand.” Simon and his team wanted to see partners clearly understand they “were in fact the first priority for us. We didn’t have a business unless we looked after our franchise partners, which meant increasing their profitability, market share and sales. The reality is that means that the franchisor and the brand overall also grows.”

Research showed a certain level of franchise partner mistrust, or at least “a gap between expectation and fulfilment and we went about trying to identify why that was the case, then what we could do to turn it around. It is very gratifying to see that the relationship has got to a much more solid foundation. It is only through that sort of strong foundation you can go on and drive the business.”

Simon then turned his attention to ways in which his bedding retailers could increase their market share and profitability and one result was a radically redesigned website, which he says gives consumers better information more easily. “The feedback we get from our customers is that is the case. When we compare it with what our website looked like four years ago, it is chalk and cheese. Even over the last 12 months our website hits have doubled, partly because it is an easier website to navigate around but it is also one of the changes in the way that retailing works these days.”

The website is clearly intended to serve as a support for the physical shop, not a competitor. Realistically, fewer people want to buy a bed online. “We are dealing with products which predominately are very comfort orientated. A mattress is all about comfort, furniture is all about the aesthetics and how it fits into your home and enhances your lifestyle. Both of those things ultimately require you, more often than not, to actually see, feel, touch the product.” Snooze is in a market, which Simon acknowledges probably has less to fear from online retailing than some others. “I wouldn’t like to be selling books or shoes these days, or fashion items overall – that seems to be where the big hits are. But it is a method some of our customers will choose and we want to be able to accommodate that.”

The total number of Snooze stores has only changed marginally in four years – 73 today compared to 71 then – but there has been considerable change within the total, not least from franchise partners who wish to take on a second or even third outlet. Simon is pleased. “That shows a lot of strength in the brand and the business model, when people who are within it are prepared to re-invest.” When he started, there were 17 company-owned stores and most have been snapped up by franchisees. This was a deliberate divestment policy, he says. Snooze had to ask itself, “Are we a franchisor or are we a company store operation? As far as I am concerned our core competency is franchising although it is important to have company stores as an example of what it is that we are trying to franchise, and it is also important to have company stores that test and trial new initiatives.” There is a big difference between having a couple of company owned outlets that can test the waters on the franchisees’ behalf, and having nearly a third of the network under ownership.

Currently there are a number of prospects for new outlets, depending on regions. Simon says there might be space for a few extra in Melbourne but more in Brisbane or Sydney. He estimates a total of around 90 store locations would be ideal for the foreseeable future, “but we are very much driven by the desire of the prospective franchise partner.” Snooze so far has chosen not to open a store and wait for someone to take up the franchise.

To open a new greenfield Snooze franchise the approximate investment required would be around a half million dollars, including a $50,000 franchise fee, fit out, stock and ancillaries. “The ballpark figure would be half a million dollars” on a 10 year franchise (five years with a five-year option). For someone new to the industry, Snooze would assist in finding a suitable site, designing it and coming up with an appropriate layout, and would provide training – both in the “classroom” and in-store – to boost industry knowledge. Snooze supports the IT system and some other non-customer facing operations and Simon says it is the usual balancing act between what an individual franchisee does with his own business and what the global needs are for the brand strategy. “If those things are aligned then the synergy is incredibly powerful and the business model is very successful.

“Snooze is an incredibly powerful brand, its systems are very mature, but it has a desire to grow, change, modify in a very strategic manner. If I was a franchise partner I would be looking at this business and recognising that it has systems in play that I can run to assist me to grow my business and that the franchisor is not standing still. The franchisor is looking for the next opportunity. We travel overseas; we go to China, Europe and the US to look at what is happening in bedding around the world. We bring the strategy, the direction – ‘this is where the industry is going, this is what is happening around the world.’ We feed that strategy down to a local level where a highly motivated owner-operator is looking to maximise that for his benefit which will also benefit the brand.”

It is tempting to suggest Simon can sleep easy, though there is still much to be done. The business is ahead of budget and he is “confident, in a very difficult retail time that we as a brand can see enormous potential for the future. But all that is predicated on us continuing to provide an awesome retail experience that adds real value for our customers.” Consumers these days are very discerning, very demanding and rightly so, he says. They demand value and to be treated in the right manner. “Our objective is to do that differently and to do it better, to provide an absolutely awesome retail experience. The franchisees are on board with that; they see it as a commercial advantage and the systems that we have put in place allow us to deliver that. That is the direction that we intend to take the business in.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

September 25, 2018, 8:16 AM AEST