Zenith Strategy Associates

What a failing vacuum cleaner retailer teaches us about strategy

Godfreys was a specialist vacuum cleaner retailer (yes really). What lessons for strategy can we draw from its failure?

Godfreys Sale

The End of a High-Street Veteran

When I first came moved to Australia in 2010, I was somewhat surprised to see a retailer on the high street that specialised in vacuum cleaners. Godfreys was founded in 1931, and back then, vacuum cleaners would have been a complex household investment, requiring the technical expertise of a sales assistant for such a big-ticket investment. From these origins, Godfreys grew into one of the world’s biggest specialist vacuum retailers.

But over time, the salience of a speciality vacuum cleaner retailer declined. Shopping for the category became more functional, and well-served by broader appliance retailers like Harvey Norman, JB Hi-Fi and others.

Coupled to this structural decline in relevance, Godfreys elected not to stock Dyson. Dyson had set the category on fire with their innovative bag-less technology. But Godfreys couldn’t get the margins on Dyson products that it enjoyed with other brands. So they chose not to carry them. The result was a retailer without any meaningful source of competitive advantage and an inferior product range.

Once interest rates and costs started rising, Godfrey’s was caught out by wage and rent inflation, and a subdued revenue line. Having failed (unsurprisingly) to find a buyer for the business, the administrators threw in the towel on 4th June 2024, with creditors facing a complete write-off of debts.

For practitioners of strategy, there are some key lessons from Godfreys to apply to your own strategy.

Need for Clear Market Differentiation

Why should a consumer (or business for B2B businesses) come to you? Especially when times are challenging, it is vital to have a clear position of differentiation in the market.

Most businesses think they are special, so it’s important to bring a high degree of objectivity to answering this question. For differentiation to be meaningful, it should be hard for your competitors to replicate it.

Sources of competitive differentiation can come from proprietary IP or technology, privileged access to resources or product lines, differentiated processes, or unique capabilities.

But you have to be able to answer this question with real clarity. Nothing is more important for effective strategy than having a clear point of differentiation that is relevant in the market.

Beware of structural changes

Like the metaphor of the slowly boiled frog, structural changes to markets can gradually creep up on you, threatening previously viable business models.

That’s why it’s good practice to take a zero-based approach to strategy development every few years. A zero-based strategy approach is about defining what your optimal strategy would be without any of the baggage of your current business model.

Comparing your current approach to this optimal strategy can help you identify areas of strategic weakness, giving you time to address them before they become existential threats.

Watch out for market disruption events

Dyson was a clear example of a market disruptor that weakened Godfreys business model. I doubt stocking Dyson would have made much difference to their long-term position, but not carrying the hottest product in the category clearly didn’t help.

Potential market disruptors emerge all the time. The challenge is to know which ones will take off and which won’t have any lasting impact on your business.

Australia often lags the US and UK in the adoption of new business models or products. Staying on top of international market developments can therefore be really helpful when assessing potential market disruption threats. And if you pick them up early enough, you have the time to develop the optimal response in your strategy.

What about shaver shop

The case of Godfreys made me think about another Shaver Shop, an Australian retailer of shaving products and related items. On the face it, you might think again that a retailer focused on such a defined category might also lack salience on the high street. After all, you can go into any supermarket and pick up razors and related items.

But below the surface, I would argue that Shaver Shop has a much more sustainable position in the market, underpinned by a number of factors and sources of competitive differentiation.

Firstly, despite it’s name, Shaver Shop caters to a far broader range of categories than shaving. In fact, a more accurate (though less catchy) name for the business would probably be “Bathroom Appliances and Related Accessories Shop”. As well as shaving, it sells products related to hair styling, oral care, beauty, massage and fragrances. This mitigates some of the single category vulnerability that Godfreys suffered from. And it probably helps that many of these product categories involve more frequent purchases than for vacuum cleaners.

In contrast to Godfrey’s decision not to stock the hottest product in the category, Shaver Shop has a market-leading range, and is also able to negotiate exclusive products with leading brands.

Combined with a strong e-commerce capability, small (lower cost) store footprints, and good customer service, Shaver Shop seems to have strong sources of competitive differentiation. A formula for success.

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