How it all went wrong for Godfreys

The demise of 93-year-old retailer Godfreys prompted an outpouring of nostalgia from those with memories of bowling ball advertisements – but many younger Australians have likely never set foot in one of the company’s 169 stores before.

Godfreys this week became the latest old-school bricks-and-mortar retailer to seemingly pay the price for failing to keep its brand alive and relevant for the modern consumer, who is more likely to buy their appliances from Amazon or Harvey Norman.

Godfreys has 169 stores around the country, but that figure is about to shrink dramatically.
Godfreys has 169 stores around the country, but that figure is about to shrink dramatically.Credit: Luis Enrique Ascui

“They were the go-to place for vacuum cleaners,” said franchising consultant and DC Strategy chairman Rod Young.

“You can see the advent of the internet changed the dynamics of the marketplace for virtually every product.”

The early days

Founded in the years between the two world wars by Cohen and business partner John Johnston, the pair took vacuum cleaners – which were once sold door to door – and built a national specialist store network and a memorable brand through iconic advertisements that still loom large in the public consciousness.

Jane Allan, the daughter of the late co-founder Johnston, attributed the company’s woes to COVID-related disruption, a tougher economic environment and cost-of- living pressures. But some industry watchers observe that its troubles began as far back as the turn of the millennium.

Allan was contacted by this masthead but declined to comment.

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The internet meant the need for in-store specialists diminished. As websites bearing product information and reviews became available online, other general white goods and electronics retailers like Harvey Norman, Bing Lee and JB Hi-Fi were expanding.

Godfreys’ large number of outlets also began weighing on the business. “Growth for growth’s sake – that was clearly the mantra of many retailers in the late 90s, early 2000s,” said consultant Retail Doctor chief executive Brian Walker. “It was about stores on every corner.”

“Godfreys never really grew with the times … The world changed dramatically. The acceleration of that change ultimately was the downfall of Godfreys.”

The onset of e-commerce meant fiercer competition from multiple fronts: online players like Amazon and Kogan.com began selling appliances at low prices and capturing more market share, subverting Godfreys’ strategy of discounting frequently and employing technical specialists.

Missing the mark

Godfreys’ decision not to stock category-leading brand Dyson for some time has been cited as another factor in its decline.

Young surmises that Dyson wasn’t prepared to offer Godfreys a margin similar to the those they were enjoying from other brands and chose not to sell it. “Certainly, Dyson would’ve taken a slice out of the marketplace,” he said. “Even though it might’ve been lower margin sales, it would’ve been sales lost for the Godfreys network.”

Godfreys was also slow to embrace technological innovation and trends like space-saving robot and stick vacuums, which are popular with apartment dwellers. Another straw that may have broken Godfrey’s back was the loss of a distribution contract with Hoover in January, one source says.

Despite Godfreys’ dwindling relevance, demand for vacuums continued to grow as urbanisation gathered pace. Revenue from Australia’s vacuum industry is forecast to hit $450 million this year, according to Statista, with an annual growth rate of 3.7 per cent over the next four years. The price of stick vacuums range widely in price, with a Dyson V15 Detect going for nearly $1700, while Kmart offers its own version for $149.

The company also suffered from structural and leadership instability which saw multiple changes across more than a decade.

In 2006, Godfreys was sold by co-founder Johnston and the family of Geoffrey Cohen to private equity investors CCMP Capital Asia and Pacific Equity Partners (PEP) for around $300 million. However, the firms sagged the business with too much debt and performance suffered during the global financial crisis. In 2011, Johnston rescued the business for a first time, along with investment bank Nomura, for $100 million.

Godfreys was floated on the ASX in 2014 with an issue price of $2.75, but over the years saw declining sales, high turnover in senior management (four chief executives passed through the business in three years), and a perpetually sinking share price that hit an all-time low of 21¢.

Johnston, who had retained a 28 per cent stake in the business, came to the rescue, buying it back a month before his 100th birthday in 2018 with the aim of delisting it, before he passed away later that year. Godfreys’ closing share price was just 33 cents, an 88 per cent fall from its ASX debut price.

“This change of ownership changed the culture of the business,” said Young. “You create challenges for the business, you might lose staff, your intellectual capital in the business is diminished, and of course while that’s all going on, the market is changing as well.”

Former Godfreys chief executive John Hardy was the face of the company’s iconic advertisements.
Former Godfreys chief executive John Hardy was the face of the company’s iconic advertisements. Credit: Sarah Keayes

Since buying back the business, the Johnston family has born the brunt of losses from a growing number of stores that have become increasingly unprofitable while trying to keep staff employed and hoping consumer confidence recovers.

“It just got to a point where their debt got to a level where they can’t service them.”

Does Godfreys have a future?

Closing unprofitable stores has been the first move of PwC administrators, who shuttered 54 stores in a network of 169 as part of an “immediate operational restructure”.

“The administrators will assess all aspects of the business,” said a statement from administrators provided to this masthead. “The intention is to sell the business as a going concern.”

Creditors are set to meet on February 9 and a report will be prepared before the second meeting that will detail monies owed to creditors and to the business.

Young believes there’s a future for Godfreys for the right buyer, noting the brand is well established and that any profitable stores may be appealing to a new owner.

But Walker believes Godfreys may go the same way as electronics retailer Dick Smith, which was bought by Kogan.com in 2016 as an online-only business.

“I don’t see [Godfreys] being a sustainable physical store model,” Walker said.

“You’ve got this passing of time, the failure of Godfreys to evolve and innovate on one level. And yet on another level, 93 years – that’s pretty good innings.”

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