Four lessons from the Pumpkin Patch collapse


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With reports that New Zealand-based children clothing retailer Pumpkin Patch has entered into voluntary administration, what business lessons can be learned? Here are four key tips to lessen the likelihood of business failure.

Stay ahead of the competition

In a hotly contested market such as childrenswear, staying ahead of the competition is crucial. Roy Morgan Research highlights in 2010 and 2014, Pumpkin Patch shopper traffic peaked at almost 220,000 people purchasing at lease one in an average four weeks, however fell to 128,000 to be eclipsed by Cotton On Kids which reached 133,000. Roy Morgan Research also points to the “stratospheric” rise of Kmart in the children’s-wear market, with the number of people shopping for children’s clothes at Kmart in an average four weeks jumping from 559,000 to 712,000 in the space of two years.

“With its cheap and cheerful kids’-wear range and a series of vibrant, attention-grabbing TV ads promoting it, Kmart is successfully luring more and more shoppers away from the competition with its fun, ‘fast-fashion’ approach,” says Angela Smith, general manager of consumer products at Roy Morgan Research.

Companies need to stand out from the crowd and remain top of customers’ minds, so marketing your point of difference and giving your brand personality is important to avoid being forgotten in a crowded market. An active presence on social media, and actively cultivating this market can also make a big difference to a brand’s overall performance.

Cultivate brand love

Interestingly, Roy Morgan Research says that Pumpkin Patch shopper numbers do not appear to be dwindling because of any dissatisfaction with the store, having won Clothing Retailer of the Year in 2013 and been among the category’s top three scorers almost every month since then, satisfying upwards of 90% of its customers.

This indicates the fickle nature of consumers, particularly in children’s-wear where often price outweighs other factors such as quality and supporting Australasian brands. So what can brands do to cultivate loyalty if competing on price is not an option?

Marketing and customer service expert Martin Grunstein says people will make their decision on price when they are given nothing else to consider.

He thinks that value added services are fundamental.

“I challenge you to do a brainstorming session with your people and generate as many value added services and things your clients get that they don’t pay for that you possibly can,” he says. “Then go to your competitors’ clients and tell them all that you offer and say ‘I just want to make sure you are getting all these things from your current supplier’.”

How does this apply in retail?

“In retail, maybe it’s worth putting in your window that you offer free delivery or a money-back guarantee or free coffee and tea while they shop. It might just make passers-by think how they were last treated when they made a retail purchase from your competitor.”

Grunstein adds: “If you are competing with the internet or any high volume, low margin competitor, you need to sell what they are NOT selling and that is things like peace of mind; service; stress management; added 'value', etc.

“Don’t do what your competitor does, do exactly the opposite! If he discounts his price, you reinforce the value added services you provide to show that your offer has more value.”

Grunstein says if you are losing business to the internet, the chances are you are not communicating effectively to the marketplace what they get from you apart from the basic product at a price.

“The solution is to stop selling the product, sell risk management; sell convenience; sell your human relationship!”

Ensure online capabilities

Warning signs of Pumpkin Patch’s flailing sales were revealed in Pumpkin Patch’s financial results for the six months ending 31 January 2016 amid challenges in the implementation of a new online platform. The results show an annual drop in sales totaling almost $20 million – from $121.9 million to $102.8 million – with sales through the online channel down by 12.7% on the previous year, which the company says was not expected.

“[The decrease] was caused by a significant shortfall of inventory available to the channel, combined with difficulties in the transition and upgrade to a new ecommerce and communication platform,” the financial results stated.

This highlights the importance of being fully prepared when adopting new technology, and preempting any potential problems to negate risks to sales and reputation.

With the convenience and ease of online shopping a key benefit to consumers, the importance of stock availability in online channels to appease demand cannot be underestimated. Nor can the risk of turning off customers who opt to shop elsewhere in a market flooded with other options and price points, and who and may not return.

Anticipate disruptors

Being aware of market forces and the potential arrival of brand disruptors is becoming increasingly important in the current business climate, with technology offering new ways to compete. The rapid rise of international ‘fast fashion’ retailers in the adult fashion scene appears to be gaining pace in children’s-wear according to Roy Morgan Research. The company points out in any given four weeks, around 35,000 Australians buy children’s clothing at ALDI, 15,000 buy it at Zara and 45,000 buy it from H&M – highlighting that’s 95,000 shoppers who might otherwise have been shopping at Pumpkin Patch.

“The children’s-wear sector is a very different place now than it was in 1990 when the New Zealand-owned Pumpkin Patch was established. Online shopping didn’t exist, and international players like H&M, ALDI and Zara were yet to disrupt the local market,” says Smith. “These days, retailers are faced with a much more crowded and competitive landscape; it’s inevitable that not every business will thrive in these ever-changing conditions.”

Marketing your business and highlighting what shoppers will gain from patronising your store – for example, free gift wrapping, personalised customer care, loyalty deals, well-priced clothes that don’t compromise on quality, supporting a local brand – is key.

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