Forum Archive Index - August 2001

["DR" <kat47@bigfoot.com>]

The Warehouse Group was started by Stephen Tindall in 1982 with $30,000 in capital, one small store and three full-time employees. In fewer than 20 years, Tindall has turned the Warehouse Group into the country's largest retailer, with 40% of the $1.7 billion spent annually in department stores on nonfood items. "It's an understatement to say that Tindall changed the face of retailing in the country," says Clyde D'Souza, an analyst with Salomon Smith Barney in Auckland.

Tindall's method was to develop a local version of the low-cost, category-killing megastores built by Costco, Wal-Mart and Carrefour. Designed to look like warehouses, the chain's 75 outlets, whose exterior walls are painted bright red, are typically huge stores in suburban areas. Inside, one finds aisle after aisle of cheap stuff piled high: tennis shoes at $6.30 a pair, boxes of lawn fertilizer for a dollar, nail polish at 84 cents a bottle. "If you go into any small town in the country, the biggest store there is probably us," says Tindall.

And he is just warming up. Last year, he invaded Australia, whose economy is six times the size of New Zealand's. He spent $54 million buying a smaller competitor there; operated under the Solly's and Clints brand names, it will be rebranded to become a bridgehead in Australia. To supplement growth in New Zealand, Tindall is starting to sell telecom and financial services and may add electricity sales as well. All told, Tindall expects to increase sales by 2.5 times within five years.

Can he pull it off? "It won't be an easy road, but I think Tindall and his team can do it," says Karen Wilson, an analyst with J.P. Morgan in Auckland. To bring in fresh blood, Tindall kicked himself upstairs last year, taking the title of founder and appointing a new CEO, Greg Muir, who had been with the company since 1999 and had helped run other Australasian blue chips, such as TNT and Lion Nathan.

Tindall's record speaks for itself. If you had been smart enough to buy a thousand shares of Warehouse Group when it listed on the Auckland exchange in 1994, your $1,050 investment would have compounded at about 27% a year and would now be worth $5,670.

Tindall, 50, has retailing in his blood. His great-grandfather founded what used to be the country's largest retailer, George Courts. His father was also a retailer, importing hand tools and other hardware. After graduating from high school, Stephen Tindall went onto an executive track at George Courts, winning the retailer award of the year at the age of 27. All the signs pointed to his one day taking the reins of the company.

But he had other ideas. "I always yearned to do my own thing," says Tindall, who stays in shape by swimming two and a half kilometers every day. During a sales visit he made to New York City in the spring of 1982, a client invited him to see a factory outlet (i.e., discount) store in suburban New Jersey. Tindall saw his opportunity. In October that year he quit his job, at age 31, and launched his first Warehouse store a month later.

It was a store unlike any other in the country. The concept of dirt-cheap goods was revolutionary for New Zealand. Tindall pioneered other concepts. He was the first to computerize his sales and inventory data, plowing $20,000 of his $30,000 in startup capital into two NCR cash registers that recorded sales data on magnetic tape, which he printed out once a week. At George Courts, inventory was taken only once a year, manually. "I was suddenly 52 times better in knowing how I was doing," says Tindall with a chuckle. Today, the Warehouse Group continues to be technologically advanced: As early as 1998 the company started to build an intranet/internet system and launched a data warehousing project.

Perhaps Tindall's boldest move was to aggressively take advantage of lower tariffs on imports during the wave of privatization and deregulation in the 1980s. "I was probably the first to start importing when they lifted the restrictions," says Tindall. By doing so, he could enjoy fat margins and still undercut domestically produced goods. He once imported 120,000 coffee cups from France, pricing them at 71 cents when similar mugs sold for $1.25 elsewhere. The cups sold out in three days. "It was just, whoosh!" Tindall exclaims. Cutting costs even further, Warehouse buys directly from suppliers around the world, thus eliminating middlemen.

One of the secrets of Warehouse's success has been Tindall himself. "He has managed to go from being an entrepreneur to running a complex organization," says D'Souza. "Others couldn't take it to the next level." Tindall's success attracted about half a dozen imitators, who have all come and gone. "They weren't reinvesting in the business. They didn't worry about technology. And they didn't understand what being a shopkeeper is all about," says Tindall

D.