The co-founder of the bedding and homewares retailer reveals the keys to his business’ longevity over its 40 years of operation – and its plans to thrive for the next 40 years.
From humble beginnings in Queensland, Pillow Talk now operates a chain of 59 stores across eastern Australia, with around 800 staff nationally.
Marking its 40th anniversary in 2017, Pillow Talk boasts a history of being ahead of the curve and looking at ways to satisfy customers first before ways to better its bottom line.
Indeed, as the company’s general manager Kate Spencer says, “When we set up our website, no one was doing that yet. But as they say, if you are not embarrassed by your first website when you look back at it – you started far too late. It is very funny to look back at that site.”
My Business speaks with managing director and co-founder Heath Goddard about his lessons in business over four decades, the keys to longevity and his thoughts on a retail industry on the receiving end of a variety of disruptive forces.
How did you come to establish Pillow Talk?
[Year] 1976 would have been a starting point, when myself and another gentleman … who was a senior manager of many departments in Myer, were discussing bits and pieces, and probably he was the instigator of saying, ‘Why don’t we go and do all this ourselves.’
It was predicated probably by an opinion back then that a new product would have some degree of legs, that was called a continental quilt.
In those days, people used blankets and bedspreads as a general bedding look. So we went off and decided to start merchandising and telling people of the efficacy of a continental quilt over heavy blankets. That materialised in opening two stores on the same day around March or April 1977. Hence, our comment that we are now 40 years old.
We were probably instrumental in changing the way the linen and bedding industry in Australia [operated]. That wouldn’t be recognised by most people south of the Queensland border perhaps, but that’s how it happened.
“We reinvested those profits back into expansion, so we were self-funding our expansion, and that’s what happened, and we continue to do it.”
How did you ensure your initial idea didn’t go the way of many popular fads?
I don’t think the mainstream retailers really got onboard with it, as I would call mainstream retailers at that time. In fact we were two stores in Queensland, and we probably had the majority of the business for four or five years. Not in NSW, but there wasn’t much business being done.
Others didn’t really pick up on it to any great consequence until I would say the early ‘80s – so four or five years later. It was being mooted and spoken about with varying degrees of interest by others.
We, as such, were selling them into the Queensland market, and we were making profits. We reinvested those profits back into expansion, so we were self-funding our expansion, and that’s what happened, and we continue to do it.
What has been your approach to scaling the business over its 40 years?
We went off and started doing things in homemaker centres, that was also foreign. So a lot of what Pillow Talk did was countercyclical to 98 per cent of what was considered normal. Indeed even when we opened our initial two stores, I think the general consensus at the time – and I’m talking 1977-78 – was we had no hope of surviving.
But you’ve got to stop and think about what the people want, how do they want it, where do they want it, etc etc. And often not many people do that – they don’t think things through.
We do things differently. We’ve always done them differently, and we continue to do them differently. I now note to all of my people here, as soon as we do something, that will be copied by XYZ, and they never let me down.
We have designers, we have our own advertising people, everything – we do it all in-house. Our warehousing is all interlinked to what we do.
If you do everything in-house, does that mean you have a large workforce to support?
I think it’s about 750 to 800. That will vary from time to time, but we have four major warehouses. We have product categories in each one. We went offshore to varying degrees over the last 20 years, as the textile industry became unviable in Australia.
“One of the great things about retail is that its people – people make it or destroy it.”
For many businesses, outsourcing workers is a big thing to try and cut costs. Why haven’t you taken that decision?
We value trying to keep people employed in Australia. That’s going to become more and more under threat ... we can’t be unconscious of all of that. But Australia doesn’t have a lot of people in it.
I think when you get down to looking at grand machinery and robotic performance in warehouses, are our businesses big enough to support that? I doubt it. Might be able to support one or two, but most likely I would say not. So we would be looking for efficiencies in how we do things, but not necessarily changing the overall structure.
One of the great things about retail is that its people – people make it or destroy it. We’re proud of the people we’ve got working with us.
How do you balance driving online sales with harming in-store sales, and vice versa?
Everyone falls over themselves about online or this or that. A lot of people want to go in – especially in textiles – [to] feel the product, assess it, make certain that what they are getting is what they are supposed to be getting.
We do various checks – I’m in the throes of checking about nine different products that I’ve acquired from online sources. We send them off to our analysts and test them. In many instances, we’re not surprised that they don’t actually come up to what they are claiming. It’s a problem.
I think a business that has a physical presence in the marketplace and a professional online presence can give quite good comfort to the customer base that they are dealing with because they’re there to go back to if there is a problem.
From Melbourne to Cairns, we have an eastern state footprint and we’re very visible – people can walk in and test.
“There’s a lot of, I’d call it obfuscation, being presented to consumers.”
There is a lot of focus on the retail industry at present, and that it’s struggling. There have been a number of high-profile closures. Would you say it is a problem of focusing on prices rather than value?
I think that the value argument is very, very important. I’m a consumer, when I go out. There’s a lot of, I'd call it obfuscation, being presented to consumers via their marketing structures.
I was with a friend in Adelaide the other day. She was showing me how she had bought these sheets from a competitor of mine, and she was saying how she got a wonderful bargain.
And I said, ‘I’ll concede you’ve bought well; you haven’t got a wonderful bargain because the item you’ve acquired is 20 per cent lower in quality than the one I offer’.
My particular quality that I’ve got is about eight per cent dearer than what she paid, but she’d paid half price from the original ticketed price.
Now the ticketed price was complete and utter rubbish, but in her mind she’d got a bargain because she’d gotten 50 per cent off. She actually hadn’t – if we had offered her that price, without being on sale, we had been about 15 per cent less than what she paid. We just didn’t happen to have that quality when she was looking. Ours was better.
“You can’t stand still, and whatever you thought was a good idea yesterday, probably isn't so flash today.”
You’re celebrating 40 years this year, you must have learned so many different lessons along the way. What's been the real standouts for you?
I suppose the one that's probably stood in great stead really is reinvesting back in your company; so having a good capital base for what you're doing rather than having huge borrowings, which means that you can be a little bit more in control of your destiny.
You can’t be off … buying Porsches and aeroplanes, you’ve got to be reinvesting back into your business.
The business that Roy and I happened to have picked up is fairly capital-intensive, and it’s becoming probably even more so because of the fact that we are dealing offshore with longer lead times and things like that. So maybe the fact that we did invest in our warehousing structure gives us security of tenure.
If you looked back at us in say 1985 and have a look at us in 2017, we’re chalk and cheese: we keep reinventing ourselves. You can’t stand still, and whatever you thought was a good idea yesterday, probably isn’t so flash today.
The pace of retail – I think it’s too fast. But it is what it is, and I can’t change it or stop it – we’ve just got to be quick on our feet to join it.
Fast facts: Pillow Talk
No. of stores: 59
Customer base: Predominantly Queensland and regional areas of eastern Australia.
No. of employees: Approx 800