Insider’s View: Why did Pumpkin Patch fail? Are you at risk?

Last month we shared some of the desk research that was done on why Pumpkin Patch failed and since this article was published a former Pumpkin Patch employee has reached out to share more insights and lessons that directors can learn from. 

The company was founded in New Zealand in 1990 as a mail order catalogue by Sally Synott. At its peak, the company was valued at over $NZ830 million and employed over 2,000 people. It operated over 180 stores across Australia and New Zealand, as well as in Asia, Ireland, the Middle East, South Africa, the United Kingdom and the United States.[2]

Key Events

IPO – The IPO in 2004 was seen as very successful and the company was generous in giving shares to staff, but there was a significant change as a result; decision making became focused on the short-term share price at the expense of long-term investment and decision making.

There was a focus on expanding fast and growing and as a result, the company took on a lot of debt to fuel the growth.

Was there enough Challenge?

There was criticism that the brand, which was premium in price, was not keeping pace with customers’ expectations. It was charging a premium, but the designs did not change significantly, and it was neither fulfilling its premium price nor cost competitive with similar offers in the market.  There are questions whether the board challenged the brand strategy hard enough.

The result was that stock built up when their seasonal approach started to fail and the GFC kicked in in 2007/8.  The feedback from the CEO to the board was that stock levels were ok as they were opening outlet stores to clear the stock.

Brand Strategy

With the pressure from high stock levels and new competitors online and from places like Kmart and Cotton On, Pumpkin Patch decided to launch a new brand, Charlie & Me’, aimed at the lower end of the market. Unfortunately, they were approaching the same suppliers asking for a similar specification but at a lower cost and they had not addressed the key issue, which was the premium brand not living up to its price with consumers.  Some of the magic brought by Sally initially, bigger ‘easy to shop’ stores with wider aisles and creches in store for kids, started to disappear in the cost cutting.

In some areas there could be three Pumpkin Patch stores, the premium store, the Charlie & Me store and an outlet store.

Overseas Expansion

The brand successfully launched its first store in the US in California in a premium mall, but it then decided to expand across the US, instead of consolidating and expanding slowly from the West coast into similar type stores in similar demographic areas.  It tried to expand nationally, using the same forecast assumptions as the premium mall in California and set up locations with very different climates like New York.  There did not appear to be a clear logistics strategy attached to this expansion. It went into areas with sub-zero temperatures in the winter with the same range of clothes that were in NZ and California, some clothes obviously not up to the job in those states.   The feedback from overseas staff was that they were not being listened to.

Internal Culture

The company that was started by Sally was initially a very family-focused organisation which was also very focused on the customer’s experience. 

The IPO was one thing that changed the culture, the other one was when Maurice Prendergast, the CEO announced he was stepping down.  Several people positioned themselves internally to take over in the vacuum.  Many felt that this lack of certainty on the CEO replacement went on too long and became a distraction for people internally.  Could they have given more clarity on this process with a better succession plan?

Lingering Questions

Twenty years after the IPO, one wonders what the governance team could have done differently.

• Did the board rely too heavily on the feedback of the CEO?  Did the board visit customers or staff overseas or challenge the brand strategy?
• Did the board consider whether their initial strategy, focusing on a design and procurement model, which was successful in ANZ, was right for a rapid global expansion? 
• What assumptions were made around the US strategy? Did board members challenge the strategy? How could they have de risked the roll out and tested slowly in other States?
• What assumptions were made about the proposed decisions? What confidence did the company have that consumers in the new market would switch to the new brand
• How would competitors react when Pumpkin Patch entered the market? What would we do if they entered our marketing?

Understanding your blind spots and getting better at understanding where your risks lie will help your organisation navigate potential potholes and crevices along the way.

Govn365 helps you understand your blind spots, challenges your assumptions to show you where you are exposed and helps you to chart a path towards compliance and beyond. Call us so we can help you survive and thrive.

2.Ref.  McCauley, Dana (1 December 2016). "How Pumpkin Patch went from boom to bust in less than a decade". news.com.au. Retrieved 13 November 2018.