A personal account of a business that has more questions than answers.
In an interview with the ABC, Smith provided some background on how the company started as well as some of the possible reasons for its collapse.
“I started Dick Smith Electronics 48 years ago, with $610 with my wife Pip. Woolworths had it for over 30 years and they made an absolute fortune for their shareholders. Roger Corbett said to me that over the years I think they made over $100 million which went to super funds and pension funds and of course in those times, they employed tens of thousands of Australians.
“But they opened so many shops, and why did they do this? Because the shareholders insisted that they have perpetual growth when it’s impossible.
“Woolworths opened far too many Dick Smith stores – I think they ended up with something like 300 and it was just ridiculous. Dick Smith Electronics as I ran it was selling to electronics hobbyists and that was the particular niche we were in which Woolworths should have stuck to and they would have done very well.
“The sad thing about Woolworths is it’s the largest operator of poker machines in Australia which I think is really sad for such a wonderful Aussie company.
“Private equity, they purchased Dick Smith Electronics from Woolworths for $90-$100 million and about 18 months they re-floated it for $500 million. This private equity company was tied up with growth and greed and some of them presumably made tens of millions of dollars in a short time. You get money for hard work, not for running some figures through the bank.
“Now anyone with any brains would be very suspicious, as how can something be worth five times as much because I don’t think they did anything or didn’t do much.
“And then 18 months later, the whole thing goes broke. I can understand the shareholders being disappointed, but they took great risk – they must have known that something that has gone up by five times in value maybe was a bit suspect, but I am very disappointed for the staff involved and also for people who have paid deposits who I understand if the company ends up going broke they could lose their money.
“The directors of the company must have known, so they must have the morality to do that and also the people from Anchorage Equity that just sold out and they made hundreds of millions. Now the gift cards and the deposits paid I’d imagine would be less than a million dollars – it won’t be a lot because anyone that has bought a gift card using a credit card or a paid a deposit can get that back from their credit card company as it’s protected, but the cash ones are lost.
“I can understand that as a shareholder you have taken the risk, sometimes you make lots of money and sometimes you lose, well ok, that’s life. But people who buy a gift card, they should not lose out and I am asking now of any of those directors who have made a fortune out of Dick Smith in the last three years from Anchorage or the recent directors, you should put in the kitty with some of the money you have made to make sure no one loses by paying a deposit or by purchasing a gift card.
“The big thing we need to remember is that we have an economic system that is completely not sustainable to have perpetual growth. It’s a type of Ponzi scheme. We should actually live in balance and we should live in a situation where we have to constantly grow because it is impossible.”
This story first appeared in Appliance Retailer.