Mr Sacha Zackariya
53 Some aspects of Mr Zackariya's evidence in chief, in particular in Ex 1, are, in my view, telling. One section of Ex 1 is devoted to what is said to be CGI's unique strategy of locating retail units in busy high street locations and on a multiple basis. He refers to a number of examples - on one street alone in Copenhagen (Stroget), CGI has five retail units; it has three retail units in Times Square; it has two retail units, one opposite the other, at Paris Opera; and in Vienna it has three units on Kartner Strasse. This strategy is not of course, and could not be, part of the pleaded Get-up, but, according to Mr Zackariya, it is a strategy towards which CEM's conduct, but not its impugned conduct, is directed. For that reason, it is of concern to the applicants. At [29] of Ex 1 Mr Zackariya says:
One of the complaints that CGI makes in this proceeding is that there is a pattern, it believes, of CEM establishing retail units in close proximity to CGI's retail units, thereby appropriating trade that CGI would otherwise enjoy as part of the application of its corporate strategy of establishing multiple units within particular locations. I have caused to be set out in a schedule the instances to CGI's knowledge where CEM has established retail units either on the same street or within a block of CGI. A copy of the schedule is at Annexure SZ-6 of the bundle.
54 At [30] to [32] of Ex 1, Mr Zackariya elaborates on this concern by reference to the fact that CGI's competitors place more emphasis than CGI does on advertising in the print and television media and by way of promotion of sporting teams, whereas CEM has "piggy-backed" CGI's marketing strategy. He says:
In the course of performing my duties I routinely analyse the strategies and performance of CGI's competitors. In the course of doing so I have observed that CGI pursues a different strategy to its main competitors in being located in prominent locations to attract custom, and places significance on the prescribed service in its signage and associated look and feel of its retail units as its main form of advertising. On the other hand each of Post Office, Forex Bank, Travelex, UAE and American Express utilise corporate names and logos as brands; in my experience, their units are not generally located in the prominent high rent areas in which CGI operates.
I have observed that CGI's competitors place more emphasis than CGI does on advertising (in particular) in trade journals, magazines, tourist publications, television advertising, promotion of cricketing/sporting teams and the like.
One concern CGI has in relation to CEM's conduct in relation to the design of its external signage and its location of units is that it is mirroring CGI's unique placement of units which enjoys the benefit of an absence of competitors in the same area.
55 In another section of Ex 1, Mr Zackariya refers to that part of CGI's marketing strategy that places emphasis on attempting to locate retail units within international airports. As at July 2005, CGI was located at the following airports:
(a) Sydney International Airport.
(b) Vienna International Airport.
(c) Tallinn International Airport.
(d) Reykjavik Airport (owned and operated by Islands Banki using CGI get-up under licence).
56 In cross-examination, it was put to Mr Zackariya that The Change Group's business is directed at the impulse buyer. Initially he rejected this (T50/27), but faced with the content of a document annexed as "SZ-14" to his affidavit (Ex 1) which he described as a codification of "CGI's Marketing strategy" he was forced to resile from that outright rejection and concede that The Change Group are "marketing ourselves to a large degree to … [the passing, impulse buyer] … but it depends on the location" (T51/39).
57 I was not impressed by Mr Zackariya's evidence on this point; I got the clear impression he was seeking to disavow reliance on SZ-14 which he himself had put into evidence, or play down its importance. He went on to say: "We have locations which are predominantly geared towards repeat customers" (T51/39-40). He was then asked (T52/33-36) and answered (T52/36-40):
See, this document says that you're not relying on people to come to us just because you're The Change group, and you're not relying on businessmen, women, backpackers, to walk from the other side of town just to come to us. That's right, isn't it?---In this document, in 2001, that would be correct. Subsequent to that, what we have in Australia, as you will have no doubt seen from other parts of the affidavits, is that we have a much bigger amount of local customers who regularly frequent us, and if you look at the ratios, you will see that in Australia, we enjoy much higher ratios of sales than other parts of the world.
58 When he was asked where in his affidavit was there evidence about getting more repeat customers in Australia, he could not identify where in his affidavit this evidence was to be found. He said (T52/44-45): "It's the ration [sic] of sales to purchases", but did not elaborate and the matter was not pursued in re-examination. My subsequent review of the material in this section does not evidence the ratio of customers who are impulse customers to those that are repeat customers and it certainly does not evidence a greater ratio of repeat business in Australia compared to other parts of the world.
59 Moreover, the suggestion in Mr Zackariya's evidence in the transcript reproduced in [57] above that SZ-14 is out of date, is not borne out by Mr Bailey's evidence at [23] of Ex 24 which refers to The Change Group's "Operations Strategy Manual", extracts of which are annexed at CB-38. These extracts are pp 3, 4, 6 and 41 of SZ-14.
60 A little later (at T61/41) it was put to Mr Zackariya that there is little repeat business available to The Change Group units from tourists. He responded that if this is a reference to tourists in general, he would have to disagree. He was then taken back to SZ-14 and asked (T62/7-27):
Could I invite you please to have a look at what the author of [the] marketing strategy document said about this at page 1343. Have you got that page?---Yes.
Just read to yourself the first paragraph of that page?---Yes.
You would agree, don't you, that whoever wrote this document was of the view that there was little repeat business in foreign customers. That's right, isn't it?---As written here.
Yes, And I think you have told his Honour already that you are not aware of any document which is being created by the Group which supersedes this document. That's right, isn't it?---This particular document, perhaps not, but there's plenty of other material that supersedes this.
Well, let me just ask you some questions about the importance of this document. Firstly, this is the document that you annexed to your affidavit. That's right, isn't it? ---It is.
You did that because you knew it was a document that was important in terms of setting out what the Change Group's marketing strategy is. That's right, isn't it?---Yes.
61 Mr Zackariya was then asked a number of questions as to the use to which the SZ-14 document was put (T62/29-45):
And you know that the use to which this document is put, at least in part, is to train some of the cashiers that are manning your units. That's right, isn't it?---No.
Well, one of the things this document does to your knowledge is tells new employees or existing employees something about the business and how to do their job. That's right, isn't it?---No.
I will just draw this to your attention. You see, at 1340, [p 3, SZ-14] Mr Zackariya, the second paragraph, can I just invite you to read the second last sentence and the last sentence and by all means, if you need, for context, as a matter of fairness, read the preceding part of the paragraph?---Yes.
Do you agree now that this document, at least in part, is marketed at the cashiers that you are employing?---No.
Well, how do you explain what's said then in the part that I have just taken you to?
62 Mr Zackariya did not answer this last question, but went on to say (T62/45 - T63/5):
This document is the marketing strategy document, which is a high level training document for people moving into management. The purpose of the document is to help people to understand overall strategies and thoughts and if you notice, the actual document refers repeatedly to a marketing book called The Marketing Plan which was actually designed and written for people who have never done a MBA, don't have a Bachelors in Business Administration and this is our attempt to help up-skill potential future managers and was written in 2001 and was out and about and present when the - your clients were employed.
63 I do not accept Mr Zackariya's denial of the proposition that the SZ-14 document was used in part to train staff in the face of the passage which he was asked to read at the end of the second paragraph on p 3; nor in the face of the last three paragraphs on p 22; the last paragraph on p 23 and the third paragraph on p 30.
64 The SZ-14 document is instructive as to the customer market to which The Change Group pitches its foreign exchange services and the strategies it deploys in that market. It is instructive because it is CGI's own statement made independently of this case and prior to it being commenced. I regard it as having far greater probative value than the evidence given by the directors and senior executives of CGI and CGA on this subject.
(1) At p 3, SZ-14 reads:
Whenever marketing is mentioned what does one immediately think of? Well I am sure the answer is "advertising". However, when have you ever seen The Change Group on the TV, radio or in the newspapers? Never! So, what is the point of this Manual? Well, The Change Group adopts a different marketing strategy and there is, as you are about to find out, more involved in marketing then [sic] just adverts.
The Change Group actually spends a lot of money on marketing every year. Where? Well we are sitting in our marketing strategy everyday. Yes our branches. They are all situated in very prominent locations, where the rent is extremely high. This is essential to us if we are to fulfil our promises to the customers in our mission statement we must be easily accessible and clearly within sight to our potential customers. Furthermore, to do this our branches must always reflect quality to the passer-by, so our maintenance costs are also high. However, above all you are central to our marketing strategy. Your smart and friendly appearance helps greatly in drawing the passer-by into our branch.
This then takes us to the question: "To whom are we marketing ourselves?" Well our target customers are as follows:-
(i) The pedestrian foreign travellers who are going shopping; and
(ii) The local travelling public.
These are very specific groups and the main phrase to keep in mind here is "The Impulse Buyer". So, you can now see that to advertise in the traditional sense would be ineffective for our purposes. We want the pedestrian to stop, notice us and come in. Therefore, we are not relying on people to come to us because we are The Change Group or for businessmen/women and backpackers to walk from the other side of town just to come to us.
Of course such customers do exist and they form greater and lesser proportions of our clientele in our different locations around the world. First and foremost, however, is still the passing impulse customer.
(Emphasis added.)
(2) At p 4, SZ-14 relevantly reads:
Where is our Market Place? Well, the book's definition of a "business jungle" is very suitable for us. Our jungle is the High Street, with all of the tall buildings, the roar of traffic and the chaos on the pavements. There are several thousand tourists roaming through our jungle everyday and the competition could be lurking behind every tree, ready to pounce on our prospective impulse purchaser.
So, why should a customer come to us and not go to the competition? Well The Change Group prides itself as being in the "Non-drip mud" class of the Foreign Exchange Market. This means that we provide a quick, efficient and high quality service all done with a smile. Most people do not want to go to some back street or shoddy outlet and would rather come to us for a professional service.
(Emphasis added.)
(3) At p 6, SZ-14 relevantly reads:
Our market also has "Low Price" and "High Price" levels. The Change Group charges local customers a very low sell price in order to generate repeat business. Whilst charging the foreign customers a high price because we are focused on impulse purchases and know that there will be little repeat business.
So, we have already seen some of our market segments:-
(i) Locals buying foreign notes;
(ii) Foreigners selling foreign notes;
(iii) Impulse one-off buyers;
(iv) Backpackers; and
(v) Businessmen/women.
As we have already seen we have targeted the foreign impulse shopper and the locals going on holiday as our major customers.
(Emphasis added.)
(4) At p 20, SZ-14 reads:
As we have already discussed in the Introduction, The Change Group does not advertise in the traditional way. This chapter should then further clarify why this is the case.
There are two main ways in which a company can communicate with its customers: These are in an impersonal and a personal manner.
Under Impersonal Communication The Change group really only uses point-of-sale displays (i.e. The rate boards and signs for phone cards) and some promotions (i.e. The Buy-back Service).
Our most important form of communication, however, is Personal Communication. This is because we focus on passing trade, meaning we concentrate on direct face-to-face meetings as the major element of our "Communications Mix".
Nevertheless, the impersonal aspect is still extremely important to us. Potential customers will inspect our rate boards because they have a need for a particular currency that they cannot satisfy without our service. Some customers will already have a figure in mind while others just want to purchase the currency. Therefore, some might shop around and make comparisons before deciding on which company satisfied their needs most fully. On the other hand others will just come in and change if they just happen to be passing your branch and are impressed with its appearance.
This chapter should also have clarified the reason why we do not advertise. Tourists are not often here for a very long time and probably are not going to watch a lot of television or spend hours listening to the radio. So these mediums are of no real use to us. Furthermore, what would be the point of paying lots of money to put up big posters in the heart of our various cities? Firstly, it is often not possible and secondly there is no need because we are all situate centrally so they will most likely pass one of our branches anyway.
As a consequence it is only important for us to make ourselves standout on the High Street by having rate boards outside that catch the shopper's eye when walking down the road. Then we need a stylish branch appearance in order to bring the customer to the till. It is then and only then, that our skills in personal communication really begin.
(Emphasis added.)
(5) At pp 22-23, SZ-14 relevantly reads:
For The Change Group personal selling is really the only option, although the Internet might, in the future, be a profitable addition. Nevertheless, over the till sales will always be crucial to us.
This then is where your negotiating skills and cashiering expertise come into play. Obviously the customer can and often does just come into the branch and hand over his/her money. These are the easiest and most profitable customers. However, if the customer makes an enquiry you must know what to offer to ensure we get the deal. Therefore, we have to be flexible in terms of commission and exchange rate.
Most companies operate on virtually a "take it or leave it" basis, but we would rather you reduce the commission and still get the deal. After all, a smaller amount of profit is still far better than losing the deal and making no money whatsoever.
Remember, once a deal has been made, the customer may be willing to spend some of his money on our wide range of sundry items. This then further increases company profitability and helps you in reaching your targets and claiming that nice bonus in return.
…
Finally, it is also important to remember that to the customer you are the company. We can have the most fabulous and luxurious branches, but if you appear scruffy, uninterested or rude then we would never get that deal. So, ultimately it is the sales consultant behind the counter who does the deal. The whole back office and international administration exists purely to support the sales consultants in being able to deliver the best service possible to our customers.
(Emphasis added.)
(6) At p 27, SZ-14 relevantly reads:
The Change Group's "Unique Selling Points" (USP's) are that we:-
(i) Are open 7 days a week for long hours all year round;
(ii) Have well lit, clean and bright branches with high security and impressive design;
(iii) Display our well recognised logo and brand name which instils confidence in our customers because of our worldwide presence;
(iv) Have multi-lingual, multi-talented friendly staff;
(v) Offer quick transaction time;
(vi) Are located only in premium sites at the potential customer's finger tips;
(vii) Offer a total package service thanks to our sundry products; and
(viii) Have excellent Special Offers, like the Buy-Back promise.
(Emphasis added.)
65 In re-examination, Mr Zackariya again sought to deflate the importance of the impulse customer when he said (T75/38-41):
We end up negotiating with a substantial number of customers who have gone from bureau to bureau. We end up … serving customers who have seen us elsewhere and seen our get up - our branding - and decide to come to us, so that's why it's just not impulse.
Nowhere, however, are the elements of the pleaded Get-up referred to in SZ-14 as a force of attraction to The Change Group's customer market save perhaps obliquely in the reference to "impressive design" in (ii) of the eight "Unique Selling Points" on p 27 of SZ-14 (see [64(6)] above).
66 Mr Zackariya was asked a number of questions going to the uniformity of the design and branding (including external signage) of various CGA retail units in Australia and conceded that a number of them departed from that uniformity in one or more respects. He conceded that the external signage at CGA's retail unit at 136 Queen Street, Brisbane, close to one of CEM's units, was an exception to the uniform design and branding (T55/32); similarly for the units at Darwin: Shop 5, Galleria Complex, Smith Street Mall (T55/36) and Shop 27, Transit Centre, 69 Mitchell Street (T55/41); similarly for the unit at 452 George Street, Sydney (T55/45), although he went on to say that it was not completely different (T56/33); and similarly for the unit at 569 George Street, Sydney (T56/5). He conceded that where a unit was being located within another's premises or where the owner of the premises had its own reputation - Harrods was used as the exemplifier - it was not always possible to maintain uniformity in external signage (T54/12-41).
67 Mr Zackariya's evidence was that part of the uniform strategy of design and branding was to de-emphasise the corporate logo (T57/5) - the globe logo with the words "The Change Group" running through the globe (T58/35-36). After initially conceding that the CGA unit at 184 Swanston Street, Melbourne was an example of the pleaded Get-up (T56/46-47), he indicated that it "would actually fail an audit" (T57/14) because of the existence of the corporate logo on the external front of the unit, although he said that its prominence there was diminished because "[i]t's below the counter, which is not where people are looking" (T58/40-41).
68 Mr Zackariya would not concede that by the time people get up to the point where they were thinking about, and able to, transact - in close proximity to the cashier, their eyes would divert to the rate board. He said: "Some people's do. It depends on the customer" (T59/4). He could not confirm that the corporate logo appeared at the top of the rate boards in each CGA unit on the east coast of Australia; would not like to use the word "standard" as a description of its use on such rate boards; but conceded that it existed on many (T59/6-36).
69 Mr Zackariya conceded that from the photographs of units he annexed to his affidavits, it could be said that generally speaking CGA does not use either foreign words or foreign symbols (for units of currency) on external signage of those units (T61/15-18).