Page 1 of 2

Jeffrey Hutton is a Morningstar contributor.

Two weeks before it launches a new website aimed at seizing a bigger slice of online shopping, Myer Holdings (MYR) chief executive Bernie Brookes is sounding upbeat.

Not only can "real life" shops compete with Amazon and other online rivals, but eventually consumer sentiment will brighten and spending will recover, Brookes told a breakfast crowd in Sydney this week.

Already, as bank balances build, customers will splurge on products like the latest Apple iPad. Eventually, memories of financial shocks will fade, the Australian dollar will weaken, and the likes of Myer and its rivals will learn to use mobile phones and online tools better in order to get customers to spend.

"What's happening in Europe or on the sharemarket is adding to a psyche that makes it hard for consumers to part with their money," Brookes says.

"When we launch a hot line or if a new iPad comes out, people will take money out of the bank. This is cyclical. It's not structural. There's still opportunity if you're a good retailer with good products."

Myer is investing millions to spruce up stores, open new ones, and improve customer service, adding to the $600 million already poured into buying better information technology and streamlining its distribution channels after it was sold to Texas Pacific Group in 2006.

Brookes says the efforts are paying dividends. The retailer in February said it would spend $25 million on improving staff training and rewards and ensure that more people are on shop floors to take customer queries.

On average, the retailer has about 2400 customer contacts each week. A year ago, for every complaint Myer received, it had 0.6 of a compliment. Recently, that ratio has changed so that now every dim opinion it receives is matched with three compliments.

The company is aiming to open its 80th store by 2014, up from 68 now.

"Customers know when you've put money back into service," Brookes says. "It meant doubling down on the training and rewards for staff."

The retailer has exited electronics such as GPS devices, and price-sensitive items such as children's clothing that can be much cheaper at specialty stores or online. Turning to exclusive brands, and revamping stores and service are examples of elements the retailer says it can control despite a tough consumer market.

The result is that Myer can rely less on discounting to woo shoppers into the stores, even in uncertain times. The company has lowered its cost of doing business to less than 30 per cent of sales from 34 per cent.

"There's still a number of things we can control - attractiveness of stores, customer service, quality of the staff and stock," Brookes says.

"We couldn't afford to be a department store where you have a little of this and a little of that. If you fiddle you fail."