Leading figures from the supply and retail sectors have outlined the strategies they’ve employed to survive the recession and come out stronger.
Speaking at the kbbreview Retail and Design Conference at kbb Birmingham, Trevor Scott, owner of Rugby Fitted Kitchens (pictured), said the downturn had taught him to prioritise cost-saving measures and embrace the contracts market.
“The key thing is making money,” he told delegates. “If you’re not profitable you haven’t got a business. You’ve got to be lean. You’ve got to buy well, you’ve to keep fixed costs to an absolute minimum and negotiate the best terms you can with your suppliers. We always pay up front where we can to get the best price. That then reflects in our selling price. We can afford to sell for a little bit less, but still maintain margin. We might need a bit more to generate turnover, but that’s what we’ve achieved over the past five or six years. We’ve doubled the size of the business since 2011.”
Scott claimed he’d anticipated the end of the recession six to nine months ahead of his local competition. He also relocated the showroom, putting the company in “pole position” to profit from the subsequent uplift.
“It worked incredibly well,” he said. “The relocation of our business has done untold good. But specifically, it was the contracts and developer market that was key. Prior to the recession, we stayed well away from it, because we didn’t want to be put at risk by exposure to builders. But post-credit crunch, and not being able to get insurance, the developers suddenly became clients we could look at. They weren’t expecting to be offered credit, and we weren’t giving them credit. We were just offering them good product and good service and that’s been the single largest area of growth in the past two or three years.”
Andrew Laidler, national sales director of Egger UK, said the company had also learnt valuable lessons from the recession. “What you do is look at how you can improve things,” he said. “Look at how you can do things differently. Look at your people, get rid of the bad apples that aren’t adding any value. We listen a lot more, we do employee feedback, we engage a lot more with customers.
“We also do a lot more in terms of the private rental sector, student accommodation and hotel work, we also sell interiors, so we’ve completely spread our business. We work with trend forecasting companies too, the futurists, we do a lot of international work as well looking at future trends.”
Laidler also stressed the importance of developing your core offering and driving further growth. “Product innovation is very important,” he explained. “You need to move forward in a challenging market, if you retrench you’re going to struggle. You need to think about a more competitive market and what you have to do to get your share of that. You have to continue to innovate.
“Digitalisaton is also going to be very important and the new generation of social media – how we market ourselves, how we develop our systems. We’ve always got an eye on the future.”
Matt Earle, commercial director at Robert Lee Distribution, said managing volume and margin remained the key concerns. “The product balance with the brands we sell can make margin very tight, because there a lot of distributors dong it,” he said. “What we’ve done is acquire another distributor that had its own brand offering that we could then bring into our own portfolio to try to improve the percentage of own-brand product with a higher margin.
“We’ve also spent a lot of money on the IT infrastructure over the past five years to enable us to offer added-value services beyond just distribution. Now it’s about supplying data to customers to allow them to do their job better. They want up-to-date prices, they want to know stock levels without having to phone up, so we’re supplying data files to customers. And how can we help this fastest-growing part of the market – the internet, which is always a touchy subject? We can help them run those businesses. It’s about improving communication with customers.”
The panel also shrugged off suggestions that interest rate rises, flat house prices and uncertainty over Brexit might trigger another recession, claiming political interference in the process was the only concern.
“Are we heading towards recession? I would say no,” claimed Keith Taylor, owner of market analyst AMA Research. “The economic evidence is benign, it’s flat. It’s not really suggesting a downturn. The main worry is Brexit – if it hadn’t happened, our economy would be going pretty well. So basically people are sitting on their hands a bit. But I don’t see the signs of a recession.”
Laidler agreed that the market seems resilient, evidenced by the large amount of development work going on in the big cities. “The only thing that could screw us up is the politicians,” he said. “That’s a worry – the way they’re manoeuvring.”
Scott admitted that although RFK was buoyant, other dealers he’d talked to at the show had experienced slower levels of business. “It’s an interesting one,” he said. “Talking to other retailers I’ve bumped into, most are saying there’s been a significant drop in footfall in the past six months or so. But we’re not experiencing that. I think we’re in a fairly stable place. Despite the Government’s best endeavours to cock Brexit up royally, we seem to be battling on all right and hopefully that’s how it will carry on.
“What’s also interesting is that in the past 18 months we’ve seen prices of mainly European products rise by between 15 to 20%. But that’s affected everyone unilaterally. It’s not like there’s one big retailer that’s 20% cheaper than the rest of us. Everything’s gone up, but we’re bubbling along quite nicely. It makes you wonder why we didn’t all raise our prices by 20% two years ago to make more money!”
Earle claimed Brexit “won’t make any difference at all” and again pointed to political interference as the only potential stumbling block.
“We’ve been talking about this for 18 months now and everyone’s getting bored with it and getting on with the rest of their lives. We had to have a few serious discussions with our European suppliers, but they said, ‘we still want you to buy our products, nothing is going to change’.”