‘Brexit? It’s just a bump in the road…’
What impact will the vote to leave the EU have on a typical mid-market retailer with a network of KBB showrooms? Tim Wallace asks Iain Forsythe, managing director of Premier Kitchens and Bedrooms, headquartered in Peterborough, how he’s reacted to the news, and why his son Shane will soon take over the day-to-day running of the business…
There’s a big sign in the boardroom of Premier Kitchens and Bedrooms that reads: ‘Opportunity – don’t wait for your ship to come in, swim out to it.’
As a company motto, it seems an apt reflection of a company that’s had its fair share of challenges over the years, but treated each one as a catalyst for further growth. When its main supplier William Ball ceased trading back in 2010, MD Iain Forsythe simply bought his own factory and began making cabinets himself. All he regrets now, he says, is not doing it sooner.
And as the downturn then began to bite, he cut his network of stores from nine to six, took out his three worst-performing salesmen, and kept the company on a more than even keel.
Premier now fits 700 to 800 kitchens a year – through stores in Bedford, Cambridge, Lincoln, Northampton, Peterborough and Wellingborough – and has a targeted turnover of £150,000 a week. Bathrooms joined the mix last October, adding another £20,000 a week.
“Our net turnover is between £9 million and £10m,” Forsythe tells me. “And with bathrooms, we’ve taken a business that bolts on £1m a year with no overheads, no rent and no rates. We’ve just got two salespeople and a million-pound turnover. How does that look? I’ll tell you how it looks and the second word is fantastic!”
Still only 53, Forsythe has recently gone into semi-retirement, spending much of his time in Cyprus. This has allowed his son Shane to take on more of the day-to-day running of the business, although you sense his dad will still have plenty of influence in the years ahead.
“Shane’s been involved since he was 12,” Forsythe explains. “He’s got the energy and drive, so I’ve been a bit left behind, but I still have the experience. We have an average age of 42, so it’s more healthy than having a 50-plus board.”
Both are in a typically upbeat mood on the day of my visit, insisting the Brexit vote will have little impact on them, as they forge ahead with ambitious plans for a new franchise model. Iain officially takes on his new role as chairman next April, which neatly coincides with Premier’s 25th anniversary…
Q: How concerned are you over Brexit?
Iain: The Bank of England told us there’s no chance of Brexit causing a recession. It’s just a bump in the road. The media can cause a recession, but Brexit can’t. The problem in 2008 was that we had no dough.
Shane: It hasn’t affected us short-term. We’re still well up on the appointments we made last year.
Q: Does it also help that you manufacture here in the UK?
Iain: It does, but we’ve had an electrical brand write to us to tell us their prices were going up by 10% because of the euro. Why the sudden rise? Because they run a poor business, they don’t make enough money. It’s an excuse for a price rise, but they won’t get away with it with us.
A lot of subsidiaries of European companies – door distributors like Blum – told us they’d give us stability to the end of the year, which is a professional way of doing it. But to break ranks with a 10% rise didn’t ring true to me.
The real problem is the supply chain. Most products come through Dover and Calais. There’ll be more checks, because once you actually declare yourself an island, you’re pulling up the drawbridge.
Q: Where do you win out over your competitors?
Iain: John Lewis can’t be bothered to come out to your house, so they make you bring measurements in. They give you a ballpark figure quotation and tell you it’s £50 to come out, redeemable if you agree with that quote. And their quotes aren’t particularly well written or officially headed.
We have a hostess to meet and greet you. We’re still the only company that produces a full 3D and elevation plan in a presentation pack with a down-to-the-penny price.
With Premier, you’re not allowed to sell to a customer when you visit them. You have to bring them back to the showroom and present to them. We do a two-part presentation and give people time to think. As a consequence, average order value has gone up by more than 25%.
Q: Do you charge for your designs?
Iain: No, never. Don’t try to trap your customers. If you’re charging, it’s because you haven’t got time to do it for free, so you need to bring someone in. Does the £50 John Lewis charge cover the cost of going out to do it? No. Does it make the customer buy? No. So why do it?
Q: Do you do contract work?
Iain: No, we don’t supply any big contractors. They don’t want to pay proper money for the product, they don’t want to pay on time, they handle it badly and then blame you. They get you into a 60- to 90-day cycle and become completely unreasonable. The only people we’ll deal with are small builders with small projects and that goes under our PKB Trade division. It’s a downgraded product.
Q: What’s your recruitment strategy?
Shane: Originally, we seemed to be employing people that wanted to do it their way rather than the Premier way. So we’ve recently taken on an estate agent, a butcher and a timeshare salesman and all three of them have gone on to be fantastic. The estate agent has broken the company record with £181,000 of sales in a month.
We pay designers a low salary with a commission. It’s fairly normal. What’s different is that we tier it. We changed it back to how it used to be – back to weekly pay for the designers. It’s made them more hungry. If they have a good week, they spend the money quickly and want to go out and sell it all again. It’s worked really well. It’s had a big impact. Our top designers earn £70,000 a year and average designers £35,000.
Q: You now do 120 carcass colours. Is your flexibility what’s helped drive your growth?
Shane: Yes, the new factory manager and the new curved units and acrylics etc have had a massive impact. We’re one of only three companies in the UK that do a curved acrylic door.
Iain: PWS wouldn’t sell us their Metris range, they said it was exclusive, so we made it ourselves. That’s the difference.
Q: Tell us more about the new franchise model you’re planning….
Iain: I’m looking for people with poor balance sheets, people who are hard-working, to come and do it the Premier way. Work with us for three months to see how we deliver. I’d like to have two open next year.
Shane: Potentially, with us as a franchise model, they can still be the fitter or the salesperson, but employ other people to grow the business. We can have an impact on people.
Iain: We’re also now back to eight Premier showrooms, because we’ve got Bathrooms by Premier in Peterborough and Wellingborough – plus Northampton, which will be delivered by the end of the year. So we can increase the business without increasing the overheads.
Q: What do you make of the Dream Doors franchise operation?
Iain: It’s an absolutely fantastic business. We got quite close to them at one time. Everybody grows a business to sell it and it’s inspirational what can be achieved.
Q: So you’d consider selling the company?
Iain: We have our eyes open, but it would depend on the offer. There’s no reason why we can’t run it for another 25 years. Where we’ve got to is amazing. Success is a journey not a destination.
Q: What’s your view on the respective quality of British and German kitchens?
Iain: I’d say [to German suppliers] just explain to me the difference between the product you’re pushing from Germany and the product that’s available in the UK? Is it 18mm resin-impregnated wood board? Do they have mild steel nickel-plate hinges? Are they tested 100,000 times? You tell me how a German product that’s been handled and travelled that many times doesn’t come with a premium on it? The chance of damage is higher. I used to pay £4 to £5 a unit to wrap it in cardboard, but now we protect the edges with cardboard and wrap the rest in cling-film to show it’s fragile. It’s cut down on the damages.
Q: What are your views on the demise of Cooper Callas?
Iain: If you look at the accounts, it’s obvious that the business was in trouble. That’s generally through poor management or a poor customer base. But what I’m hugely surprised about is the pressure that’s been put on the rest of the industry, and particularly our suppliers. They’ve blamed poor distribution on Cooper Callas who are no longer there.
There’s a snobbery around distribution, mainly from the distributors. They see themselves as the goliaths of the industry and hold themselves in very high esteem, but trying to use them commercially can be very difficult. The distributor will say they don’t get loyal customers and the customers will say they don’t get loyal distributors. Something needs to give. You have to pick your distributors very carefully.
Shane: We’re very loyal with our suppliers. We’ve been with Electrolux 24 years, the same with Astracast. We get people coming in saying, ‘oh, you buy Roca, but we can do it 1% cheaper.’ We’re not interested in 1%, we’re interested in the service and building long-term relationships, but the distributor doesn’t understand that.
Iain: It’s a constant merry-go-round. If you take B&Q, Wickes, Wren and Better Living as the serious contenders in kitchens, how many times do they change supplier? They work with their trading partners and that’s what we do.
Q: What do you make of bathroom distributors who dump brands in favour of cheaper product they can put their own name on?
Iain: You’ll get leaks and damage in transit. If you buy cheap, you get what you buy. We had to have a product that matched our kitchen offer. We couldn’t go down the route of unbranded.
We call it nicking the odds. They could find some real test cases. Our issue was Astracast buying taps from China and then rebranding them. We had to say, if you continue to do that, we’ll do it ourselves or talk to a UK manufacturer.
Q: What’s your view on the CMA investigation into the bathroom industry?
Shane: It’s made meeting suppliers difficult, because they don’t want to say anything to you.
Bathrooms will be something we’ll put online at some stage, to support what we do in the showroom. I’ve been trying to get some idea of the CMA’s rules on it, but suppliers are saying they can’t legally give us any guidance at the minute. They’re all going through it with solicitors to see what they can and can’t say. They’re in the process of redoing their agreements.
It’s odd that the CMA say you can’t have a price for people with a studio and a price for online. That’s like saying you can’t have a price for someone that buys £10m from you and someone who buys £100 worth.
Iain: The CMA have upset the wrong person. They’ve got to have been really unlucky or ultimately there’s something that hasn’t come to light that was the real catalyst to it. Ultra have tried to do the right thing, they’ve tried to protect the bricks-and-mortar people.
The whole way we trade is surely open to the individual. It’s a waste of energy and that’s where I feel there must have been a warning? If we go online, there’s always someone who’ll say, ‘if it’s £15,500, will you do it for £15,000?’ There has to be trading involved somewhere along the line. It’s the nanny state coming out again.
Q: Do you see it as a victory for the online channel over bricks-and-mortar?
Iain: No, it’s not. It’s another divide between online and bricks-and-mortar. The company who were trying to price-fix will probably turn round and say, ‘we ain’t selling to you’. Would that not be a better thing to do? Can they afford to?
If I took my confidential agreement with retailers to other retailers in the country, do you think my terms would be the same as their terms?
Course they wouldn’t.