Leading from the Front…
Originally an advocate of branded distribution, West Yorkshire-based Frontline Bathrooms now sources products it can put its own name to instead. Chief executive Nick Hall (right) and sales and marketing director Michael Sammon (left) tell Tim Wallace why the strategy is paying off
The recent collapse of distribution giant Cooper Callas raised some important questions about the future of the bathroom sector. After all, the company offered a big portfolio of recognised brands. It didn’t just source a pile of cheap product from the depths of China, rebadge them, mark up the price and make a killing.
These are uncertain times for distribution, and the Cooper Callas situation only served to underline it. Brands are out of favour, we’re told. There’s no margin in them and manufacturers want too much control. Some are turning their backs on distribution altogether and going direct to the retailer.
Admittedly, Cooper Callas had problems largely unrelated to wider industry trends. But what’s clear is that many distributors view the unbranded route as increasingly appealing. And it’s a big worry to those who see established brands being sidelined in favour of obscure, but ‘exclusive’, bathroom products offering bigger margins.
But the point is that established brands might be ‘recognised’ in the industry, but not necessarily by the general public. Few consumers have a list of their favourite bathroom brands, or know who’s offering the best quality, so they’re unlikely to buy a bathroom suite just because of its name.
One bathroom distributor that’s unashamedly exploiting the unbranded trend is Frontline, based in Featherstone, near Leeds. Launched in 1990 and owned by the Grafton Group since 1997, the company’s original portfolio was 100% branded, but that figure has now shrunk to just 15%.
As you’d expect, the company vehemently denies accusations that it’s simply chasing margin and dressing it up as a marketing strategy. I’m assured that only 35% of its products are sourced from the Far East, and all from the best factories. The quality is good, the price is right and the service second to none. If you want it next day, you’ve got it.
The paradox here is that although Frontline has offloaded most of its big names, it’s still right behind the idea of branding. But it would rather promote its own brand – prefixing many of its collections with the word Aqua – and rely on great marketing and a top-notch brochure to do the rest.
Heading the operation are chief executive Nick Hall and sales and marketing director Michael Sammon. The pair have overseen double-digit growth over the past three years and are continuing to develop their own product range and distribution network.
Frontline’s 85,000sq ft warehouse holds £3.5 million worth of stock and there are plans to extend it even further. The office is even open on Saturdays, underlining its determination to offer not just “good quality at the right price” but unrivalled customer service.
Turnover is just shy of £22 million and the aim is to hit £30m in the next five years. The company buys a sizeable chunk of its product in dollars from the Far East and has taken a bit of a hit following the recent Brexit vote. However, Hall and Sammon have decided to freeze Frontline’s prices for now, criticising those who’ve introduced knee-jerk increases in recent weeks.
So how’s business going and what’s the company’s strategy going forward? As ever, the two directors offered me an open and honest assessment…
Q: Tell us more about your brand strategy…
Michael Sammon: We decided 10 years ago that we needed to be less reliant on brands and more on bringing in products ourselves. It’s moved forward since then. But we don’t just source from China. Our products come from the UK, Europe and the Far East. Our baths come out of the Duravit factory. We also supply Merlyn showers and Just Trays do our own-brand trays. We’re also in partnership with April shower enclosures and RAK.
Q: So you’re not totally against brands?
MS: No, if a brand knocked on our door and we could operate on a successful margin, and it wasn’t bastardised in the market, we wouldn’t say, ‘no, we’re own-brand only’. It’s just that we found brands have got their own strategies and have got to achieve certain volumes. A brand isn’t just going to say, ‘here’s an exclusive product for Frontline’. They need to give it to four or five distributors. And that’s where the race to the bottom can potentially start.
Nick Hall: And you’re competing with other people then, aren’t you? There’s a big market for brands, but it’s not one that Frontline is in. The good thing is when we have such a vast array of our own products, they’re not competing. It’s our product and it’s nice to be in control. We’ve looked at growing the business on two things – product and service. Our customers want the product tomorrow.
Q: Will you go more unbranded as time goes on?
NH: Yes, if 95% of everything out there was branded, your margins would be dictated to and you’d just be competing with whoever you can get that brand cheapest from. On top of that, we need better products, better photography and better service to compete with the brands. It’s a harder gig really. A brand would generate its own demand.
Q: Some have suggested that you’re heading towards the TC Bathrooms business model?
NH: In what regard? We don’t sell online. We’ve stayed true to what we are. Where others have gone online, we haven’t.
Q: Would you consider selling online in the future?
MS: No. We have an élite dealer package for customers who display their own branded products, so they get extra terms again. It’s beneficial for showrooms to showcase the products.
Q: Is there a wider trend towards the unbranded model?
NH: Yes, even in terms of the brochure. If they want to wait for our brochure to come out and copy it, that’s fine – you know who you are! [laughs]. It’s a nice flattery. We were one of the first to do a retail brochure. We invested in it and it’s one of our strengths. It’s a key success. Others have tried to mirror it. We’ve got to keep moving forward and be a step ahead of that.
Q: Is there still a place in the market for a branded distributor?
MS: Yes, if they control their costs and the brand is giving them ample distribution margin so they can pay their bills. But if the supplier is only going to give them x margin and it costs more to distribute, then it’s a no-win.
NH: Yes, we saw it coming a few years ago. One of our suppliers was starting to get more products and competing against us. Own-brand eradicates that.
MS: For a manufacturer to go and buy x amount of vans and deliver products is a big cost. A lot of people don’t want to get involved in it. It’s not a trend.
Q: But aren’t many suppliers being forced to take more of their products direct to the retailer?
MS: Yes, with Mira and a few others. Grohe also went down that route. It’s difficult, because online there’s no restriction on what you sell at. If you want to make a pound and I want to make 10 pounds, you’ll always be cheaper than me. That will always be the case with Mira or Grohe. When it’s so readily available online, someone is happy to earn less than the other person. You can’t control it.
Q: Are you basically doing everything a manufacturer used to do – finding products, becoming agents, producing brochures, etc…
MS: Yes, we’d have some branded, some unbranded and we’d sell on behalf of that brand to our customer base, like Claygate or Barwicks. That’s a cost a manufacturer doesn’t have to incur. He’s got four distributors, so he’s got 40 reps. You reach a lot of people a lot quicker than investing in your own brand. But if you compared our marketing spend with other distributors, ours would be a lot higher. We’re effectively doing the advertising for them. The added element is the élite dealers.
NH: We also did a radio campaign, similar to the Bathroom Brands sale.
Q: What else in the industry has changed?
NH: The end user – everything is convenience. It has to be easy and quick. Our customer base wants to order today and get it tomorrow. That’s what we do and get it right first time, that’s what’s important.
Q: You’re buying a lot of product from the Far East in dollars. How much of an impact is that having since the Brexit vote?
NH: Obviously, we’re taking a hit on currency. We have done for the past 10 months. The currency has gone against us. Inevitably, people are starting to put their prices up. It was a knee-jerk reaction, but we’re looking at the bigger picture. People planning to have their bathroom done will still get it done. Even the experts don’t know. People who’ve gone straight out with an increase have got to look longer-term. Why does it have to be negative? There’s no need to be at all.
MS: I think some brands and distributors were wrong to release statements the day after the Brexit announcement. We’re just carrying on. It’s business as usual, no price increases, just seeing if the market stabilises, which it doesn’t look like it’s particularly going to. The drop in the dollar has been nearly 25% in the past 12 months. We can’t put our retail prices up by 25%.
Q: Are you surprised by Crosswater putting their prices up by 10%?
NH: Each business has to do what’s right for them.
MS: If they are buying in dollars, even if they’re putting it up 10%, the drop or the hit has been 25% over the past year, a lot worse. So there’s another side to the coin.
Q: And people buying from China will take the biggest hit?
NH: Yes, it’s one of the big hits. But that’s what we do. You take the gains when you get the gains and you have to take the losses when the losses come.
Q: When does it become a problem?
NH: If it continues in the same trend. It’s always the same, it goes up and down and you take the rough with the smooth.
Q: What percentage of product are you buying from China?
MS: About 35%. But after Brexit, we’ve negotiated price reductions with suppliers. Europe is keen to make sure they keep the business. We’ve even had China supply us at reduced prices. It allows us to pass on as little as possible to the retailer. We’ve got to make sure the momentum keeps going.
NH: It’s an exciting time to be British. The leave and stay camps both lied and made it very difficult for the man in the street to make a decision. They were so confused, they didn’t know what to do. They muddied the water on both sides. Immigration was the driver.
MS: The currency thing you just have to ride. It’ll level out and you realign.
Q: Who are your main competitors?
MS: Claygate. It’s a good business. They run it well. They’ve got a mix of branded and own brand products.
NH: They’re very like Frontline. But everyone supplying bathrooms is a competitor. Over the past five years, we’ve had more lower-end suppliers taking market share and passing on the really cheap Chinese products. Everyone’s competing, but there’s a big enough market for everyone.
Q: What do you make of the Bathroom Brands operation?
MS: You’ve got to be respectful. Burlington is a fabulous brand. We’re looking at what Bathroom Brands are doing because a lot of the time they set the trends.
NH: It’s a winning model. The support they give the retailer is fantastic. One exciting bit of our work is because we’re own-brand, we help develop the products with our suppliers. When it starts to sell, it’s really satisfying.
Q: Why do you think Cooper Callas went bust?
NH: It looks like it was all single-digit margins. Distribution is a very heavy cost. If you don’t have the margins up front, you have a problem.
MS: There was a reliance on a big brand in Franke. You don’t want to see other distributors fall by the wayside, but it’s a massively high cost.
Q: What makes a good retailer?
MS: One that pays on time! Ones who work with us, display our unbranded product and are there for the long term.
Q: What does a retailer want from you?
MS: Back-up and ease of returning a product. We’re quite flexible with that. There’s no comeback. Make yourself easy to deal with and put things right immediately.
Q: What’s your take on the CMA investigation into the bathroom industry?
NH: You could see what direction Ultra was going in to protect their showrooms. They tried to do the right thing. It’s a bit close to home, that. I sympathise with them.
MS: Their intentions were right, but you can’t dictate what the retailer sells at.