Innovative Retailers - IKEA

Brought to you by Retailinsider.com and PCMS

The Name: IKEA
The Place: Too many countries to mention – but about 325 stores in around 35 countries.
The Story: It starts with another youngster in a shed - Ingvar Kamprad, stuck in the depths of southern Sweden with a helpful aunt. In 1930-something she helps him buy 100 boxes of matches which he sells on individually at a handsome profit. And a global retailing genius is born.

IKEA big box: A familiar global sight. 

Some history please, but keep it brief: IKEA stands for the founders initials plus the initials of the farm and village where he grew up respectively. Kamprad founded it in 1943 when he was 17 and at first sold pens, seeds and Christmas cards in the aforementioned shed. But in 1948 he added furniture to the range, and in 1949 a mail order form was sent out with the Swedish Farmers Gazette.

Don’t make me laugh! It reached 285,000 people. They bought stuff and by 1951 it was necessary to produce the first IKEA catalogue – which was and continues to be free to everyone. Jump to now and they print 197 million of them.

Alright, I’ve stopped laughing: In 1955 they start designing their own furniture, in 1956 they introduced self assembly products, and in the 1970s and 80s they really got going on the alternative design thing. Companies who made buckets were used to produce their chairs. Sofas were covered in materials like denim from a totally different industry. And supermarket trolley manufacturers helped them with sofa frames.

And where does it stand now? According to Businessweek, IKEA has become a curator of people’s lifestyles. It’s a one-stop-sanctuary for coolness. Anyone anywhere who wants to be middle class is a target and it is a quintessential global cult with their mantra ‘to create a better everyday life for the many people’.

IKEA bookshelves: Everytime, everyplace, everywhere.

Seriously though, it’s about low cost isn’t it? Certainly IKEA turns normal retail rules on its head. Its designers start with a functional need and a price - a very low price. From there they cut every cost corner they can without compromising on the quality to be able to design it. As has often been said: ‘Designing beautiful but expensive products is easy, whereas designing beautiful products that are inexpensive and functional is a huge challenge.’

Do they rise to it? Absolutely. IKEA replaces one third of its product lines each year. And almost uniquely among retailers they move heaven and earth to make things cheaper to buy year-on-year. Former CEO Anders Dahlvig has written that sales prices were reduced from 1999 to 2009 by around 2% each year. And still turnover in 2010 was Euros 23.1 billion, up 7.7% on the previous year, with 734 million store visits around the world.

Anywhere particularly booming? Russia, China as you would expect and er…Portugal. The average-spend is bizarrely the same wherever you are - from Sweden to Russia - and the best selling lines are the best sellers worldwide. It’s a phenomenon.

Well, the customer knows best: And what the customer doesn’t know is how much money IKEA makes out of their co-operation in the ‘IKEA Way’ of shopping. This involves the customer basically choosing, collecting, transporting, and assembling the products themselves. Dahlvig says in his book ‘customers must be even more integrated in the sales process, doing more themselves while having the perception of an improved service level’.

So the experience is exactly the same all over the world? They’d like it to be. Dahlvig writes that in 2006 a set of key performance indicators (sales, productivity etcetera) was set up which revealed that the difference between the best and the worst performing stores was more than 100%. So they try to move all stores up to the KPI performance level of the best 25%, improving results ‘practically without any new development.’ But he admits that IKEA is better at innovation than execution. And we can add to that, especially when it comes to marketing gimmicks.

Howso? IKEA is famous for its marketing ploys to entice customers in. Customers might be invited to become Ministers of Kul (Swedish for fun) and live in a store for a week before it opens, or start a queue to get thousands of dollars of free goods. They are expert at creating a story and spreading the buzz. It all worked marvellously until…

Until…Until they decided to open a store in Edmonton, near Hackney in north London. And the citizens there showed IKEA what happens when you open a store at midnight with the promise of discounted goods until 3am next to one of the poorest boroughs in London.

Shopping in Edmonton 2005.

Ouch: Thousands turned up, it all got nasty, and the store was open for just half an hour before it closed again. But on the bright side, someone did write a play about it. And then there’s China.

Riots? Not quite. Dating. According to the Wall Street Journal the Chinese have just never seen anything like IKEA stores and at the Shanghai branch senior citizens have decided it is a place to find love. Hordes of them turn up once a week, avail themselves of the free coffee, bring their own food to eat and just take the place over. IKEA is planning to exploit the growing middle class in China and increase store numbers from nine to 15 by 2015 but firstly they have to get over the Chinese liking for sleeping in their show beds and bringing videos to watch on their sofas. Apparently it is called ‘retailtainment’.

Is nothing sacred? Well, it’s the retail wild west out there but back in the old world the innovation is in more traditional avenues. IKEA UK has invested in a wind farm in Scotland, which provides 30% of total IKEA UK electricity. And there is also a forestry organisation which sources wood across 48 countries to try to increase the amount of certified wood. In 2002 IKEA Recovery launched in 100 European stores where returned products are mended instead of thrown away. And there are reports that IKEA is thinking of creating its own retail bank in Russia.

Crikey. Is that safe? Only licensed banks can run credit operations in Russia so the theory is that if they have to apply for a banking licence anyway, they might as well run a bank.

Can a shop run a bank? Well, it would be Ikano Finance – a separate entity which is still owned by Kamprad and his family. IKEA already charges 70p on all credit card transactions in the UK as a challenge to the charges placed on them by the credit card companies. They say it gives them a whole new revenue stream to use in the cost cutting drive for all customers. Perhaps a bank is just the next step on the path.

So what’s left to conquer? India of course. Although the government in New Delhi remains unsure about allowing foreign ownership of Indian single brand retailers. But when they do allow it, expect IKEA to storm in. Honestly there are people in Mumbai who don’t even know what a Billy bookcase is.

PCMS Group is a leading independent supplier of software and services to the retail industry; PCMS Store and Multi-channel solutions have been chosen by over 98 retailers including Arcadia, John Lewis and M&S.

Retail Species - The newcomer - Nicola McClafferty of Covetique

The Person: Nicola McClafferty
The Company: Covetique
The Job Title: Co-founder and CEO

Investment banker to online fashionista – now that’s a career journey: It certainly is. But McClafferty has always specialised in the internet/digital sector even when first working in investment banking after university. However, like many others before, working with entrepreneurs made her want to ‘get closer to the action’ which she did by moving into venture capital. Balderton Capital was her home for three years where her absolute speciality was e-commerce investment.

Anyone we know? Betfair and Lovefilm to name two. But from 2007-09 it was online fashion that really caught the imagination and the idea of an online consignment store for pre-owned fashion came to life.

Do you mean second-hand? Wash your mouth out. I mean pre-owned. But if you are having difficulty grasping the concept then McClafferty has a neat one liner for you: ‘Net-a-porter meets Ebay’.

Got it. But what’s wrong with selling clothes on eBay? Nothing at all. But McClafferty is very interested in secondary market places emerging in verticals. According to her, Ebay has not grown into the best site for some products and luxury fashion is one of them.

And why not? In a word, because people selling Miu Miu sequin flats for £165 are highly unlikely to stand around in Post Office queues waiting to ship them off in brown cardboard boxes. Nor are they fond of taking digital photos of said shoes in their living rooms and concocting a description. And as for engaging in bidding…. No, no, no. Covetique collects your items for free, authenticates them, photographs them, writes the sales patter and ships them on for you once sold.

And they make? 37.5% is their commission, which she says is lower than the offline stores. Hot tickets right now are Mulberry and Burberry.

And sales? Not happy to talk publicly about numbers but month-on-month it’s going very well and they are beginning to ship globally aswell.

So is anyone else doing this? Not really according to McClafferty. There are a handful of smaller players and Ebay will always do a big trade in fashion but mainly it’s a few offline stores around London. She enthuses about the UK’s more sophisticated market place which houses such companies as ASOS – whom she admires for stretching across such a wide demographic and translating so well internationally – and Net-a-Porter. We also have a good attitude to second-ha… sorry pre-owned goods.

OK. Brass tacks. Who does she want to be using her site? Now it gets interesting. At the moment McClafferty feels there are two distinct groups buying and selling. Sellers are so far only UK based and the vast majority of them have never sold anything before. But once they start its all systems go. They have a right old clear out. She wants to get to the stage which she has seen in New York where women consider this revenue stream as part of their monthly income. Buyers on the other hand are ‘aspirational’, fashion savvy but not in a financial position to buy new. However, McClafferty reckons that some crossover will start to appear soon.

Dare I ask about men? Not really. She has yet to be convinced there is a market for selling-on men’s designer fashion. Women just think differently about retail and probably clothes. Women are more about brand trust – as long as the retail experience is good and they trust the name of Covetique they will use the site. In fact, McClafferty has taken all this a stage further. The site allows you to create your own personal 'selling wardrobe' which buyers can then access – on the grounds that if they trust/ like one thing you sell they might well like all the others. McCLafferty says this is popular with US women ‘dipping’ into UK women’s wardrobes.

OK, this is a very young business. Who’s funded it? The two founders (Bobby Devins is McClafferty’s business partner).

To the tune of? ‘Enough’ according to McClafferty.

So are they in it to sell it or make it a high end Ebay? In a word she wants it to be the global destination for online consignment. She is very optimistic about its chances both in the UK and globally and ideally she would like to get to the point where a woman walking into Harrods buys a dress with one eye on how much she can re-sell it on Covetique. The message is: Women of the world, arise! And make your wardrobe work for you!

That’s quite a step-change in thinking: Admittedly but McClafferty sees digital technology as being instrumental in that. Leveraging social platforms is the way forward and she expects platforms to be much more tightly integrated for sharing tastes and discoveries. In essence making it easier to find what you already know you will like. For Covetique social shopping will change how women engage with fashion .

Shangri-la? Depends on whether you like shopping. But certainly the era of ‘smart fashion’ is about to dawn and Nicola McClafferty is right there to help you monetise it.

Launch of search for Top 100 E-commerce/Multi-channel Movers & Shakers 2012

The search for the Top 100 Movers & Shakers in E-commerce and Multi-channel Retail has been set in motion following the official launch of the process at the recent Retail Business Technology Expo 2012 in London.

This will be the third Retailinsider.com Top 100 report that is again sponsored by multi-channel specialists K3 Retail, and which continues to gain credibility as a key tool for highlighting the major players in the industry.

The constant change within the retail sector - as new digital technologies emerge - and the recognition of multi-chanel as the future of the industry has ensured that practioners in this part of the market are increasingly valuable.

We are confident that the forthcoming report, which will be released later in the year, will deliver on its key aim of highlighting just who are these valuable stars in the retail sector. It will comprise a mix of well known individuals along with lesser-known names who are heading for big things.

To view the Movers & Shakers Top 100 from 2011 click here

If there are any names you wish to put forward for consideration for inclusion in the Top 100 Movers & Shakers for 2012 then please drop Retailinsider.com a line at glynn@busicomm.co.uk

Guest Slot - Analysis Insider - Sarah Wilson

Question: Does anybody know why the UK operates an odd system of collecting rentals on stores on a quarterly up-front basis?

Big clue.

Answer: It dates from a time when property owners were typically many miles away from their assets and relied on horse drawn wagons to collect the rents.

The answer surprised us too. The last few years have seen a shake-up of the British high street as well-known brands have disappeared and the high street vacancy rate has risen to an average 14% with a shocking 25% in the North in towns such as Nottingham and Blackpool.

There are many factors at play here around customer service, customer offer, and the rise of convenient and price sensitive online shopping. Much has already been said on these topics. In fact, last year we spoke at the Retail Week conference on the future of the high street discussing exactly these topics.

However, there is also something simpler at play here, tipping the balance for retailers struggling with cash flow: the UK’s outdated mode of rent collection. This century old mode of rent collection is the nail in the coffin for the old timers and a potential barrier to entry for newcomers to the High Street.

Quarterly rentals: Nail in the coffin for many retailers.

A new retailer’s cash flow scenario is simply too severe when you have to take into account the three-monthly rental cycle. It is ultimately fuelling a cycle of potentially terminal decline.

Thankfully, there is something of a fight-back taking place with certain merchants including Monsoon, Sports Direct, Clinton Cards and Arcadia arguing with their landlords for a much-needed shake-up of the existing model, demanding the right to pay on a monthly basis.

The UK is part of a select group of European retailers including France, Italy and Ireland whose retailers still pay rent on a quarterly basis. It seems that the rest of Europe has moved on from horse drawn rent wagons, though this probably won’t be comforting news to the likes of Game Group that has gone into administration and Mothercare that is struggling to maintain its store estate.

Horses are not the only problem. Historically leases have been on a 15, 20 and 25 year standard lease and although there will be review points built into them they will be upward only rental reviews. There is a growing trend now towards six year leases which is a step in the right direction but still seems at odds with the pace of change around us.

How many other things in our lives are fixed at six years? The world was a different place six years ago: just think we had no iPhones, and no apps and no mobile commerce.
Fortunately, there is one chink of light: some landlords are waiving business rates on empty high street stores. It helps but it’s a sticking plaster, not a solution.

In her report on the future of the high street Mary Portas had many criticisms and many recommendations but there has been a failure to hone-in on the key things that would make a real difference to town centres. One focus should be on overhauling the rental system.

The problem is that there is no holistic approach being taken to reviewing the current model and a lack of a single body fighting for retailers on this tough issue. At present there is no organisation with any teeth that could potentially initiate a systematic plan to sort out this mess that amazingly has been causing problems since before cars had petrol engines!

This is a spondored column from Sarah Wilson, a retail specialist at consultancy Egremont Group

Multi-channel heralds big winners and even bigger losers

For some years having a multi-channel presence has been recognised as the way to drive extra sales from your customers.

Multi-channel: All good, but what's WAP TV?

It has been proven many times over that if they shop across multiple channels then they will be massively more valuable shoppers.

The big guns like Marks & Spencer, Tesco, and John Lewis have long advocated the multi-channel route because shoppers who buy across more than one channel can be anything up to four times more valuable than a customer that only uses a store or the internet to buy through.

At the recent Retail Week Conference 2012 Charlie Mayfield, chairman of John Lewis, was again highlighting this very point [click here for details]. Actually, the reality is you can't go to a retail conference without a presenter making this case.

He was suggesting that in these tough times merchants should look at the good old 80:20 rule and focus on the most valuable 20% of customers, which in its case would be its multi-channel shoppers. Retaining these should be the key aim.

This sounds very sensible and if you extrapolate such thinking across the whole retail industry - whereby the more successful multi-channel players grab and retain their fair share of these valuable shoppers who then inevitably spend less at other retailers - then we will likely end up with a modest number of very successful multi-channel operators and a lot of businesses that have lost their customers.

It's multi-channel or bust. 

This all rings true at Debenhams. The multi-channel shopper is worth double that of a store-only shopper and is three times more valuable than an online-only customer.

Its marketing director Richard Cristofoli suggested at the recent British Retail Consortium Multi-channel Retailing 2012 conference that customers are using the ability to shop multi-channel as a way of "editing their destinations". [Click here for a review of the event]

He therefore foresees fewer merchants providing an ever-broader array of products across multi-channels to very loyal customers who choose to shop with only a small number of operators.

The result of this is that we will see some very big success stories but equally there will inevitably be a lot of losers who fail to adapt to the changing marketplace. Multi-channel will have a seriously polarising effect.

The most sensible thing retailers can do therefore is to get their acts together and develop their multi-channel capabilities because if they don't then somebody else will be eating their lunch very soon. Actually, they probably already are...

My suspicions are that this topic may well crop up again at the forthcoming eTail Europe Conference June 25-27. If it doesn't then more people are deluded than we think.

Movers & Shakers Q&A with Gideon Lask of BuyaPowa.com

Brought to you by Retailinsider.com and K3 Retail

Gideon Lask, founder and CEO of BuyaPowa.com

1. What is the greatest opportunity for your business?

Brands recognising the power of social commerce as an amazing marketing tool; and a great way to develop direct, transactional relationships with their end-customer.

2. What is the biggest challenge to your business?

Customers are ready; we are ready; and we all want brands to start embracing social commerce more aggressively. It will come, and it will be great, but we want it faster.

3. With the benefit of hindsight what would you have done differently so far?

We’d have started working with the magazine publishers earlier. They are using co-buying to make that tricky shift from content to commerce. Their view is that co-buying leverages the relationship they already have with their audience, which is based on recommendation and empowerment. It's proving to be far more powerful than bolting on a traditional e-commerce store. They also get to charge their existing advertisers for running a co-buy to complement an existing ad campaign - so it proves to be lucrative too.

4. What is the future of the physical store?

They’ll be far fewer; and we’ll hopefully move beyond the Apple store-clone phase we’re in.

5. What will the high street look like in a decade?

I want them all to look like Marylebone high street, but they won’t. I predict Coffee shops, pizza restaurants, and Amazon lockers.

6. Will mobile devices be the primary sales channel in the future?

No – don’t forget the TV, and the fact that huge amounts of online shopping happens from the office. The future is about shopping across all of these channels.

7. What other retail business do you admire?

As a customer I’m really enjoying Mr. Porter, by Net-a-Porter. It demonstrates how brilliantly a melting pot of editorial and commerce can work. I love Amazon, but the thought of an online future dominated by mega departments stores depresses me. And I’m excited by businesses like Shop Kick. Multi-channel means so much more than click-and-collect. The potential of mobile CRM to deliver entertaining and rewarding shopping experiences is huge.

8. If you hadn't been a retailer what would you have liked to do?

I’d have liked to be Jensen Button. That would have made my wife happy too.

9. What marks out of 10 do you give yourself so far for achievement?

I give the BuyaPowa team a solid 10. We’re all in this to help define the next chapter of e-commerce – and we’re doing it. As a retailer I’ve never seen the levels of sharing, lead generation, and brand advocacy that goes on around a co-buy. I’m very proud of what we’ve done in just 12 months and I’m excited to see what we do in the next 12.

10. Who would you place in the Top 30 Multi-channel/e-commerce Movers & Shakers?

Patrick Wall, founder of MetaPack. He is quietly and very successfully streamlining the home delivery experience for all of us online retailers. It’s a great solution and he is a great guy.

Innovative Retailers - Hotel Chocolat

Brought to you by Retailinsider.com and PCMS

The Name: Hotel Chocolat
The Place: 62 stores in the UK and two in the US plus three franchises in UAE

The Story: Founders Angus Thirlwell and Peter Harris began selling confectionery together in 1988 and via Geneva Chocolates and ChocExpress they arrived at Hotel Chocolat in 2003/4. The first shop arrived shortly afterwards and in 2006 they upped and bought their very own cocoa plantation, the Rabot Estate, in Saint Lucia. Since then they have launched a hotel on the Estate, added lots of new stores, bought a second estate, piloted a ‘cocoa house’ chain (don’t call them cafes – no one will be your friend), and very recently opened a chocolatier’s store in Covent Garden where customers can see the chocolate making process. Phew. Still, it’s nothing for the man who puts raw cocoa nibs on his muesli every morning.

Angus Thirlwell: cocoa maestro.

They must be running to the bank every 10 seconds to finance this kind of expansion non? They say a resounding ‘pah’ to normal fund raising channels. It’s their own customers who fork out when they need money. In 2010 a truly revolutionary idea was presented for FSA approval - a chocolate bond. With interest paid in chocolates. There were two levels of bond value - £2,000 and £4,000 - and an extraordinary £3.7 million was raised from members of the company’s Chocolate Tasting Club, which funded a lot of the big projects happening at the same time. Thirlwell says that the idea of paying interest to their own customers instead of a bank was a very attractive one. There are some regulatory hoops but they heartily recommend it as a form of connecting with customers.

Blimey. How big is this Chocolate Tasting Club? 100,000 persons strong. They recently wrote to all the bondholders of the £2,000 level to ask if they wanted to upgrade to the £4,000, which gives a better rate of return. And immediately they raised another £500,000. As Thirlwell says, not bad for the cost of a stamp. The Bonds last three years and at the end of that period customers can elect to get the money repaid in full.

Crikey, if they started a tasting club all round the world think of the money they could raise? Hmm, not as easy as it sounds. Hotel Chocolat is indeed building a base in Scandinavia and North America but a lot of Europe has been ruled out. Delivering chocolates in hot countries is a messy business. But he says it can work anywhere with a commonality of approach to chocolate, a good delivery system and a sound economy.

That lets out Greece then? For sure. In revenue terms the international club is still an ‘embryonic’ part of the company but it is now the focus as Thirlwell feels the optimum number has been reached in the UK.

So, it’s not every chocolate manufacturer who ups and buys an actual plantation? Certainly not. This kind of vertical integration is unusual but Thirlwell says it evolved organically partly from customer demand and partly his own instincts. The huge pros for him are that it protects their intellectual property. No one knows what is about to hit the market until bam, it’s there. And as they control supply of their core ingredient the right stock is always there at the right time. This is very important at key times like Christmas.

Sounds like hard work? Yes, but they have already done it again. Buying another estate on St Lucia, which the existing team are bringing up to scratch to plant different varieties of cocoa bean.  And of course you can now stay at the Rabot plantation and fully indulge your love of chocolate. It soft launched all through 2011 as of January 1 this year it is totally open. Agro –tourism is a long term prospect for the company but as Thirlwell says ‘everything we do has the potential to be scaleable’. The beauty is that you can relax in luxury but are safe in the knowledge that the workers outside your veranda are not being ripped off. It’s the way forward. And the company is pretty confident that bookings in 2012 will reflect that.

And what do I hear about chocolate beauty products? Yup. There’s nowhere they won’t go this lot. They make cocoa butter products in St Lucia for the hotel guests but see no real reason why they should not spread chocolate beauty to everyone including their new European customers in Copenhagen and Amsterdam.

Roast + Conch Covent Garden.

The first stores? Yes, and the Copenhagen store will also feature a pilot of the Roast + Conch brand.

Which is? Hotel Chocolat is the master brand but Roast + Conch is the casual food and drink offer that sits underneath it. Thirlwell says they can only go in stores where the footprint is large like Copenhagen and Kensington but ongoing they will actively look for sites that are big enough to take on more than just the chocolate range.  

And where does that place the cocoa house brand? Keep up, that is different again. The pilots of the Coffee vs Cocoa bars are in Covent Garden and Edinburgh. Thirlwell says that the café experiment has been going on for five years with the first attempts not quite right. But he thinks he may have cracked it with the original idea of offering a normal coffee menu but with the option of having your latte made with cocoa beans instead of coffee beans, or with a shot of each. He would like to ‘dispel the comfy myth of cocoa’ – It’s more powerful than coffee and a super-food to boot. So don’t mention slippers and a milky drink.

I won’t, but I will ask what do you do with a problem like Thorntons? Ah, Mr Thirlwell goes quite coy on this point but will concede that to lose touch with what your customers want is the death knell. He sees his customers as a constant trigger to innovation and would consequently never sell through supermarkets (although he is approached all the time) because you have no idea who is buying your product or why.

It sounds like a retail jungle out there in artisanal chocolates. Correct? It’s certainly crowded but Thirlwell has just one word for you – fillings. Other people’s chocolates are about the filling. His are about the chocolate and that’s just the way he likes it.

PCMS Group is a leading independent supplier of software and services to the retail industry; PCMS Store and Multi-channel solutions have been chosen by over 98 retailers including Arcadia, John Lewis and M&S.

No wonder high streets are lost cause

Many high streets are doomed because  the economics make it staggeringly difficult for independent, non-chain operators to get a foothold and to then make the numbers stack up.

Doomed.

Over the past few weeks there have been a number of stark examples in London of the system failing these businesses. The first involves Jewish cafe Gaby's Deli on Charing Cross Road.

It's been around for 50 years but it's 71-year-old owner is now being shoved out by his landlord the Marquess of Salisbury who has received planning permission to have the site redeveloped by - just what we need - a restaurant chain.

It is just these sort of independent businesses with their quirks and character that make high streets interesting. But you can't argue with the landlord if he can make a better return from another operator. That's market economics.

Another desperate situation involves The People's Supermarket (featured recently on Retailinsider.com) that faces closure over unpaid business rates. This co-operative food store was held up by David Cameron as a beacon of his 'Big Society' thinking. Among its virtues are its employment of ex-offenders and the long-term unemployed.

Doomed.

It was supposed to be at the vanguard of a move by the government to make it easier for communities to set up and operate co-operatives. But if it can't pay the exorbitant business rates - that can be double the rentals on some shop units - then it's gotta go. That's market economics.

The final sorry tale involves the fall into administration of the Union Market supermarket/farmers market that opened in the former ticket hall of London's Fulham Broadway tube station. The idea was for an independent business selling British seasonal produce to compete against the big supermarkets.

Doomed.

But an increase in the rent to £300,000 per year and the local council putting up parking charges for visitors to the area pushed the operation over the edge. But as we've said, if you can't pay your bills then you can't be in the game. That's market economics.

There are no doubt many other similar examples around the country whereby interesting and independent businesses that bring vitality to the high street are doomed by the simple factor of the financial cards being stacked against them.

While this continues then it is hard to see how there is any long-term future for the high street. That, as they unfortunately say, is market economics.

Guest Slot – Recruitment Insider-Nigel Sapsed

There is a trend gathering pace. It might be down to the state of the economy or the fact that people are sick of all things corporate and are therefore thumbing their noses up at the big brands.

Big has had its day...for now.

Whatever it is it’s leading to the emergence of new small, family-owned businesses. In some cases these are being led by senior executives coming out of large corporations who’ve simply had enough of the constraints of working within the world of big business. 

The philosophy behind these new players is not about build, build, build and brand, brand, brand before sell, sell, sell, which has been a feature of the market for some years. Instead, the thinking today is more about growing methodically, holding onto the business, and maybe passing it onto your children some way down the line.  

One example of this is restaurant entrepreneur John Barnes (founder of La Tasca) who has set up a farm shop and cafe business that is being run by his daughter. It has its first unit housed in a former Little Chef and there are plans for no more than six outlets in total rather than a grand plan to create a mega-sized estate and then sell out to private equity.

And out in the country I’ve a garden centre near my house where the owner is always trying to expand the offer and he recently added an enormous farm shop. It is absolutely rammed at weekends despite it not being cheap so maybe we are seeing support for independent businesses where there is a perception of better quality.

Certainly I believe people are buying differently – with localness moving up the agenda and big brands now being shunned. People are instead popping into farm shops and other specialists retailers for the provenance and product knowledge they offer.

In big business there has been a loss of integrity in the eyes of many consumers who are choosing small family-owned operators instead. A senior executive I know recognised this and has recently left the comfort of his big-bucks job to set up a bakery in St. Albans.

He no longer wants to be in an environment where he has to adhere to rules from on high even when he believes them to be the wrong. Instead he is moving into an area that he fully believes in and his decisions are based on talking to customers.

This loss of connection with customers is sadly inevitable with large businesses. We invariably find that when independent operators grow to a certain size (and then often sell out to a corporate) they lose some of their individuality and spontaneity. In the desire to bring in structured processes to operate the business it loses much of its original charm.

Businesses can also lose their fizz and excitement as they become part of the furniture. Pizza Express is a very well loved operator but it is losing out to newer players who are offering something that is less engineered, and less overtly branded.

Pizza Express: Still loved, but is losing out.

The key today is about offering greater flexibility. Yes, Pizza Express is a casual dining experience, but there is now a trend for an even more relaxed environment – where you might wander in wearing muddy boots and bring your dog too, and where there is great flexibility with the food and drink offer. Maybe we are talking more pub than restaurant, but either way the desires and demands of today’s customers continue to evolve.

It is inevitable that many of the current crop of new independent businesses will ultimately find themselves in the hands of acquisitive corporations. But at the moment we are in the early stages of the cycle of growth of these newcomers before the next round of consolidation invariably hits the market.

This might be in another five or 10 years time so my recommendation is to enjoy the vitality and provenance of these new players while they are still in their infancy because we all know children can grow up far too quickly and become lumbered with the many burdens of adulthood.

Nigel Sapsed is director of executive search specialist Sapsed Stevens