Anyone looking at N Brown’s figures would think there was no such thing as an economic slowdown. And chief executive Alan White sees no reason why business will not continue to boom at the niche home shopping group.
In the face of an economic slowdown, it must be comforting to know you are running a business driven by virtually the only three current growth areas in retail: internet sales, niche markets including -sizes, and the grey pound.
N Brown chief executive Alan White really is sitting pretty. Earlier this month he unleashed Christmas sales figures with like-for-likes up 14% for the 20 weeks ending January 12. These came on the back of a strong performance in the second half of 2007, in which sales rose 13.6% to £290.6 million and operating profit increase 17.7% to £41.2m.
But White says the rise of N Brown is about more than just getting lucky. “We’ve made improvements in product and our catalogues and websites, and that has been the main driver. The internet grabs all the headlines but the truth is our catalogues are bigger and better than ever.”
On the flip side, White runs a business which operates 40 brands, from Simply Be to JD Williams, and Viva La Diva to Gray & Osbourn (see box on page 30). It serves customers aged from 30 upwards, who span all socio-economic groups, and offers them products in “normal” through to outsizes, as well as specialist fits in fashion, footwear and lingerie.
The company holds 120,000 SKUs at any one time, deals with more than 600 different suppliers and chops and changes the same ranges to serve the many audiences its different catalogues attract.
Simply Be stock, for instance, may also appear in the Fashion World catalogue and so on. It mails out 117 catalogues annually, from 600-page books to 48-page brochures, and has a 250-strong marketing department. Its websites attract several hundred thousand hits each day.
Keeping this well-oiled machine ticking is no mean feat and the management’s combined experience of more than 100 years in the home shopping sector counts for everything at HQ in Griffin House, Manchester.
White, who has nicknamed the business “Complexity-R-Us”, is quite candid when he says: “We are the most complex business in retail. We have a group of brands and a product bank of our entire range. You wouldn’t set this business up now. It’s only because it’s evolved this way that we do it and are able to do it.”
A trek across the 30,000sq ft buying floor reveals just how huge White’s operation is. Knits, bras, jackets, dresses and handbags all burst from the various rails and cupboards. This floor is home to the 275-strong buying department, and to thousands of samples which make it feel more like a pick-and-pack warehouse than an office.
The chaos underlines how vital supplier relationships are to the group. Offering 56L bras and EEEE wide-fit footwear requires huge investment in fit development, as well as in quality control to combat returns. Volumes on obscure lines can be minimal, which can be frustrating for suppliers, but buying and merchandising director Paul Short insists suppliers are rewarded in the long run with loyalty from N Brown.
White adds: “We are at the opposite end of the spectrum to Primark, ordering hundreds of thousands in volume. We have 100,000 SKUs rather than units. We have a little of a lot.”
However, this “uniqueness” is what the business thrives on. To an outsider, a melange of 40 brands with a plethora of sizes and cross-pollination of customers makes little sense, but White explains that each one has a part to play in growing the group’s customer base.
“Niche brands are ways of recruiting. We recruit customers on a narrow platform, for instance via wide-fit shoes, then cross-sell them clothing and lingerie, through to home and leisure and even bingo and finance services by sending them other catalogues. Each brand gives a very specific entry to the group and each has a very specific reason for being.”
Given the power of the company’s database – it contains about five million active customers – cross-selling is often a success. This Christmas the company drove up average spend largely by pulling niche customers through to other categories in the group via internet ordering.
However, N Brown does not just deal in niches. It has customers beyond the stereotypical larger woman who is too embarrassed to shop on the high street. White explains: “We tell everyone that more than 50% of our business is size 20 and over. What we don’t say is that the other 50% is sizes 12 to 18, which are normally available on the high street. Anyone who is a size 12 or above, and over 30 years old is in our target market.”
White says N Brown’s unique knowledge of its customers via its database helps it outperform its rivals. “When the likes of Marks & Spencer and Bhs are designing their ranges, they can’t be as specific as us. We can be clearly focused because we know so much about our customer – we can design for the size 12 60-year-old because we know all about her.”
The addition of a fast-fashion team last year added another dimension to the business and brought it up-to-date with its high street competitors. The group had lagged behind on trend-led merchandise, which caused some of the difficulties it encountered in 2003, when full year pre-tax profit had sunk to £25.1m, which is when White was parachuted in to turn round the business.
White says: “In 2004 there was a lot of retail theatre on the high street. We realised we’d got to make home shopping as exciting as stores.”
N Brown can now take a style from concept to internet within six weeks. About 30 new lines are added to the Simply Be website every two months – next month look out for 70s Flare and Primitive Safari. White says: “We can change the web every hour if we want to. It gives us huge flexibility and works in tandem with the catalogues. At the moment we are working as far ahead as spring 2009 but we’re also working on spring 2008 with fast fashion too. If we miss a trend then our fast-fashion team can fill the gap.”
The internet has not only revolutionised speed-to-market in mail order, it has also changed the shape of home shopping marketing.
In addition to television advertising, marketing director John Hinchcliffe also exploits print advertising, advertorials and PR opportunities. A tie-up with Gok Wan from Channel 4’s How to Look Good Naked was a masterstroke in terms of lingerie sales last year.
The products featured in the show are flagged up on the Simply Yours website. So far, this has dragged in an extra £250,000 worth of sales, including between £30,000 and £40,000 worth of orders of its body-shaping Esbelt slimming corset.
Building on success
N Brown launched four new internet shopping brands last year: outsize branded menswear site Jacamo, specialist womenswear site Marisota, lingerie site Simply Yours and home and leisure offer Simply Be Home.
White says 2008 will be about building on the launches. “Last year was unusual for us but all four have done what we expected. In 2008 we’ll spend more investing in those and building on those successes,” he says.
Certainly there seems to be huge untapped potential for N Brown in the men’s niche markets – menswear contributes about 10% of group turnover, while womenswear makes up more than 50% of sales.
The development of Jacamo, essentially a brother brand to Simply Be, has gone some way to addressing the menswear growth story. Some 28 brands, including Ben Sherman and Wrangler, have agreed to deliver up to 66in chest shirts and 54in waist jeans to men carrying a few extra pounds, gym fanatics and rugby players.
White says menswear provides a “huge opportunity” but will not be pinned down on targets. He says: “We’ll back the biggest brand for our buck. How sales are carved up is not so important as that can change depending on products, trends or the weather.”
Aside from the new launches, N Brown rescued womenswear brand Nightingales from administration last year, but White is philosophical about acquisition potential for the group this year. He says: “A lot of home shopping companies are private, with entrepreneurial owners, and therefore not on the market. When they want to sell though, we just might be interested.”
Similarly, while he does not rule out expanding beyond N Brown’s niche categories or below its 30-year-old entry customer level, White says: “We wouldn’t rule out bringing a new age group, social class or ethnicity to our customer base. We don’t do kidswear, for example. But if you ask me if we are likely to do kidswear in 2008? The answer is no.”
This year may be planned in as a year of investment and consolidation of the existing business, but it is by no means the end of the fairytale for N Brown. White smiles: “Although we’ve had a good year we believe this is just the foothills of what we can achieve. We have a list as long as your arm of things we could do better.”
2002 Chief executive, N Brown
1999 Finance director, Littlewoods
1996 Appointed non-executive director at John David Group, alongside his full-time job
1985 Finance director, N Brown
1979 Senior financial role, Sharp Electronics
1976 Chartered accountant, Arthur Andersen