At our investment seminar last Thursday 1st March, I asked the presenters from LGT Vestra whether the demise of some of our well known high street companies was an indication of a weakening UK economy, or was it down to poor business management?
Sanjay Rijhsinghani, an investment manager and partner at LGT Vestra, was absolutely clear in his opinion that brands like Maplin and Toys R Us have suffered from a lack of innovation and degrees of complacency.
Maplin and Toys R Us are not alone. Clothing chains New Look and House of Fraser are seeking financial support from landlords and other creditors. The bed retailer Warren Evans, the fashion brand East and high street furniture chains Feather & Black and MultiYork have recently fallen into administration.
Toys R Us in the UK has blamed its problems on its “warehouse-style stores”. It went on to state that their stores are “too big and expensive to run in the current retail environment”. The BBC reported that retail analyst Kate Hardcastle, from Insight With Passion, said both Toys R Us and Maplin had reduced staffing in an attempt to cut costs, which had led to poor service in the shops.
“To succeed you need to offer some kind of differentiating factor – either a good discount or an experience that makes visiting the stores worthwhile. Toys R Us didn’t move with the times. It didn’t do discounts or retail theatre” Kate added.
This is a wakeup call for us all. At Blue Sky we are always innovating, always reinvesting. Over the years, from across our sector, my approach has been questioned many times: “Why not just sit back and enjoy the fruits of your labour?”
It certainly would be more profitable in the short-term, but it’s not about self-gratification. For me it’s about being the best we can be for our clients and our team. It’s all about culture.
I recognise that the drivers can be different for a business quoted on the stock market. Being responsible to shareholders can encourage behaviours which may be at odds with the long-term strategy and inward investment can be a drag on profitability. As it has been proved by a number of companies recently, this is a dangerous path to tread.
In this rapidly evolving world, it’s important to embrace changing regulation, to use technology to enhance your service and drive efficiencies, and to understand the expectations of your customers.
Failure to do so is akin to letting your company ‘wither on the vine’.
Best wishes,
Gary
Gary Neild B.Sc.Hons. DipIP PFA
Managing Director
