The art of survival

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Shaun Barrett of Barrett’s Digital World.

Barrett’s Digital World enjoyed a good year in 2010, and I believed that the market had recovered after the credit crunch and recession of 2007-08. What made 2011 so hard to grasp and comprehend was the size and speed of the downturn throughout the year.

It started with the infamous VAT increase a year ago, and as quarter rent days arrived, there was another retailer shutting their doors for the last time. Those retailers with high cost leases were and are the most vulnerable.

Those who have invested wisely in freehold property have a more sustainable business model. The last two big ones to go were Best Buy with a £100 million loss and who never should have opened on our shores and Comet being sold for just £2. It will be interesting to see how Comet performs and where it ends up in the next 12 months.

What caused all this? In my view the problem is twofold. On one side of the coin, the value of the flat panel market was still growing in 2010 thanks to the demand created by the World Cup and the new TV technologies of 3D and Smart TV. We hadn’t sold such high value panels in such volume for a couple of years. However, in 2011, there were no major sporting events and no new ground breaking technology to increase or even maintain flat panel demand. All brown goods manufacturers and retailers have known that we have been too dependent on flat panel TV for a number of years. On the other side of the coin was the previous government that had been in denial since the credit crunch and was pumping money into our reckless banks and the economy. In 2011, the new coalition government saw the time for reckoning and payback.

In 2010, Barrett’s Digital World achieved 10% growth from flat panel TV and without the benefit of the digital switchover. However the majority of the growth came from our white goods business which increased by a massive 33%. In 2011, white goods has been our knight in shining armour, paying the bills; it increased its share of our business by almost 10% during the year. White goods is a more stable market than brown. It doesn’t experience such large fluctuations as brown goods and a retailer can achieve higher margins than brown goods by choosing their brands correctly. We managed to increase our average sale price in white goods by dealing with selective mid- to up-market German brands. It cannot therefore be a coincidence that it is only the German economy performing successfully in the Eurozone.

Quality built-in appliances and range cookers are also performing well and have helped to increase our average RSP. As the housing market has slowed in the last three to four years, consumers have chosen to upgrade their kitchens rather than move. This is a factor that is likely to continue through 2012. In summer 2010, we set up a kitchen studio in our showroom in conjunction with a local kitchen fitter and designer, and this in turn led to an increase in built-in appliance sales.

Many of the cooking appliances in our kitchen studio and Miele Centre are live and we use them during open evenings and other special events. Last month, Belling and Stoves invited celebrity chef Brian Turner to cook for our customers at our annual open evening, and it was a great success, attracting many customers. Such events require a great deal of planning but they boost customer loyalty and generate recommendations to friends and repeat business.

Most manufacturers and suppliers will be keen to support you. We always organise a raffle during these events, funded by the suppliers for the benefit of a local charity of our choice. The charity will normally run this part of the event for you and your local paper should be keen to report on it, increasing the awareness of your business in the local community. This type of event is also a good way of attracting and finding new customers.

What does 2012 have in store for us? Most likely, more economic uncertainty caused by declining consumer disposable income and increased unemployment, continued euro and banking problems throughout Europe.

But we have the Olympic Games to look forward to, and for some lucky dealers there is the last of the digital switchover in London, the South East, the North East and Northern Ireland. And, of course, we also have a stable white goods market in which there are opportunities to benefit from.

Make the most of these events in what looks to be another turbulent year for the whole of the retail industry.  Happy New Year!

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