Intense competition, financial shortfalls and senior management disruption. Sound familiar?
Sports car manufacturer Lotus has been battered by all of the above in recent years, and yet this summer reported a profit for the first time in nearly 20 years.
Founded by Colin Chapman in a stable in Hornsey, North London, Lotus pioneered lightweight automotive engineering
“Cars with smaller and less powerful engines – which results in something that’s lighter on its feet – could run rings around more powerful but heavier Jaguar and Porsche competitors”
The manufacturer boomed with the launch of its featherweight Elan model in the 1960s, at a time when US manufacturers were churning out gas-guzzling motors.
However, following years of declining sales, ex-Peugeot-Citroën president Jean-Marc Gales was drafted in as chief executive in 2014. Gales developed a clear strategy of product launches and its new owner Zhejiang Geely Holding Group – which took a majority stake In September – represents strong backing, having turned around Volvo’s fortunes in recent years.
With light at the end of the tunnel, here are five lessons retailers could learn from Lotus to fight adversity:
Know your USP, and continue to adapt
Lotus stands by its mantra “simplify, then add lightness”.
The manufacturer showed that cars with smaller and less powerful engines – which results in something that’s lighter on its feet – could run rings around more powerful but heavier Jaguar and Porsche competitors.
Chapman said: “Adding power makes you faster on the straights; subtracting weight makes you faster everywhere.”
Lotus, tiny by scale in comparison to rivals such as Porsche, has remained a benchmark sports car manufacturer by applying its philosophy to modern technology.
The launch of its Elise model in the 90s – which repurposed lightweight components the manufacturer could easily get its hands on while investing in cutting-edge chassis – made sales boom.
Retailers that are clear about their USP, and – crucially – remain agile through investing into modern practices can reap rewards despite global competition.
“Lotus could probably sell its carbon fibre pens more profitably online – but that isn’t the point. The store is a brand marketing exercise, which creates a halo effect for its core car product”
John Lewis, which celebrated its 153rd birthday this year, has demonstrated this. Its longstanding “never knowingly undersold” mantra has been applied to the online world and the department store has become a multichannel leader, able to take on global giant Amazon.
John Lewis’ online business grew by 16.2% in 2016/17 and accounted for more than 42% of overall sales, which is among the highest proportions within the retail sector.
The Lotus group is made up of car manufacturer Lotus Cars and consultancy arm Lotus Engineering.
The unsung hero, Lotus Engineering, undertakes behind the scenes consultancy for automotive manufacturers and is said to have been involved in advising engineering practices for more than 20% of cars worldwide.
The consultancy arm is the more profitable side of the group. It also helps Lotus to understand its competitors better and provides insight into the latest trends.
Such diversification pays off in retail.
Amazon’s stellar performance has been supported by a number of non-retail activities, including Prime Instant Video, Amazon Marketplace and cloud computing subsidiary Amazon Web Services (AWS).
The strongest growth at Amazon is coming from AWS, which bolstered the group’s pre-tax profit margin from 0.6% to 1.7% in 2016.
Lotus is one of very few companies that has manufactured for competitors, including Vauxhall and Tesla.
In 2006, Tesla co-founder Martin Eberhard said: “We wanted the first Tesla car to handle like a proper sports car, so we approached Lotus Cars, known to make the finest handling sports car on the road.”
Lotus was able to offer Tesla engineering nous. Motor aside, Tesla essentially replicated the Lotus Elise to create its founding electric Roadster model. Lotus gave credibility to a start-up idea, while the investment enabled Lotus to shore up its production line.
Retailers are increasingly collaborating with each other to spur joint success. The grocers have led this push, with retailers such as Arcadia, Currys PC World and Holland & Barrett opening shop-and-shops in Tesco, while Jessops, Specsavers and Clarks have concessions in Sainsbury’s.
Similarly, to drive footfall in a less familiar market, Sports Direct initially made a move into Malaysia through concessions in Tesco stores in 2014. The move proved fruitful and the sports goods retailer had 25 outlets in Malaysia in 2016 to 2017.
Recognising a retailer’s market position and turning that into an opportunity for competitors stands to benefit both parties.
Own the brand experience
A raft of brands such as Dyson, Samsung and Smeg may have opened stores in London’s West End over the past few years, but Lotus beat them to the chase.
The Lotus store in Piccadilly opened in 2012 and alongside the usual branded lifestyle products that appear on the Christmas list of many an enthusiast, is a virtual car configurator that allows shoppers to fantasise about their dream car.
Lotus could probably sell its carbon fibre pens more profitably online – but that isn’t the point. The store is a brand marketing exercise, which creates a halo effect for its core car product.
A string of etailers have opened stores to deepen the brand experience as well.
Online furniture retailer Made.com operates three showrooms, which allows shoppers to interact with the brand and its products.
Missguided opened its first standalone store last year and chimes to its market with fixtures that create “Instagrammable moments” in-store. A spree of openings is expected in the UK from next year.
Cut your losses
For decades, sister company Team Lotus was a Formula One giant with the likes of Nigel Mansell, Graham Hill and Ayrton Senna behind the wheel.
Nowadays, the marque does not appear on the grid.
Team Lotus competed in Formula One between 1958 and 1994, and won seven constructors’ titles and six drivers’ titles in its heydey between 1963 and 1978.
However, when Camel cigarettes dropped its sponsorship in 1990, the founding Chapman family were quick to organise the sale of Team Lotus to former employees Peter Collins and Peter Wright, allowing Lotus to focus on developing its road cars.
This turned out to be a shrewd move, because its namesake under new ownership folded by the mid-1990s.
Much can be said for retailers who cling on to non-core activities for too long.
B&Q opened its first store in China in 1999. However, the DIY trend did not take off in a nation where labour is cheap.
B&Q’s move to China dragged on for years, until it finally admitted defeat and parent Kingfisher sold its entire stake to its Wumei Holdings by mid-2016.
By comparison, Tesco was quicker with its move in (and out of) the US. Tesco’s Fresh and Easy format launched in the market in 2007, with a focus on ready meals. But this turned out to be a half-baked idea during the recession.
Tesco realised it was not right for the market and swiftly exited the US in 2013 to focus on its core markets.
In similar vein, HMV moved away from video games in 2014 to focus on music and film when sales started to dwindle.