Some of the best performing retailers in this tough economic climate are family-run. Joanna Perry asks what gives their businesses the extra edge.
Retail patriarchs such as Primark’s Arthur Ryan and Morrisons’ Sir Ken Morrison may have stepped back from day-to-day responsibility in their businesses, but there is a whole new breed of family-run retailers out there – and many of them are trading extremely well through the recession.
From single corner shops to huge chains, retail businesses are often started as family firms. But while the Sainsbury’s name lives on on many high streets, the descendents of the American Woolworths dynasty can no longer say the same if they come to the UK.
So what is it about today’s family-run businesses that has continued to appeal to shoppers, and what are the retail pitfalls that family owners and shareholders must avoid?
TJ Morris operations director Joe Morris works alongside his two brothers in the family business, which trades as Home Bargains. The growing retailer has 190 stores and the plan is to expand this to more than 350 by 2015.
Morris explains that Home Bargains was grown from scratch, started by his brother and TJ Morris managing director Tom, with one store. Joe Morris worked there as a Saturday lad.
He says that this helped prepare him for his future retail career. “You get a good feel for what’s involved in the business – serving on the till, speaking to customers, driving the van and working in the warehouse,” he says.
The Morris brothers’ parents and grandparents were also retailers, and Joe Morris says that his family helped his brother Tom to set up a store as he had a young family and needed to put “bread on the table”. At the time there was no master plan for what Home Bargains has become today, as Morris says: “It is only in the past 10 or 15 years that we have seen the formula works and decided to roll out across the UK.”
He thinks that there has been a history of family-run businesses in retail because it is reasonably easy to set up with a single store, or more recently to start a business on the internet. But with the three Morris brothers all now working in the business, their ambitions have gone beyond simply generating enough income for the family to live on. “When Tom started, a lot of retailers stopped when they got to 5 or 50 or even 100 stores. But our goal is to develop a national chain.”
One example of a family who has used the internet to set up shop is the husb-and and wife team beh-ind My-Wardrobe.com. My-Wardrobe chief executive Sarah Curran founded the business along with her husband Andrew in 2005.
She admits that working in the business together means that they are both fully focused on its success. “The positive effect on My-Wardrobe is that Andrew and I are thinking about it 24/7. It has our attention constantly, and this has had a positive impact on the speed we have developed the business,” she says.
Though she says there is no guarantee for how long My-Wardrobe might stay in the family, already her six-year-old son Jake is taking an active interest. Curran says that Jake comes to the etailer’s offices, has his own laptop, and understands what the company is and why his parents do what they do. As her son was born a month after she opened north London fashion boutique Powder, prior to setting up My-Wardrobe, he doesn’t know any different to a retailing family.
This family atmosphere at the etailer is extended to the staff too. Curran says: “Our view on the team is that it is a big family.” One practical way that the Currans have achieved this is to start a share option scheme, so staff can share in their success. Another is the lack of a strict and complex management structure.
However, though the husband and wife team are very much in control of the day-to-day running of the firm, they have already accepted that they needed external management to bolster their own skills. Curran says: “I view it in the best interests of the company. So we bought in experts in buying and PR, rather than thinking we know best.”
She adds that not knowing your limits is one area where family businesses can fall down. “Sometimes in family-run businesses there is a reluctance to bring in external people – that’s a dangerous mindset. I’ve always made sure that we don’t get stuck in that trap.”
The Morris family is lucky in that the three brothers originally took quite different paths, so they have a range of skills between them. Says Joe Morris: “We have got very few people that have come from outside the company. My brother Ed has a PhD in electronics, so he developed our own IT systems, and I’ve worked outside the business
He says that the three brothers work well together precisely because their skills are different, and there is little friction. “We all understand the strategy, agree on it and stick to it,” he says.
Home Bargains customers may well not know that there is a single family behind the fascia. Morris says: “We don’t make a massive shout about it to customers.”
However, he adds that for customer and staff interaction to get feedback is critical, and this is something that family-run retailers often put time and effort into, and particularly relationships between management and staff can be closer than in other types of retailers.
Career development for staff is another area that Morris thinks is important. “You always need to grow people from within. With a bit of guidance they can grow with the company, though there are a few skills you might have to bring in, such as for IT or health and safety,” he says.
He adds that once retail businesses are passed down through the generations and family members are not so closely involved with the day-to-day running of the business, then there can be problems. He says: “When the family are just shareholders, that’s where you can get conflict.”
When the Currans set up their business, they already had an exit strategy planned. But a few years down the line, and Curran seems less dead set on walking away. “We started with the vision of exiting in five or six years, but three years in I can’t see that happening. I’ve grown attached and the business is a bit like another child,” she says.
One retail family that has had no problem cutting the apron strings is the Lalani family, who run 99p Stores.
99p Stores Commercial director Hussein Lalani talked about his family business at The Retail Conference held in London last month. His family has been traders in three different continents for over 100 years – India, Africa and then Europe – with a move to the UK where the family opened a shop in north London in the 1970s.
Unlike other family-run retailers, the Lalani family are serial entrepreneurs, and have managed their exit from retail businesses on more than one occasion.
In the early 1980s, the family started Europa Foods, and sold out in the late 1980s. During the 1990s they built-up another business, Whistlestop, and also sold this on. Lalani said from here the move to discount retailing came after his father had a chance encounter with a Poundland store in Birmingham’s Pallasades Shopping Centre, after missing a train from New Street station.
In January 2001 the first 99p Stores shop opened on north London’s Holloway Road, and this had grown to nine sites by the end of 2002.
“We went from Whistlestop where we were selling things for as much as possible, to 99p Stores where we sell things for as little as possible,” Lalani said. The business is now servicing more than 1 million customers a week from its 109 stores.
Ironically it was the failure of what was originally another family business – Woolworths – which Lalani credits for creating the huge opportunity the family now sees for further expansion. “We didn’t imagine we could grow at such a speed until Woolworths went bust.”
Lalani said that 99p Stores could be thought of as the Woolworths of the 21st century, which he pointed out also started life as a family-run, one-price store chain.
The current breed of family-run retailers prove that the same entrepreneurial spirit and a passion for servicing customers continues to be passed down through the generations.
Family retailers and their success
Dunelm full-year sales for 2008/09
Dunelm full-year pre-tax profit for 2008/09
Home Bargains full-year sales for 2008/09
Home Bargains pre-tax profit for 2008/09
99p Stores full-year sales for 2008/09
My-Wardrobe sales for the second half of 2008
Dunelm: A family affair
Dunelm is one retailer among several such as Wilkinson and Lakeland where the families involved prefer to stay out
of the limelight.
Publicity-shy Dunelm chief executive Will Adderley, runs the retailer that was founded by his parents, Bill and Jean Adderley, in 1979. They began the business by selling curtains on a Leicester market stall. It developed into a chain of high street shops in the Midlands, and is now focused on out-of-town soft furnishings and homewares retailing.
Though the company listed on the London Stock Exchange in 2006, selling 30% of its shares, the family retained a majority stake. At the time of the IPO, analysts questioned whether the Adderley family had the capability to continue growing the business, though they admitted that it had a good opportunity in a fragmented market.
Three years later, the retailer’s results are better than many others out there.
In its latest financial results for the year to July, sales were up 6.3% to £417.1m, including a like-for-like decrease of 0.5%. Operating profit
was also up 4.5% to £51.6m
Adderley is confident that growth can be maintained in the medium term and has said that the business has good opportunities to roll out to more locations while the property market remains weak.
Dunelm highlights that it is still family-run to its customers and Adderley is proud that the family values on which the retailer was built still hold firm.
He has said that Dunelm’s staff love hands-on retailing, and this means there is a “can do” attitude in the business that he believes will allow it to continue to be successful.
Everyone working for Dunelm is encouraged that they have the opportunity to make a difference and be noticed, and Adderley can see how much progress people are making.
Finally, Adderley, who is married with children, says that in a family business, family comes first.