There is a growing trend for larger-format shops and Hughes Electrical has just upsized its store in Swaffham. Chris Frankland talks to MD Robert Hughes about the thinking behind the move…
The face of retail is changing and Hughes Electrical is changing with it.
The group, which is now the fourth largest specialist electrical retailer in the UK with 41 Hughes branded stores and eight Apollo outlets, has been closing some of its smaller stores and replacing them with larger stores with on-site parking on arterial road locations.
Last year, Hughes also added new Hughes Plus stores. These are bigger than the market-town stores such as Swaffham and carry a bigger range, more stock to take away on click-and-collect sales, parking and the ability to deliver the same day.
ERT is at the newly-opened Swaffham store in Norfolk to talk to managing director Robert Hughes about his reasons for opening the new, larger store.
He explains that it was all about consolidation. “Swaffham had three electrical retailers and effectively each was cutting the throats of the others,” he explains. “The market was not big enough to support three. We all managed to survive the recession on the basis of our other expertise: ours was rental, for the store we bought [TK Drake] it was electrical contracting and for the other [Blaines] it was kitchen design.
“We needed to speed up the evolution process and have a bigger store that could specialise on the electrical side. We contacted Drakes and agreed terms to buy them out.”
But don’t think that this move is a ringing endorsement of market towns as a prime location to open new shops.
“I wouldn’t want anyone to think that what we are saying is that market town electrical retailing is alive, well and thriving. It isn’t,” concedes Mr Hughes. “This was purely a defensive move. It ties in with our more general move to bigger shops with more space, parking and click-and-collect facilities.”
He adds: “We would have chosen not to be in Swaffham if we weren’t already there. But being here, and having a strong rental presence, it made sense to consolidate our position.”
Mr Hughes explains that it worked so well because Drakes sold mainly white goods and the Hughes store predominantly browns: “One benefit of being here is that we can promote rentals to the predominantly white-goods customers that Drakes had while transferring our predominantly brown-goods customers from our old store to here.”
And whereas, says Mr Hughes, you might expect to lose some customers along the way, especially those that have to walk past the other remaining retailer (Blaines), it seems one and one in this case really has made two in terms of sales.
At 1,400 square feet, the new store is nearly twice the size of the old market-square premises and has another 1,000 square foot of warehousing space on top of that.
This, Mr Hughes tells ERT, is crucial. He knows that in this age of the internet-savvy and well-researched consumer, you have to offer a good range of products.
“We are aware that increasingly people only shop once before they buy,” says Mr Hughes. “They have done their research and they want to come and get a demonstration to help make their mind up as to whether to buy it online or buy it from us. So we found we had to have the range, but we also had to have product that was ready to go – so a small shop fails on both counts.
“Electrical retailers are increasingly moving to arterial road locations with parking, so people become aware of you because they drive past, but they don’t need you for spontaneous impulse purchases. But when they do want to make a considered purchase, they know you are there, they can see your product online and that you can give a demonstration. They come and see it is a big store. If the store is small, they may choose to drive on to a Currys.”
However, Mr Hughes does point to a growing trend for people to support their local shops to stop small towns from dying.
“There is a growing trend in market towns towards localisation,” he observes. “People are very concerned about their market town dying. When a town dies, I have never, ever seen one resurrected. Swaffham never died. It even has a Costa and that is usually a measure of ‘have we made it?’
“We shut three shops last year as part of our rebranding exercise with Bennetts and I had a number of customers writing to me as they were upset about it. They were concerned about the future of their towns.
“In most of our market-town stores, they will go to the biggest Hughes store, see what they like and come back and buy from us. If they do that, we will always be here. And people do that. We can tap into that localisation that clearly Currys can’t do.”
Mr Hughes believes the small shop format is only viable if you have a local monopoly: “The size of shop needs to be bigger than it was five years ago, as all our products have got bigger, whether it be TVs or appliances. None of those markets are big enough that you can be an expert in one – you have to do the lot. And customers expect to see a range, so you need to have a bigger shop.”
And a large part of what drives the move to bigger premises is the growing slice of Hughes’s business done on click-and-collect.
Mr Hughes believes that retailers ignore click-and-collect at their peril. “It’s still early days for click and collect,” he says. “However, at our larger stores, there is always a lot on email on Monday mornings and it’s a good source of extra business. It’s difficult to know always whether it is incremental business, or business you would have had anyway. But the more we look at it, the more we come to the conclusion that you have to have it. The business may not be incremental, but if you didn’t have click and collect, you’d lose it. The majority of our customers have been online before they come into the store. We know from our footfall counters and the level of business we do that we have far fewer visitors but far more sales.
“You must do click and collect. Just look at Argos! The majority of their business is click and collect. It’s early days, but it is a trend and you will have to do it at some point.”
This means that Hughes’s web presence is crucial in order to drive those sales.
“Our web strategy and our shop strategy are absolutely joined at the hip,” says Mr Hughes. “This branch has its own web page with its own offers, gives a lot of information about the shop, and it encourages click and collect at all points. We want it to be a shop window.
“It will get a lot bigger. It does mean you need more backup stock. You always need one to show and one to go. Much of it is lower-priced products – bottom end. With more considered purchases we are more likely to install and take the old one away. And many stores don’t want the cheaper product on the shopfloor as it starts the sales discussion at too low a price.”
We move the discussion on to 4K. With it looking like the biggest thing to happen in TV, ERT is interested to know what Mr Hughes makes of the TV market now. Is 4K going to be its saviour?
He smiles and answers: “Yes. But the TV market is probably not in need of saving at the moment, because there is enough change going on and products at the right price – whether it’s HD, 4K, curved, OLED. There are a lot of reasons to be very excited about the TV market and not least because the majority of the customers do not have a jumbo television and with 4K they can more comfortably accommodate one as they can sit closer to it.
“And only 16 per cent of TV owners have a soundbar and that again is one of the lovely aspects of these televisions – the sound is so poor.
“But 4K, yes, it is part of the revival. We had our first year of growth in TV sales last year. It’s not a big rise, but I don’t think it’s a ‘dead-dog bounce’, as they say. It is bouncing up.”
He goes on to reveal a milestone development: “We are increasing the amount of floor space we devote to TVs this year across the stores. In previous years, we had been reducing the space given over to TVs in favour of appliances. This year, some of that space is being taken back. It has reversed the trend. Partly because we are selling more big screens, but also because there is so much more choice. We need to show curved and OLED. And those big screens have that wow factor in-store.”
Looking forward, ERT asks Mr Hughes if he feels that 2015 is going to be a turnaround year for electrical retailing in the UK.
“I am more positive this year than I have been in any year since TV switchover ,” he confides. “I would estimate that 85 per cent of the categories we sell will grow this year. But will we hold share or will more of it be leeched on to the internet? I think that for the industry, yes it is a turnaround year, in that TVs will grow, appliances will grow, SDA will grow, IT and tablets will grow. It will be a pivotal year, helped by the General Election result.”
What are his future plans for Hughes Electrical?
“We need expansion because we need to remain relevant to our suppliers. Many customer journeys start on a manufacturer’s website, so you have to be on the front of that, and to do that you must grow turnover. I do not consider it an option to stand still or go backwards. We have grown every year for the past decade and we will grow this year as well.”
As if to prove it, Mr Hughes reveals that by the time you read this, it should have opened another Hughes Plus store in a major Norfolk town.