Recession-Buster BrightHouse Has No Magic Formula

Last Updated Aug 17, 2009 5:22 AM EDT

The BNET UK team has just had a meeting with Leo McKee, CEO of BrightHouse, to pick his brains on how to create a recession-busting company.

BrightHouse is a rent-to-own electricals, white goods and furniture retailer, based in Scotland, the north of England and Wales, which targets the sort of low income shoppers other retailers would normally dismiss as a customer base. Its differentiation is that it provides credit to customers so that they can pay for goods in weekly instalments, if they want to.

Last financial year, BrightHouse grew sales by 16.9 per cent, with like-for-like sales up 13.9 per cent - at a time when retailers with similar categories like Woolworths and MFI went to the wall.

Given the low individual worth of the customer base and the big-ticket categories in its offering, how has McKee managed to not only hold his own, but actually position the company for expansion?

Talking to him, it's clear that if you cut him, he bleeds retail. He visits every one of the 180 stores around six times a year. When he arrives, he's in uniform. If a customer needs serving while he's there, he'll do it.

"It's the one place you can't hate," he says.
It's this attitude that McKee, who joined the company in 2005 on a transformation remit, put at the core of a strong corporate culture. Everyone in the Watford head office spends at least one week in a store and senior executives are expected to make at least 10 sales while they are there. McKee is anxious that every strategic manager is familiar with the needs and concerns of the store managers they direct.

McKee recognises that these people are the ones on which the company's fortunes turn and that he and his team are there to support them, not the other way around. The retailer has an active staff committee, which has a say in working conditions - it designed the current uniform after the one designed by Geoff Banks was junked for being impractical.

Corporate citizenship is a strong ethic for McKee. BrightHouse has sustainability goals, just like many other companies, but for McKee, responsibility to the community is also a business goal. He notes that BrightHouse stores remain in locations from where other retailers have withdrawn. He says 70 per cent of the stores' workforces come from the communities they serve.

Responsible retailing perhaps, but good business acumen too, when BrightHouse's proposition rests so heavily on good customer service. 40 per cent of the retailer's customers come by recommendation.

McKee denies the downturn has driven customers into his stores. He says BrightHouse's target customer demographic hasn't changed. The retailer's owes its success to its customers having been previously ignored by financial services companies.

They couldn't get credit, so they have relatively little debt, which means their biggest financial commitment is to BrightHouse. Shoppers who have huge credit card bills and mortgages in negative equity won't necessarily prioritise BrightHouse repayments over other debts.

BrightHouse is under represented in the southern regions of England and McKee has established there are around 650 sites that would be suitable locations for stores. Now that he has embedded best practice in stores, he has turned his attention to creating robust supporting systems. The company's IT is undergoing a revamp and the distribution centre has adopted Just In Time processes, so that inventory has been reduced in value from £7.5m to £2.5m in around four years.

BrightHouse has a strategy of expanding its store estate by 25 per cent year on year, opening stores in clusters to get an economy of scale on support services, such as home delivery. McKee breaks the expansion task into four precursors:

  • Planning, including resource allocation.
  • Clarity of milestones.
  • Management buy-in.
  • Communication to staff and customers.
So a surprisingly simple strategy really, once you've had it explained to you by a veteran retailer. But for those of you who still don't get it, here it is, in bullet-form.
  • A strong commitment to customer service.
  • Motivated and empowered front-line staff, who strive to meet high standards.
  • A strong sense of community, enforcing brand identity with staff and customers.
  • A viable untapped target customer.
  • Opportunities for expansion.
  • A robust, efficient infrastructure.
Nothing very revolutionary there in concept, but it's all in the execution. McKee quotes Confucious: "I see and I forget. I hear and I remember. I do and I understand."
(Pic: BrightHouse)