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On the Shop Floor with...Ben Sherman chief executive Miles Gray

It may come as a bit of a surprise to some people that Ben Sherman is to open a shop on London’s Savile Row in October selling high-quality suits as it represents a giant step away from its iconic ‘Mod-inspired’ shirts. By Glynn Davis

On the Shop Floor with...Ben Sherman chief executive Miles Gray

It may come as a bit of a surprise to some people that Ben Sherman is to open a shop on London’s Savile Row in October selling high-quality suits as it represents a giant step away from its iconic ‘Mod-inspired’ shirts. By Glynn Davis

But it is probably only a surprise to these individuals because they are no longer Ben Sherman's target market, having simply grown too old, and have not seen the brand change.

For the past two years Miles Gray, chief executive of Ben Sherman, has been working hard at shifting the business away from its older, larger-sized customers towards a younger, slimmer-shaped audience that better reflects the brands increasingly aspirational positioning.

“We used to have two collections for these two groups of people but we've now got just the one and we've lost some of the older customers. We're walking away from them to make the brand trendier and have stopped selling to some of the big chains. This has been hard because it is 3 million of ebit (earnings before interest and tax) profits,” he explains.

This

move towards the younger shopper in the UK coincides with the group's ongoing expansion into overseas markets where the brand has always been seen as very much more upmarket than in the home market.

you can't be trendy in Japan and not in the UK. It had been a much more middle of the road proposition in the UK,” says Gray, who adds that the shift is ongoing and has to be handled with care. “We've got the UK cash cow to allow us to go overseas and as this happens then we can raise the drawbridge in the UK to get the more aspirational customers.”

This need to better target customers and add some definition to the brand is part of the long-term aim of turning Ben Sherman into a lifestyle brand, which is why it has over recent years moved away from selling a single product - shirts. They now account for 35 to 40 per cent of revenue with suits and womenswear now generating a slice of sales. And licensing the Ben Sherman name to the likes of sunglasses and shoes brings in around 10 million per year.

Product diversification and the move into international markets were the key elements of the two-pronged strategic plan put forward by Gray 10 years ago when he led a Management Buy-out of the company with backing from private equity firm 3i.

Although the overseas expansion over this period has been embarked upon with some gusto - as shown by the fact the company now sells its products into 37 countries through deals struck with partners in different territories - Gray says it became clear over time that Ben Sherman had to gradually move away from being a wholesaler (selling into a whole host of stores) - to also being a retailer.

“Four or five years we realised we needed a retail presence to be a credible brand. You're also more credible to the department stores that you sell into if you have your own stores,” he explains, while also acknowledging that being reliant on selling to department stores that are owned by an ever-smaller number of operators represented an increasingly worrying situation.

It was around this time that the company was sold to US-based Oxford Industries who were supportive of the roll out of company-owned retail stores and for tying-up with partners overseas to run Ben Sherman outlets to a rigid operational template (similar to the franchise model).

From a standing start Gray has built up a portfolio of 30 stores - including five company-owned units in the UK, two in Germany and five in the US. The remaining 18 are partner-owned and include stores in Australia, Singapore and China.

These outlets now account for 15 per cent of group sales (the remainder being derived from the wholesale operation) that amounted to 90 million in the last financial year. However, Gray says this figure is slightly misleading as it only includes the royalty Ben Sherman derives from its partners. For instance, Australia accounts for only 1.2 million of the 90 million even though its sales amount to 12 million. The real group turnover is therefore more like 260 million globally.

Gray says he “would be surprised if in two years we don't have 50 stores worldwide” and suggests he will be much happier when retail sales account for 30 per cent of group turnover because he predicts “the future is mono-label stores”.

This level would have been reached much quicker had it not been for the recession, with Gray recounting the intention to have 12 of the 25 stores he'd earmarked for the UK now open, whereas the portfolio presently comprises a much more modest five units.

However, Gray admits that he was finding it tough to make the numbers stack up in the UK even before the recession. “We found it difficult to run UK stores profitably with the rent and rates,” he explains.

Units can now be had outside London for more acceptable rental levels but Gray says in London little has changed since the start of the recession. A new rental agreement was recently signed-off on its Carnaby Street flagship store at a higher level than the existing contract despite 18 months of tough negotiating with the landlord. But maybe this is not surprising given that Gray says the store is trading 22 per cent up on last year, with the majority of its customers coming from Europe to take advantage of the favourable exchange rates.

The plan therefore is to open just a couple of stores in the UK over the next two years (a unit in Covent Garden is under consideration) and to instead have more of a focus on new shops around the world, as the expectation is that “our partner stores will flourish”, including the US, which is possibly going to throw up some better deals than the UK.

What will potentially fuel this expansion is the development of a store template, the development of which began with the gradual realisation during the past five years that non-mall locations work best and with an optimum size of 1,500 sq ft.

This thinking was developed further following the appointment 12 months ago of a retail director, who created a “richer, darker look” for the company's stores. The first such units opened in Cologne and Berlin and Gray says: “Next up will be Boston . We feel we've found the template and if it works in Boston then we'll open more in the US.”

How the forthcoming bespoke unit on Savile Row will compare with these off-the-shelf Ben Sherman stores is as yet unknown. But what is known is that the company regards the development of its retail operation in all its forms as fundamental to the long-term development of the Ben Sherman brand around the globe.

Ben Sherman was the winner of The Retail Bulletin sponsored 'Retailer of the Year' category in the UK Fashion Export Awards 2009

glynnd@theretailbulletin.com

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