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On the shop floor with…N Brown chief executive Alan White

Don’t mention green shoots to Alan White of N Brown. He reckons talk of a recovery is a tad premature and that even if you have the best data in the world then it still has to be interpreted objectively. By Glynn Davis, City Editor

On the shop floor with…N Brown chief executive Alan White

Don’t mention green shoots to Alan White of N Brown. He reckons talk of a recovery is a tad premature and that even if you have the best data in the world then it still has to be interpreted objectively. By Glynn Davis, City Editor

And to the mind of this chief executive of the Manchester-based home shopping group there is insufficient sensible reading of market forecasts, as well as too little emphasis being placed on the unemployment forecasts, and how this will adversely affect the retail sector.

“The one statistic for me is unemployment and all the forecasts have this reaching three million from the current 2.2 million. This is a lot of consumers losing their jobs and it will also impact on sentiment. To rise by a third is a hell of a lot. Until we see this forecast come down then we'll be cautious,” he suggests.

Fortunately for White, the typical N Brown shopper is more protected from major life crises such as unemployment. Being on average 56/57 years old and likely to be on State Benefits, as well

as receiving an Index-linked pension supplemented by the likes of winter fuel allowances, they are reasonably stable and secure creatures.

“They might be on low incomes but they are looked after. It is the younger customers where more 'events' can happen,” he says. Although the average age of N Brown's customers is gradually reducing - five years ago it was 59/60 years of age and in another three to or five years White reckons it could be down to 53/54 - the bulk of sales will still continue to be derived from the over-45s who account for more than double the number of other customers.

N Brown is also benefiting from many of its shoppers migrating from ordering over the phone to transacting online, with the internet now accounting for 38 per cent of total sales (having grown 40 per cent on last year). And White is forecasting that it could reach 50 per cent over the next three years.

This represents a major earner for the group as he suggests order sizes online are 25 per cent larger on average and the internet has lower operating costs. One example comes from such orders not needing to go through the company's call centre, which reduces the cost of each transaction by a not insubstantial 1.

The ongoing move to integrate online into its traditional catalogue-based mail order business has helped N Brown evolve into one of the UK's more successful multi-channel businesses. And unlike many merchants that have been operating out of high street stores and have simply added internet shops N Brown has benefited significantly from leveraging its long-established home shopping experience.

This includes an ability to cost-effectively handle myriad manually intensive activities such as pick and pack, despatch and checking returned products before resending them to new customers. Much of this would be lost on bricks and mortar retailers.

“The high street retailers going multi-channel are largely outsourcing but this means they are paying a price for it. We've decades of experience and have an advantage both financially and through improved customer experience,” explains White.

Another core part of its mail order business has been the use of customer data. As a multi-channel operator N Brown has arguably cranked-up its use of insight and analysis. This involves using data to better deliver on its marketing-costs-per-sale ratios and achieving improved monitoring of customer-lifecycles.

“The amount of date we have is astronomic but the skill is to see the wood from the trees. There are many nuggets out there but they will not necessarily change the world. We have to work out how to summarise this data ,” says White.

The company has recently acquired a web analytics tool and White says this will help it better develop its website with a key objective being “to link the web analytics to the customer database for mass customisation” whereby each customer is presented with their own personalised home page and targeted offers.

The website has also been enhanced through the addition of new functionality such as a zoom facility, catwalk videos and 360 degree views of products. It also benefits from having a much wider range than is available in the company's various catalogues, which last year led to 13 million of group sales attributed to products available only online.

The continued growth of the online business is likely to see a reduction in the use of catalogues: “The Holy Grail over the medium term is to take some of the paper away from the catalogues, without damaging the top-line. We will be experimenting with reducing the size, having fewer pages, and using more of these pages to tell people to go online. But we need to be careful how we manage this transition.”

The catalogues are also increasingly taking on more of the look of a lifestyle magazine with stylists regularly featured and 'outfit building' incorporated into the pages. White is adamant that the disappearance of the catalogues is not on the cards because they remain important branding tools and drive customers online.

Of more immediate concern have been the levels of bad debts among N Brown's customers, which has been an issue for other home shopping merchants whose customers rely on credit to make their purchases. Around 45 per cent of N Brown customers take up its credit facilities.

With unemployment on the rise White says there is inevitability about bad debts rising, which is why he took the step of announcing a provision of 5.6 million alongside the company's recent trading figures. This went down badly in the City, which disappointed White.

“We were slightly bruised when we hit the numbers but then got hit for putting in the provisions. We'll see deterioration in people being able to pay but we believe we've provided for that level of risk,” he suggests.

And White adds that the company has a number of levers it can pull to manage its debt levels including changing credit limits. He also admits its APR of 39.9 per cent is reasonably high but is reflective of the risks to the company from offering credit to many people who would typically be rejected for store and credit cards.

Shaky investors might be assuaged by the fact White has a strong track record of running this well managed business and is as unlikely to shock through a failure to deliver on his financial promises as he is from suddenly launching a range of outlandishly designed clothes.

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