While many retailers are trying to dress up their stores to attract customers through their doors, Duvet & Pillow Warehouse is taking an entirely different approach to retailing.
The online-only homewares specialist is keen to keep costs down and operations simple to ensure it maintains its impressive sales growth of recent years and is instead concentrating on promoting its value message.
“Our focus is on value and quality rather than providing a shopping experience,” CEO of the company Charles Hunt tells Retail Gazette.
“We are a totally no-frills retailer - we quite often say ‘no catalogue, no salesmen and no expensive management’.”
Without jazzing things up the small business has consistently increased sales, and has an aspirational turnover target of £20 million for sometime in the next three years.
Hunt predicts the company will turn over £5 million during the financial year ending this July, and explains that the retailer has a strong balance sheet and a healthy net margin “above industry standards”.
Duvet & Pillow Warehouse was launched in 2006, generated revenue of £400,000 in its first year and has reported growth of 50 per cent per annum since opening for business because of its “authentic high quality products” that typically sell for less than similar goods on the high street.
But the CEO is keen to express that the real strength of the business model lies in its compressed supply chain.
By cutting out wholesalers and outsourcing its distribution and customer service to a company in Sunderland, the duvet and pillow seller is able to considerably reduce costs and those savings are seen in the retail price.
“When comparing high street prices to supply costs, the mark up is pretty significant, but removing a level of the supply chain and by refusing to have a bricks and mortar presence we can reduce costs typically by 40 per cent,” Hunt notes.
Staff costs are at a minimum too, with only around ten people working for the company at its Guildford head office.
“These are predominately marketing people,” the retail boss states. “One of the downsides of following the model we do is that an awful lot of money must be spent online to get the brand and message out to consumers.”
International expansion is currently a key goal for many UK retailers faced with a sluggish marketplace at home, with Mothercare and Marks & Spencer two examples of British companies investing in stores abroad.
Fashion e-tailer Asos.com is also expanding, with early sales figures at its new European and US websites looking healthy, but the goods Duvet & Pillow Warehouse provides means the firm is quite restricted when it comes to becoming a global player.
Hunt explains: “There isn’t a natural demand for our product globally because UK duvets are of a unique size - our growth focus is currently on the UK market but we are starting to look at different bed sizes in the German market.”
Instead, further expansion in Britain is in the pipeline, and the firm has put plans in place to sell mattresses in the country in the near future, despite an under-pressure UK homewares market.
The retailer’s product development team is working on selling this product by replicating the structure of the current business, but with homewares struggling in general it is a move that Hunt will no doubt be taking with caution as well as a considerable amount of fear.
“Homeware is one of the first sectors hit by recessions and economic downturns because products within this area of retail are an aspiration not a necessity,” he said.
“However, we find that our online conversion rates are good because of our compelling value proposition.”
Another major challenge facing the retail sector is that of inflationary pressures such as rising cotton prices, and the CEO is expecting the impact of this to grow as the year draws on.
He explains that in February this year the company’s costs from its main factories in India increased four days out of five in a single week.
“We’re never going to see the £1 or $1 T-shirt again as those costs just aren’t there anymore,” he states, although he acknowledges that the situation presents him with an opportunity to promote his business.
“If the press are full of stories about high prices it is only going to increase the number of people coming to us!” he remarks.
“Issues such as cotton prices rising highlight the problem of costs to a consumer - and, for us, that is a good thing.”
Overall though, Hunt thinks it will be a mixed picture for retail in the year ahead. If he were a grocer he might be likened to an Aldi or a Lidl, attracting more customers from all social backgrounds when times are hard, which is a trend reported in recent years in the UK.
The difference, he argues, is that Duvet & Pillow Warehouse provides “the same products - sometime better” as companies on the high street - he is just in the favourable position of being able to sell them for less due to the way the retailer is set up.
“Consumers are demanding better value from retailers so in these tough times you still get retailers that are doing well,” says Hunt.
“It is the retailers that have their costs under control and those offering real value who will get through the year most successfully.”