The Works is in the middle of a transformational journey as it looks to establish itself as an affordable retailer providing entertainment for the whole family.
The business has doubled down on its toys, crafts and book ranges in recent years, refreshed dozens of stores, as well as delisted from the main stock exchange to save on costs and deliver value for customers.
It’s now entering the second phase of its transformation, which aims to grow its brand, improve customer convenience and become a leaner, more efficient operator.
The new strategy is already paying off, with The Works set to deliver a full-year profit higher than its initial forecast later this month after making “excellent initial progress” on its growth plans.
Retail Gazette caught up with chief executive Gavin Peck to talk about the new strategy, building momentum on social media and how the business is delivering value for the whole family.
Enhancing the product range
The Works has been busy revamping its core crafts and toy ranges in recent months, which has seen the introduction of well-known brands including Crayola, Peppa Pig and Squishmallows to some of its stores. Lego is also on the wishlist, though Peck says “the margins on that are really tight”.
“We’ve basically gone through section by section [of our ranges] going, ‘how do we make our own brands more attractive, more relevant, and where do we supplement that with key branded items that we want?'”
Peck explains the retailer has used its bigger stores to trial new products and range extensions that are then introduced to the rest of its estate if they land well with customers.
Alongside the arrival of more notable brands, The Works has also refreshing its own-brand craft lines, rebranding and combining its three different labels into one offer.
Peck says the business has also started releasing “more trend-led” crafts, such as floral decorations for spring, which is helping to deliver a “really strong growth”.
With a stronger product offer, The Works is looking to shout a little louder to promote its new strategy with the launch of its ‘Time Well Spent’ tagline that launched before Christmas and focuses on promoting screen-free fun.
Peck shares that the business has seen positive results from the new tagline, explaining that one of its newsletters featuring the term ‘screen-free activities this half term’ delivered a 70% uplift in revenue compared to a generic ‘February half term, big brands for low prices’ one.
Strengthening the book offer
The Works has built a cult following of bibliophiles over the last couple of years, as avid readers flock to its stores to snap up the latest releases at low prices.
Being hot off the press is something that Peck is proud to see – and a stark contrast to the old, clearance titles it sold previously.
“We would not have had new books on release days two or three years ago. We’ve now got those and we’re getting more confidence in the volumes behind those,” he says.
Peck shares that the retailer’s campaign around the release of the latest Hunger Games: Sunrise on the Reaping, which saw a dozen of its stores transformed into one of the twelve ‘Districts’ from the books, had proved popular among shoppers.
“It was the first time we’d seen a huge queue outside of our Edinburgh store and they sold out of all their books during the first couple of hours,” notes Peck.
Book sales make up “a third” of The Works’ sales – and Peck is keen to build on the momentum.
Alongside newer releases, The Works is also working with publishers to create “lots of exclusive sprayed edge editions”, which Peck says has created “a point of difference for us”.
He laughs awkwardly at the name of the retailer’s ‘Spredguary’ campaign at the start of the year – a merge of the slang term spredges and January – but admits “it got people talking”.
The retailer’s range has also become the topic of conversation on TikTok and its BookTok community, with users sharing their recent purchases and upcoming book launches.
“We’re in talks with Tiktok Shop to look at whether that is a channel that we explore,” he shares, although he cautions that selling it could “be hard to make work” from a profitability perspective once fulfilment costs are accounted for.
Selling on TikTok would not be the first time that The Works has sought to sell its products via a third-party.
“We had sold on Amazon and eBay in the past [but] we pulled back from that couple of years ago just because it wasn’t profitable,” says Peck.
A store on TikTok would add to The Works’ existing ecommerce operations, which Peck notes “just about breaks even”.
“We’ve been focused on driving profitable growth online. Online is less than 10% of the business. Historically, it was loss making, and so we want it just to be a profitable channel. We don’t necessarily need it to grow,” he says.
“We do get some challenge from investors that are ‘why don’t you just close the website?’ and ‘it’s a lot of effort’, but the bit that you can’t quantify is the benefit it has on the brand.”
Navigating cost headwinds
After warning on profit last year, The Works left the main market on the London Stock Exchange in favour of its AIM sub-market.
Peck says the move was mostly to do with reducing the regulatory burden on the business and saving on costs.
“We saved about three quarters of a million in costs by doing that,” he says, adding that the business has also made “massive move forwards” with its strategy development without being under the watchful eye of the market.
The company has slimmed down its leadership team, bought its business operations closer together and reset its strategy.
“One of our challenges [before] was we had quite siloed mentality across the business, but by having a smaller team, it’s brought my team and therefore the business closer together,” says Peck.
The retailer formally launched its ‘Elevating The Works’ strategy in January – focussed on growing brand fame, improving customer convenience and becoming a more efficient operator – but Peck explains that work began behind the scene last summer.
Saving on costs also make up a large chunk of the new growth plans so the retailer can limit the price rises it passes through the shoppers.
“We’ve worked with our suppliers to reduce product costs and improve our product margins. There’s a huge saving there,” says Peck.
“We grew [product margins] by 2% last year and we’re probably going to grow it by another one percentage point this year.”
Peck says the retailer’s new head of distribution Adam Bialasiewicz, who joined the business in May last year, has implemented new ways of working that has helped deliver “about a million pounds annualized savings” to date, with further efficiencies underway.
This included adjusting the warehouse layout to improve the flow of goods and order fulfilment, as well as reduce handling time.
The Works is also building a new mezzanine floor in its distribution centre in Sutton Coldfield, reducing the need for it to commission external storage elsewhere.
Despite these efficiencies, The Works has had to increase some its prices. This includes the popular ‘Three for £6’ book offer which has since risen to ‘Three for £7.50’.
“We didn’t really want to change it but, as with every retailer, we had to look at pricing,” says Peck, quickly adding “it’s still the best deal in the market”.
He adds that the business has also sought to make its products better so it can “charge a little bit more for it”.
The Works is facing £6.5m in headwinds this year due to rising minimum wages and national insurance contributions – something it’s able to fully absorb driven by the efficiencies already achieved.
“The change to the National Insurance threshold was the bit that caught us out,” says Peck.
“The headline number didn’t feel like too much of a hit but when you worked it through you saw that, particularly for retailers who have a lot of colleagues towards the bottom of that threshold, it was quite a significant increase in cost,” he says.
Peck says that the changes have “probably accelerated some of the cost saving initiatives” rather than encouraged the business to scale back from investing.
“We’re fortunate that we’re growing sales so quickly that that is helping us fund our growth.”
With a product range spanning across books, crafts, stationery and toys, the retailer is putting in the work to establish itself as a retailer fit of the whole family.
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