House of Fraser chief executive Nigel Oddy talks multichannel, China and the challenging UK retail market.
”Everything I do in life I do with pace. It doesn’t matter if I’m running or working or doing a project, I do it with pace,” explains Nigel Oddy as he sips tea with Drapers in House of Fraser’s (HoF) London Oxford Street flagship. And pace certainly describes the chief executive’s first 18 months at the helm of the department store group.
HoF, which was acquired by Nanjing Cenbest, a subsidiary of China’s Sanpower Group, in 2014, is now in the pack of retailers leading multichannel innovation in the UK.
“We have worked hard on the fact the customer can buy on their sofa up until midnight and collect in store tomorrow from midday,” says Oddy. “Thirty-five per cent of our customers choose to do that and 25% of those shoppers will make another purchase when they are in store. That, to us, is a truly multichannel business.”
Following his promotion from chief operating officer (COO) to chief executive in February 2015, Oddy has put his stamp on the business by driving that multichannel mindset and creating a single customer proposition: “We only launched our website nine years ago, but we hadn’t recognised that we were channel centred. We had separate marketing for stores and online, and we weren’t giving the customer consistency,” he explains.
“Once we recognised we needed to put the customer at the centre of everything, we extended Andy Harding’s role [to chief customer officer, in March 2015] and made sure a multichannel view was built into every category, from fashion to home.” Harding has now resigned and will be replaced on an interim basis at the end of May by Alison Lancaster, former director of Bravissimo and Bonmarché.
HoF’s ecommerce sales increased 26.8% for the year to January 30 and now account for 18.9% of the total. Oddy says this will be a key avenue of further growth over the next couple of years. The business is launching a new website later this year, which will allow it to trade in local currencies and present a localised offer for each market.
However, HoF’s 60 UK and Ireland stores, and outpost in Abu Dhabi, play a vital role in its multichannel plans.
“Bricks-and-mortar stores are a very important part of our business,” says Oddy. “It’s very easy just to talk about the great growth of online but to be truly multichannel, you have to have more than one channel. There is still the need for shoppers to touch and feel the product, and we know the shopper who is multichannel will spend more than the single-channel shopper. We need to make sure that each channel works together and there’s consistency.”
The strategy appears to be working. In April, Hof reported its first pre-tax profit since 2006, of £1.3m before exceptional items, and adjusted EBITDA of £66.3m on sales of £1.3bn for the year to January 30. In fashion, concessions account for 50% of HoF’s business, wholesale 35% and house brands – earmarked for further growth – 15%.
“Last year was another record year for house brands and we will continue to bring in new wholesale brands,” says Oddy. AllSaints is coming back into stores this autumn, and we have Kate Spade New York and Charlotte Tilbury coming in on accessories and beauty.”
Oddy undoubtedly has a strong work ethic, having never taken a day off sick in his 35-year career. His love of retail was sparked at young age by helping out in his father’s business, JL Cowan –Ladies Outfitters, in Chester.
“I used to help him as a boy and I loved it,” he recalls. His parents wanted him to go to university, but he wanted to start work immediately, so they challenged him with finding a “good job”. “When anyone gives me a task, I normally achieve it, so I left school one day and started on the Marks & Spencer young management scheme the next.”
Having joined M&S in 1978, Oddy worked there for 23 years in various roles from junior trainee to general merchandiser of the Marble Arch store in London and executive buyer. Among other successes, he established the retailer’s first direct sourcing supply chain in the Far East.
“M&S was the most fantastic grounding. It taught me all about the basics of retail and the old adage that retail is detail,” he says.
In 2006, he was approached by John King, then chief executive of HoF. King had been Oddy’s first-ever supplier at M&S. Oddy joined HoF as executive director of homeware in 2007 and was promoted to COO in 2013.
“It was a natural step up to become COO as I had become more involved in the operational side of things. John and Don [McCarthy, former HoF chairman] had already thought about the succession plan prior to John leaving. Over the course of nine years at HoF, it was a natural progression for me to go from director to COO to CEO.”
Perhaps one of the biggest challenges of Oddy’s career was in the first months as CEO, when he had to lead the business under its new Chinese owners: “We had only just been acquired by Sanpower when I took over, so it was really about understanding the rules of engagement with our owners,” he explains. “They have a very clear way of reporting, so it was implementing that into the business.”
The chief executive of one footwear brand stocked in HoF says: “Nigel has been in retail for a long time, but he has a tough job to do, dealing with a parent company in China. His biggest challenge is to not get distracted from running the UK business, as it’s an increasingly competitive market.”
House of Fraser will open its first Chinese department store in Nanjing this September. A second store in Xuzhou had been planned for this year, but has been pushed back to next May because of upgrades to the Sanpower Plaza, where it will be located. Chongqing, a city with 32 million people – around half the population of the UK – is another location the group is eyeing.
The UK and Chinese businesses are kept separate, Oddy says, overseen by a board of directors from the UK team and Sanpower. He adds that the potential for growth through China is “huge”, although he admits that, despite all the time he has spent there, he still only knows three Mandarin phrases: gan bei (“cheers”), xie xie (“thank you”) and ni hao (“hello”).
“There are 650 tier-one and tier-two cities in China. It is a very different country and an ever-changing environment. There is huge opportunity once you get used to the difference in culture. If we can take one small part of our Britishness and put it there successfully, it will be very exciting.” Oddy says there are plans to open a “large number” of stores in China in the long term, but will not give a number. For the time being, the focus is on the first two.
Closer to home, Oddy is “cautiously optimistic” about 2016: “Consumer confidence has lowered and there is a general feeling of uncertainty. We are making progress on the year but not quite the amount we would like to be making. There is always room for improvement. Homeware had a great start, womenswear has been tougher and menswear is somewhere between the two.”
A self-confessed avid shopper, Oddy says he would never blame unseasonable weather for poor trading, but he thinks the weather is having a bigger impact on spending patterns than ever before.
“People buy now to wear now. When I was young, you used to buy your seasonal clothes at the start of every season. Now, if you’re going out tonight, you’re going to buy an outfit for tonight. As retailers we have to have far more transitional products to cope with the changing weather pattern.”
He adds that retailers need to adapt their sourcing strategies to allow them to react in season: “Fast fashion has to be closer to home. That’s what our teams are working on – that and keeping open to buy so you can change, cut, duck and dive. That’s what retail is all about.”
One brand source said: “HoF is like turning around an oil tanker – it’s not very reactive, and its systems and procedures with regard to in-season trading and stock swaps are quite laborious. There is a lot of red tape.”
The volatile market has led to an increase in discounting on the high street, but Oddy says HoF reduced the amount of time it was on Sale by a week in 2015, compared with the year before.
“Our consumers have got used to getting a bargain and I don’t see that going away. However, we have made a conscious effort to reduce the number of days we are on Sale and we’re also trying to be more flexible with the type of promotions we are doing.”
He adds: “It isn’t always about red-and-white ticketing – it might be about vouchers or a card promotion to encourage people on to our database. I don’t want to be on Sale more than we need to be, but we need to entice our customers in and being creative with discounting helps that.”
Oddy says his strategy for the coming year is clear: “It’s about the growth of multichannel. It’s about premium brands. It’s about the development of our stores and the internationalising of our business. The strategy isn’t going to change, but we need to focus on those cornerstones of our company to develop and build on them.”
These cornerstones will be central to a successful expansion in China. In the UK, Oddy’s suspicion of discounting will be welcomed by high street competitors. If he can manage all this while pushing the multichannel agenda, HoF will do its owners proud.