Yahoo Finance M&S boss turns to hi-fi entrepreneur to amp up profits
When they meet it is discreetly, in a small windowless room at the back of a Mayfair cafe in London. But it’s not a clandestine affair. The men, Richer Sounds founder Julian Richer and Marks & Spencer boss Steve Rowe, are debating ways to reinvigorate M&S, which, in a dramatic admission, said last week that it had become “too corporate” and lost touch with its shoppers.
“I wanted us to meet outside the office so we could talk without distractions and we have very intense discussions,” explains Richer. “I’m an ideas man. I’m all about the people.”
The entrepreneur has been drafted in by M&S chairman Archie Norman to assist with a major restructuring that involves “fracturing” a dysfunctional business culture in which decisions are made by committee, accountability is blurred and customers are abandoning its shops.
Richer successfully assisted Norman with the turnaround of no-frills grocer Asda in the 1990s and at M&S is acting as an “independent adviser on culture change”. This time around it is Rowe, not Norman, heeding Richer’s counsel, and they are unlikely bedfellows.
Richer, with his long hair and sideline as the drummer in funk band Ten Millennia, is lauded for the success of his Richer Sounds chain, which he founded in 1978 at the age of 19. Rowe, by comparison, is an M&S lifer who supports Millwall. But the men appear to have built a rapport; after a recent tête-à-tête Richer persuaded Rowe to abandon his driver and hire a bike to pedal across the capital together to visit a store.
“I think we have connected very well,” says Richer. In fact Rowe, after a punishing week in which M&S reported a collapse in pretax profits linked to its large store-closure plan, pitched up on Thursday morning, along with a handful of other M&S directors, to attend a lecture on Richer’s new book, The Ethical Capitalist, in a Salvation Army hall in the West End.
Profits might be going backwards at M&S but Richer is the first to admit his hi-fi and TV empire is a “minnow” alongside the might of the UK’s largest fashion retailer, with just 53 stores to M&S’s 1,035. Last year, Richer Sounds rang up sales of £187m while M&S recorded £10.7bn. But M&S is in decline: its clothing market share, for example, has almost halved from a peak of 13.5% in 1997 to 7.6%.
It's akin to having a oil well in your back garden
Julian Richer on staff suggestion schemes
By comparison Richer Sounds has kept the mighty Amazon at bay and regularly comes top – including this year – in the annual retail poll by consumer group Which?. It is fair to say M&S would like to sprinkle some of that stardust on its shop floor. At the end of Richer’s talk, Rowe said a few words, confessing that, after a meeting with “Jools”, “I feel like I’ve had 17,000 volts put through me.”
When Norman took the M&S chair last year he certainly electrified the boardroom. He forced Rowe, who had already been running the business for a year, to kick the tyres – and, judging by last week’s investor update, the company failed its MOT spectacularly. Serious faults include a “top heavy” head-office culture, a clunky website and a food business that needs a complete overhaul.
“Archie gave me a pass and I turned up at the Pudsey store at the crack of dawn,” says Richer of his experience at Asda. He would spend a day a week for the next two-and-a-half years at the grocer, sending Norman regular reports. Now he has an M&S pass.
Some of Richer’s culture-change ideas are simple, such as a suggestion scheme for staff. He introduced one at Asda and recently at M&S. It’s “not very sexy”, he admits, but they empower staff and the ideas they generate, he says, are “akin to having a oil well in your back garden”.
The Yorkshire-based entrepreneur has plenty of big ideas too. Among his new pet projects is funding a new non-profit organisation, Taxwatch, where journalists and tax professionals will work together to expose abuse of the tax system by multinationals and individuals in a bid to galvanise public opinion.
Given the entrepreneur is worth an estimated £160m, one might expect his loyalties to be elsewhere, but he says: “I’m outraged by the status quo. We pay our taxes but these people are laughing at us.”
As 134-year-old M&S faces the potential shame of dropping out of the FTSE 100 in this week’s reshuffle, the stakes are high for Rowe – and for Richer to replicate his Midas touch. “I’ve nailed my colours to the mast,” says Richer of the challenge ahead. “M&S has to change, and is changing, fast.”
