House of Fraser: The same old story

The owner of Sports Direct has agreed to buy House of Fraser for £90 million when not so many years ago it was acquired by a Chinese group for about £480 million. We all know that retail is a challenging place to be right now, but there are parallels to be drawn with other industries. How is value created and maintained?

Four key conclusions are being put forward in the financial press.

The internet

If you don’t evolve, you get left behind. House of Fraser was investing in digital technology but at a fraction of the rate of and later than its main competitors. It isn’t a lot different in a manufacturing environment. If you don’t invest in new plant and equipment that works more quickly or to greater precision, you risk losing customers who will seek out a better solution.

No USP

What was House of Fraser all about? Lots of swallowed up defunct brands and stores dominated by third party concession owners. No reason to say, “I have to visit House of Fraser because…..”. What is your business known for? Where is it world class and what is holding it back?

Too many stores

It’s all very well investing in expansion, but those assets do need to be sweated to generate a healthy return. They need to be utilised optimally. There is no point having a factory full of state of the art assets if half of them are only working at a fraction of their potential.

Management troubles

Usually the root cause of everything…

The question is, what has a high-profile retail failure got to do with the owner-managed business around the corner? The answer: the same things drive value.

Invest appropriately. This doesn’t mean being at the bleeding edge, but you can’t keep relying on assets 20 years out of date.

Understand what your customers want, what you are good at and how that can create lasting value. What needs to be changed?

Make sure you are efficient. Efficient businesses make more money which puts them at an advantage over inefficient ones.

Invest in your management team so they are running things on a day to day basis. This leaves you much more space for working on the business and not in it.

If you are considering the value of your business, get in touch today on 01254 679131 or via email at jim.akrill@pmm.co.uk. We can help you understand where you are now, where you want to be, and how you can get there.