Intouch Spring/Summer 2008
Quality brands breed success
Consumers are more engaged with their favoured brands than ever. Respected retailer Stuart Rose, the newly appointed Chairman of Agent Provocateur, believes that strong brands can grow throughout the economic cycle.
When Stuart Rose became Chairman and co-investor at luxury lingerie group Agent Provocateur last year he had a clear idea of the label’s huge potential.
Rose, Chairman of The Hamleys Group and former Managing Director of The Body Shop, believes Agent Provocateur is an outstanding brand that has forged a powerful connection with consumers. It is edgy, humorous and high-quality – and enjoys strong customer loyalty. All this will help it successfully expand overseas, online and through licensing.
“There is an awareness of the brand that is out of all proportion to the size of the business. We bought it not for its current earnings but for its ability to develop,” says Rose, who took a stake when 3i acquired the company and appointed him Chairman in November 2007.
Building trust with consumers
Rose, who has extensive experience of international retailing and brand development, believes that strong labels provide an excellent platform for corporate expansion and earnings growth. Household names not only convey certain values and standards, they also command loyalty and justify a premium price. What’s more, their appeal can be exported to new markets and extended to additional product lines.“Consumers are more brand-aware than ever,” he says.
“Brands create trust and help companies stay engaged with customers, whatever the economic climate. That’s why it makes sense to invest in them.”Consumer demand is the engine of the global economy. But recently both the US Federal Reserve and the Bank of England have cut interest rates to defend against a consumer-led downturn that could affect the performance of the restaurant, retail and leisure sectors and beyond.
Yet, at the time of writing, Rose believes talk of a slowdown is exaggerated. “The general mood of the market is positive – although that might change if job losses are reported.” Spending by wealthy consumers in the Middle East and the emerging markets of Russia and China appears particularly strong, he adds. Rose has also been working with the management team at family-friendly restaurant chain Giraffe to roll out the business across the UK.
Rose, who became a non-executive Director of the company when 3i made a growth capital investment in the firm two years ago, is advising Giraffe as it takes a brand built around global food, great service and world music to almost 30 new locations in three years.
“Giraffe is known for quality, freshly prepared food and friendly service. Diners know they will have a great experience at our restaurants, which is why they keep coming back,” he explains. The company has already successfully launched a number of outlets outside the south-east.
Rose, who helped steer The Body Shop through tough trading conditions in the early nineties, believes brands that keep to their core values and avoid the temptation to cut costs can continue to grow throughout the cycle. “You stick to what you do best and you keep doing it. No amount of marketing can bring customers back once you have lost them.”
For strong brands, finding new markets abroad is a proven method of improving sales and earnings. Agent Provocateur, which already has outlets in 10 countries across Europe, as well as the United States, Hong Kong and the Middle East, plans to open more stores in its existing markets as well as in new European and Asian markets. “Having an international content balances the risk, bringing different income streams and often higher prices,” Rose says.
The label is targeting wealthy consumers by expanding its high-end lingerie range. “The incomes of those who are prepared to buy luxury items like these have not changed,” Rose observes.
Leveraging a successful label
Successful labels are also harnessing the power of technology to understand customers and build sales. One outstanding example, according to Rose, was 3i’s revitalisation of the well-known Interflora brand’s website following a £20m investment in 2005. As well as redesigning the site, the company introduced a service that emailed customers to remind them about forthcoming anniversaries. As a result, online sales improved by 43%, and when 3i sold its stake the following year it made more than three times its original investment.
Rose believes that one of the most effective strategies for growing sales is to focus on improving the customer experience. It was a tactic he employed at Hamleys’ flagship toy store on London’s Regent Street after the 7/7 bombings. Investment in staff training led to improved customer service and a conversion rate that leapt from 40% to 60%.
Over the years, the best brands have secured a loyal customer base by offering a unique and trustworthy product or service. Now, these labels provide an outstanding platform for growing sales and margins by taking them to new markets. “It takes a long time to build a brand,” says Rose. “That’s why their value can be colossal.”