100 Days at the Helm
Gerald Dawson, Finance Director at Weird Fish, sits down to chat with us about his first 100 days.
What's it been like joining Weird Fish - was it what you expected?
I've learned not to expect things over the years because nothing's ever quite what you expected. I knew as a small business it would have a whole bunch of challenges, which ones they would be, I didn't presume to know. I figured I would lift a few rocks, place some back, and others would have creepy crawlies hiding under there. I think it hit my expectations mainly because I didn't have detailed ones.
Did you have a clear picture of what you hoped to achieve when you arrived?
Oh no, not at all! One of the questions on my third interview was 'what would you do in the first 100 days?' and I answered 'get into the business'. I wanted to get in to the business. When you join a business you've got one shot at being objective. You've got three months and then that's it, you'll never be objective again until you spend six months in a coma and come out.
It's this difficult balance between the day-to-day (which obviously absorbs your time rapidly - and then being objective, standing back an saying 'well what's actually happening here?' I force myself to do that regularly. Just step back and remind yourself of what you're trying to do here and what you're trying to achieve. If you don't, you end up on a treadmill of stuff with events coming at you, board meetings and the whole cycle of the business without seeing what's special about it. It's important to see this in a business and nurture it, rather than just seeing what's wrong.
As a finance director we tend to come in and look at what's wrong. One of our traits is to be the 'seeker of bad news', and we tend to take a bit too much pleasure in delivering it. The sales guys are the opposite, they avoid any sight of bad news, strap on the blinkers and will never ever deliver it in any shape or form. We just need to find the businesses own unique specialness and make sure it's nurtured.
Having now been here over 100 days, are your priorities still the same - are you still immersing yourself in the business or do you now have a plan of where you're going forward with things?
The whole thing changed in that it became clear we weren't going to achieve some of our key objectives for the year. So the priorities have changed.
There was a clearly set out strategy but the emphasis changed from 'deliver the strategy' to 'do we need to modify the strategy, or is it just an execution issue'.
So it's stepped up a level as I'm now working a lot more on the fundamental strategy, which is trying to decide on the balance between the different channels -for example should we be opening stores or becoming more of a catalogue company or being more international? There are so many options.
What, apart from Finance, sits under your remit in the business?
It's quite broad. Ecommerce, buying and stock management, and operations. That's direct ownership. Oh and IT, I always forget about IT, but that's mostly outsourced. So it's everything that's not product design, retail stores and wholesale.
What do you see as the key challenges you face as Finance Director? Is it people, processes, systems, operations or cash?
Well you can't unpick them. There's a unifying thread in the context of 'what are we trying to achieve?' If we're going to shift more to retail then what does that do for operations? If we become more of an Ecommerce business then what would that mean in terms of flow of product through the warehouse? So it's all of them I guess. One of the biggest challenges in retail is always cash, but the business has very good cash discipline already. Systems are a limiting factor but I ignore them. You just don't get bogged down in it - there's no point in wringing your hands over a system you can't work with.
Biggest challenge though? People. That's a big one, because without people nothing happens.
But I'm not sure there is a biggest challenge. It's really holistic because it's a small business, everything impinges on everything else.
So each week the challenges have been different, and I'm not sure what the single biggest one has been.
How about relationship management? What about the backers - are they relatively hands-off or not?
They're interested in what we've got to say and they're not prescriptive, but they do bring a lot of very relevant experience. They are very pragmatic and don't get too emotional.
You've been trimming head office staff. Is that partly short term fire-fighting, or is it saying actually we don't need these people?
The balance of the business has been changing with growth in Retail, Ecommerce and International, and a stable Wholesale channel. It became clear that the balance of resources hadn't kept up with this change, so we figured out the right structure and then made the changes which got us there.
The government are trying really hard to tell us it's getting rosier in the garden. From where we sit, a lot of companies are certainly busier, but there is still apprehension around increasing head count or doing it too quickly. What is your perception on the high street retail scene?
It's a weird one. The issue isn't the state of retail itself as people are buying more than they've ever bought. The issue is where the money goes to. There's been this big shift in margins (margins have been slaughtered!) and you can blame businesses such as Amazon, Lidl and Aldi. So it's now a much less profitable business 'selling stuff', unless you've got a brand that people will pay full price for and there aren't many. Burberry are doing really well. But you go to the mid-market and it's a harder slog, it's just fundamentally a lower profit business. This means to employ one more head you've got to sell £150,000 more product, whereas it used to be £100,000. The amount of money that drops through I think has gone, but more stuff is being bought than ever, we're still consuming at a phenomenal rate of knots. Then there's this whole 'app economy'. We're buying stuff but it's not always physical goods. It used to be that consumer sales were consumer sales, it was physical. Now there's this whole digital market; music downloads and steaming services and data plans for your mobile. I mean, what was your phone bill 20 years ago? It was your landline and calls. Now a household is spending probably £200 a month on phone services because it's the data, the Wi-Fi for home, everyone's got data contracts on their phones. You've probably got about £2.5k a year going out of each household on data, so that's gone away from physical goods. There are winners and losers.
Fundamentally though, it's a low margin economy,it's not a low turnover economy and the squeeze has to be on head count, you can't avoid it. I think retail's in rude health in terms of the top brands and even the high street vacancy rate has come right down from about 10% at peak. The people that are squealing are the people that have the wrong business model. I'm a bit grey-haired now, I've been through about 4 recessions, but the time of biggest change is in the recovery, that's when people spring up.
As well as this, everything's going onto monthly payments, even if you're a business. Ecommerce platforms are now based on a percentage of sales, rather than up front licence fees. So that's affecting everyone. Stuff you would normally have bought with a licence is now all about the monthly payments, and companies are as bad at that as consumers. It's a bit of a dangerous game as you end up with a massive overhead that you're locked into, so I'm fairy cautious against those deals. But the government do it with private finance initiatives too. Instead of buying a hospital, they'll rent one. It doesn't matter ultimately, as long as you can afford the monthly payments it doesn't come home to roost, but it is not without risk and once again, it lowers your profit margins.
Your head office is located in Cheltenham. Does this give you an advantage in attracting top talent, or is it a hindrance?
It's interesting - I haven't perceived any challenges from that, but I haven't tried to hire anyone yet. I don't think it will.
I think we're near enough to the commuter belt for Birmingham in that we can get people to commute the other way and I think that's fine. In the same way I worked in Sloughwhich which competes in the job market with London, so they have to get people to commute in the opposite direction. Or just get ones living in Slough who are used to commuting into London and say you can save them the commute time. Cheltenham is really well placed between Bristol and Birmingham and with a great quality of life. We've also got low staff turnover at Weird Fish, everyone seems to have been here for years.
How do you feel your finance team is perceived by the wider business?
I think they're viewed pretty well, helped by it being finance and IT, so they are keen to automate rather than be a bureaucracy. They've been there a long time and it just works. They do a good job of being pretty invisible. They are lean, but it's a pretty simple business - it's not complicated. Buy stuff and sell it for a bit more, spend the difference on overheads.
100 days in, if there was one thing you could change about the business to make a real step-change, what would it be?
Crikey, what would I change? Well it's kind of changing anyway, but it's all about evolving from being a wholesale business to be a more balanced wholesale and consumer business. We don't meet the consumer enough. We sell to the people who meet the consumer. We don't have that constant engagement with 60% of our business and if we could, we'd be a better business for it. Businesses that are totally consumer-driven are the winners. They get it. Wholesale's great for giving you reach, I mean we're on sale from Land's End to John O'Groats which is fantastic, but in terms of actually engaging and creating that long-term relationship we just can't do it.
The customer that buys us in Debenhams just doesn't experience that brand in the way that they would in one of our stores. Joules have done the classic transition though. Everyone starts out as a wholesale business and then you flip into 'direct to consumer' and they used the recession to pick up a bunch of cheap stores. Seasalt are picking up stores now too and spreading across the South. You grow through wholesale but there comes a point, largely because your stockist is always looking for the next new thing, where they're going to get bored with you. So you need to ride up that slope and then quickly move into a more balanced channel strategy. That is very much work in progress at Weird Fish.
What was it that attracted you to Retail in the first place, or was it just a happy accident?
Oh happy accident! I was a B2B person for years, selling software, furniture, toys, all sorts of stuff and then I joined Amazon and became a consumer advocate. It was an interesting business because they don't meet their customers. There is no consumer engagement but yet they call themselves the world's most customer-centric business. It's not just a slogan - on the agenda at every meeting it's 'what's the consumer impact?' It doesn't matter what it is, you could be discussing building a new office in Seattle and you say 'how will it impact the customers?' They're obsessive about that and how it can impact positively or negatively.
It's a conversation that doesn't happen often enough in every other business I've been in. So you might be discussing the timing of when stock comes into the business and what the impact might be on sales and you'll discuss the impact on cash flow, but you'll never just say 'oh well, what do the customers want? When do the customers want this product?' It's just not said and it should be because that's what affects sales. Sales are not an abstract that just happens, they happen because a customer walks into the store and buys something.
It's getting that aspect of consumer-centricity that's one of my aims.
It's fair to say you know a lot about building brands - which brand do you most admire or consider to be aspirational?
I hate the word aspirational! What does it mean? Well I suppose it means that people who can't afford you, wish they could.
'If I was doing better I'd drive an Audi instead of a VW', or, 'you've got a Skoda and you want a VW'. You move up the value chain. However, what's the Skoda then? Is that not an aspirational brand?
'I don't have a car so I wish I had a Skoda'. Is that what it is? I don't know, I'm not sure I know what aspirational means. Everyone claims to be aspirational, but that doesn't answer the question.
Which brands do I admire? I admire the brands that focus on their target customer to a point of religion. So Jack Wills is a fantastic case of that. 18-25 - they're the real meat of it and once you're 25, obviously you can cling on to being 18, but usually you're done with that. If they get a PR opportunity that doesn't target that age group, they're not interested, they will not pursue it. So what if it would get them some sales from 40 year olds - they don't want those 40 year olds. That would dilute the brand. It would damage the brand. All they want is that core customer and everything they do is about that core customer. Obviously you reach a point where you run out of growth and you say 'now what do we do? Let's try and broaden the range', but it's a mistake.
The focus on that age group is quite amazing, and how they do it. They've always had old buildings and as they got bigger the challenge was how do they keep that? Do they stay in quirky old buildings that might cost a fortune, or do they just accept that they might have to be in some glass-fronted shopping centre? But they stick with it, its core.
They shipped a town house to Dubai, brick by brick. A London town house! All because they wanted the authentic Jack Wills experience. It cost them an absolute fortune, but it's their most profitable store. All because they brought a London town house to Dubai, and that's authenticity. They're saying 'this is us, and we can't step out of that, even if it costs us money'.
That's what I admire and what I'm trying to get into Weird Fish. Authenticity is key. The big retailers, it's not possible for them to do that and they then become all about systems and process and sourcing and they make money from economies of scale. For a small business you have to be authentic, flexible and courageous; the economies come later.