The Hut Group Profiled in Retail Week

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Northwich lies south of Manchester and Liverpool and did not exactly have a reputation as a hotbed of retail talent. Until now, that is. Ambitious online retailer The Hut is located on an out-of-the-way and nondescript office park in the town.

But inside its inconspicuous headquarters a group of young entrepreneurs is building a business that has attracted investment from retail luminaries including former Tesco boss Sir Terry Leahy, former Tesco and Debenhams director Terry Green and former Marks & Spencer boss Sir Stuart Rose, who is also a non-executive on the board, which is chaired by retail veteran Angus Monro.

Despite the weight of retail experience, The Hut does not class itself as simply a retailer. “We have a split personality – we’re a tech business and we’re a retailer,” explains Steven Whitehead, group commercial director. “And we have to be a master of both.” It has proven expert so far, with group sales soaring 70% to £143m in 2011.

The Hut launched in 2004 and last year was eyeing a float before pulling the process because of volatile market conditions. But an IPO remains the preferred route for The Hut. “We’re 80% more ready and 100% better as a business than we were a year ago,” says Whitehead.

The Hut, which operates 15 online stores, is youthful and fast moving. Each website, such as MyBag.com and Lookfantastic.com, has a buyer, a merchandiser and marketer. “They’re running their own businesses, that’s what creates the culture,” says Whitehead.

While the overall goal is a common one – to increase The Hut’s sales and profits – there is healthy competition between the brands, and very few places to hide if you’ve had a bad day at the office. For instance, an email is sent round daily detailing the progress of each website. “We’re very transparent,” says Whitehead.

Everyone in the company can see how much their colleagues are paid – even chief executive Matt Moulding. The hope is that it will drive staff to up their game to match their colleagues’ salaries.

To inspire people to go that extra mile, The Hut runs competitions such as the 5k Challenge, for which employees submit ideas for cost savings or revenue generation. Ideas adopted win the employee £5,000.

Moulding shares an office with several other directors, who all have desks facing inwards towards each other. Staff are encouraged to walk in and pitch an idea. “You can go in with ideas and never get told no, you’ll be told to go away and think about it some more,” says Whitehead.

An enduring challenge for a growing entrepreneurial business is how to keep that enterprising spirit. “If you still feel like a start-up then that’s the biggest safeguard,” says Whitehead, referring to The Hut’s recent launches into new categories, which include clothing and beauty. “We still feel like a start-up even though we’ve been around since 2004.”

The Hut may not be the most well-known retail brand in the UK, but it boasts 6 million customers across its brands. All trading decisions are driven by real-time data – if an item is not selling well the retailer can quickly try things such as tweaking the price.

The business uses Google, its eBay shop and its own customer data to inform decisions.

Daily deals are key to the business. The retailer offers a core range and has long-term supplier relationships – when suppliers have surplus stock issues, for instance, The Hut takes on that product to offer deals to its customers, providing daily newness. When a buyer completes a deal, the products can be on the site 90 minutes later. “We can offer them a 6 million-strong database. We’re helping the brands,” says Whitehead.

The Hut differs from online giant Amazon by running specialist websites rather than one department store-style offer, he adds, and the products are “retailed in the right way by an expert”.

Customer service is another differentiator. The Hut’s beauty site Lookfantastic.com, for example, employs beauticians in its customer service team, while MyProtein’s team hires nutritionist experts.

To keep improving the business, The Hut insists on what it calls ‘agile development’ – it enhances the platform on which the whole business sits every Wednesday, making tweaks to improve the customer experience.

With a strong platform and a customer base that is growing, Whitehead says bolt-on acquisitions are fairly easy to integrate and develop. “There are plenty more to come,” he says. “We’ve looked at 250 businesses in one form or another. Our platform allows us to be a disruption in the market.”

Future acquisitions will fit into one of three of its divisions – consumer, prestige and lifestyle. The retailer focuses on non-perishable product, so steers clear of food, and high fashion.

“When we launch into new categories we do it in a big way. We’ll do two or three acquisitions, and then the brands say ‘I’m on board’,” says Whitehead. Lifestyle is a good example. It acquired MyProtein last year and is just about to launch MyVitamins.

With the exception of Zavvi.com, which The Hut acquired in 2009, and Iwantoneofthose.com, The Hut’s brands are not the best known among British consumers. But chief marketing officer Andrew Booth insists that it is more important to get to the top of Google searches when shoppers search for a product. “On a Monday morning, we have 350,000 people looking on our sites, we have no problem with traffic,” says Whitehead.

And later this year, when the group launches a ‘joined-up’ checkout, customers can even search for a hair dryer on Zavvi and be recommended a product from sister brand HQHair.com.

A third of the business is international – with product largely shipped to Western Europe and China – but Whitehead says there is lots more growth left in the UK, including through its web services division that provides technology services, such as loyalty reward schemes, for organisations including the Daily Mail.

Since its launch, The Hut has morphed into an entirely different business. When it was founded, it ran white-label websites for retailers such as Argos and WHSmith. At one point that business represented 90% of turnover. Now it accounts for just 5%, after the retailer launched its own websites. “It gave us learnings and working capital but the asset is in owning the brand and the customer,” says Whitehead.

The Hut’s shareholders – Balderton Capital, Artemis, William Currie Group and the retail veterans mentioned – are demanding, according to Whitehead. But they are also supportive. “We’ve bought five or six businesses in two years and changed our business model. That would blow the minds of most PE houses. And they’ve supported us through three rounds of investment,” he says.

While retailers such as Pets at Home and The Hut are thriving in the Northwest, and cities such as Manchester and Liverpool continue to be the go-to place for expansion in the region, it is easy to forget the more blighted spots. CBRE’s Barr highlights secondary markets such as Warrington and Preston, which have been hit hard by the recession.

But even they are now seeing small green shoots, says Barr. Overall, the region is “very good, retailers perform strongly”, he says. Not even the volatile weather can put a dampener on that.

The Hut:

  • Operates 15 brands including Zavvi.com and Iwantoneofthose.com
  • Sells 1.1 million SKUs across health and beauty, sports nutrition, gifting, clothing, accessories, entertainment and sports
  • 35% of the business is international
  • 78 million unique visitors went to the group’s websites in 2011

ENQUIRIES:

Hudson Sandler Andrew Hayes/Andrew Leach/Kate Hough Tel: 020 7796 4133

For in-house enquiries contact Clare Potts clare.potts@www.thehutgroup.com

Notes to the editor:

About The Hut Group

The Hut is the UK’s leading multi-product, multi-website online retailer with rapidly growing international operations. Founded in 2004 by CEO Matthew Moulding, it is focused on selling fast moving consumer goods that are non-perishable with high levels of repeat purchase. Products span health and beauty, gifting, entertainment, fashion, bags and footwear.

Please find below a list of websites owned by The Hut Group. For more information please visit their websites.