The boss of one of Leicestershire’s best known companies says he would love to hit annual sales of £500 million in the next five years as he takes on the likes of AO and Currys.
Mark Smithson started Marks Electrical back in 1987, buying and selling second-hand cookers out of his dad’s Leicester garage.
A few years ago it moved from a well-known shop in King Richards Road, in the city, to a 200,000 sq ft warehouse near the Beaumont Leys Shopping Centre, on Leicester’s outskirts.
And a few months ago Marks raised £30 million through a listing on the AIM stock exchange, which valued the business at £115 million.
Mr Smithson, who still owns 70 per cent of Marks, said there was no reason why sales couldn’t keep growing thanks to his straight-forward business model.
By comparison, back in January Currys said its sales dropped over the key Christmas period as supply issues it short of stock for some popular tech products.
Mr Smithson said Marks, which has 182 staff right now and could soon have “several hundred more”, was succeeding where other retailers were struggling because much of its stock was sourced from the EU rather than the Far East, so it hadn’t been hit so hard by recent global trends.
The 56-year-old said: “We cover 99 per cent of England – we go to where the people are and that’s one of the secrets of the business.
“We can run all of that out of Leicester, and that’s another major benefit because we can have just one big warehouse in the middle of England and get to the vast majority of the population.
“We don’t need to go to Scotland, for instance – that’s why we’re profitable – and we don’t have satellite warehouses either.
“We have a 200,000 sq ft dedicated site and £15 million of stock at Beaumont Leys.
“We will do £80 million up to the end of March this year and the target is to do much more than that next year.”
Mr Smithson said supply chains were a problem for any UK retailer, but supplying from Europe rather than the Far East had cut down on his shipment costs.
He said: “Buying from China is fraught with danger – there’s the $20,000 cost of getting a container from China to here, so the price of the cheaper products are as expensive as a Hotpoint to buy now.
“The benefits in savings of dealing with the Far East have dropped off. Most of our stock comes overland from mainland Europe – from Germany, Poland, Spain, France – so we’ve not got problems with ports.
“All our competition has 20-25 satellite warehouses and will maybe take an order up in the Manchester area and deliver it overnight to one of them. Our business model is to have one huge warehouse and take the order from there and deliver free the next day, seven days a week, using our own transport.
“We also like to sell more premium brands, we don’t chase the bottom end. Our vans go out with a lot higher order value on them than the likes of Currys.
“As fuel’s gone up and wages have gone up and shipping’s gone up the actual price to the consumer has gone up, but not dramatically, probably by 5 per cent.
“You might have found it’s gone up 10 per cent and we’ve only put it up 5 per cent – the bigger we get the more scale we’ve got in the business to control our overheads.
“Our overheads are very low. We’re a nimble business and can move quickly and don’t have to pass on such huge costs as some of the other bigger players."
The UK white goods market, he said was worth £5.3 billion, with another “£2-£3 billion” coming from TV sales, so any significant share was worth fighting for.
He said taking on the big online retailers could see him selling even more of his stake in Marks to bring in extra cash. But he would retain the majority stake, he said.
“Over the next five years we’d like to get to half a billion pounds in sales and take a 10 per cent share of the major domestic appliance market. AO did it from scratch up to £1.6 billion.
“It’s all built into our costs. We make money already and we’re growing and it’s all about building that brand awareness.
“We’ve got a very, very good website and we make a profit.
“I think we’d create several hundred jobs doing that. We’ve already been in talks with local developers about new sites.
“We’ll always use that one warehouse model from where we can deliver to 99 per cent of the population in England, which is a huge number of people. The market’s more than big enough for us to go after.
“We reckon we could grow to £200 million in this current warehouse, so having 600,000 sq ft would be equivalent to having a turnover of £600 million.
“We’ll stay very close to Leicester because that’s where our employees are all from.”
Mr Smithson said listing had been an easy decision because he had always wanted to “professionalise” the business and knew how injecting cash into it – from moves such as selling property on Leicester’s King Richard’s Road – could drive sales.
He said: “I just thought that with a bit more cash in the business we can take on the likes of Currys and AO and John Lewis, and provide a different offering to what they do.
“We’re focussed. We’re not selling lawn mowers and garden furniture and mobile phones, so it’s easier for us to control the market that we are in by forecasting better and buying the right amounts of stock.
“We have to be in-line with the market though and if anyone makes a move we have to make sure our customers get the best deal possible.
“I love doing this. It’s fantastic. My sons work in it now as well – Jack is 29 and Oliver is 25 – so it’s got a real family feel to it. It’s great, and it just makes you work even harder in all honesty.
“They love doing what they’re doing at the moment, but whether they actually want to take over and run it is another thing.
“But I’ve got no plans to go anywhere.”
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