In a volatile and inflationary electricals market, Marks Electrical has bucked sector trends by growing both sales and market share. Retail Week speaks to chief executive Mark Smithson about how his business is outcompeting its more established rivals
Marks Electrical reported record results in its maiden full year as a listed company this week, with sales up 44% to £80.5m in the year to March 31, against a strong comparable of 78% revenue growth the previous year.
The online electricals retailer also reported an adjusted EBITDA of £7.2m with a 9% profit margin.
The AIM-listed retailer’s results stand out against its bigger competitors such as AO and Currys – both of whom have blamed the fallout from the cost-of-living crisis as reasons for flagging sales.
Also this week, AO announced that it would be closing its German business after eight years due to the prospect of further deterioration in the market’s outlook.
The etailer will instead focus on driving profitability and winning market share in the UK.
Having launched its IPO in November 2021, Marks Electrical is one of the few pureplay retailers to have successfully floated in the past few years, avoiding the pitfalls of overpromising and underdelivering that have plagued the likes of Deliveroo and THG.
While only commanding 1.6% market share, the retailer’s boss, Mark Smithson, is focused on raising brand awareness using the funds raised from its IPO to further its expansion plans.
Float to the top
While other recent retail IPOs have disappointed, Marks Electrical raised £30m with a market capitalisation of £115m, which Smithson says will give the business the influx of cash it needs to continue to drive growth.
When asked why he persevered with the float despite the failures of others, he says it is down to Marks Electrical’s “great business model”.
A key part of this model is a focus on offering customers what it calls “distressed purchases”, catering to customers in urgent need of a replacement for a broken cooker or fridge-freezer.
“We’ve got a great business model that makes sense,” Smithson explains. “A lot of people use a lot of marketing spend and hide behind smoke and mirrors, whereas I’ve spent years and years building up to now and it makes a profit.
“It was all about scaling it up – I never had any cash before.”
Smithson also chose not to look at others’ IPO plans, instead focusing on his teams and his purpose.
“I don’t look at the share price,” he adds. “I just work hard, get my head down, drive the sales, improve the profitability and get stuck in as a team. We’ve got such a great team. That’s what we focus on.”
A powerful model
Smithson believes the business’ delivery proposition is what sets it apart from its competitors and brings it alongside the likes of Amazon.
Marks Electrical has the logistic network capability to offer next-day delivery to 99% of the UK. Unlike its main competitors, the brand always offers next-day delivery to customers for free.
“Why did people start buying from Amazon? With the old retailers you could get delivery within a week if you were lucky – then they came along and changed it. And we’re changing it again”
Mark Smithson
“80 per cent of what we sell is a distressed purchase,” Smithson says. “So if your washing machine breaks now, you can go on our website and get it delivered free tomorrow, and that’s a real key differentiator.”
Smithson says many competitors do offer free delivery but over a longer period of time. Between the ubiquity of Amazon and the increased delivery expectations developed by customers over the pandemic, he says this is no longer good enough.
“Why did people start buying from Amazon?” he asks. “Traditionally, with the old, antiquated retailers you could get delivery within a week if you were lucky – then they came along and changed it. And we’re coming along and changing it again.”
Smithson also flags the retailer’s customer service proposition and owned delivery network as key to its success, flagging the high retention rate of customers after they’ve shopped with Marks Electrical once.
With his business focusing firmly on growth, Smithson’s next goal is to elevate brand awareness through key partnerships with big brands such as Samsung to co-fund its marketing capabilities.
“We’re going to focus more on our TV campaign,” he says. “Brands are now much more interested to work with us – go back a couple of years and you’d have never had Samsung co-funding a TV advert with Marks Electrical. They’re now co-funding our Sky advert.”
Marks is beginning to edge out the competition in this respect as big-name brands, who formerly would have focused on bigger retailers such as AO and Currys, have looked to jump on board as the business has grown.
“We’re going to start pushing the social side of things as well,“ he adds.
“Not because you go on Facebook or TikTok to buy a washing machine, but to try to get that brand awareness out there so that people subconsciously think of the brand next time they go and Google washing machines.”
While Smithson stops short of predicting a blockbuster upcoming year, his confidence in the success of his namesake business is undeniable.
Consumers may be cutting back on expensive, big-ticket items, but Smithson says the retailer’s focus on distressed purchases moves its offer from the discretionary to the essential spend category.
Combined with its Amazon-like focus on speedy delivery and customer satisfaction, Marks Electrical is proving that bigger isn’t always better.
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