Next month, DIY giant B&Q turns 40, and Euan Sutherland would say that’s the age when life begins anew for the business.
Until recently, critics would argue, the famous DIY chain looked as if it was mired in a mid-life crisis. The market leader seemed to have lost its way and lacked the energy and innovation that typified its earlier years.
But Sutherland, appointed in June to pick up the baton from Ian Cheshire – who set B&Q on the road to improvement before being promoted to run parent company Kingfisher – is confident that the chain’s future remains packed with opportunity.
Coincidentally, Sutherland celebrated his own 40th earlier this month and jokes: “I think I’m looking in worse shape than the business now.” Perhaps that would be no surprise because, as chief executive of Kingfisher’s UK division – comprising Screwfix as well as B&Q – the giant Scotsman has one of the most demanding jobs in UK retail.
There is no overstating B&Q’s importance to the overall success of Kingfisher. When Cheshire stepped up to become group chief executive last year, he drew up a seven-step strategy for how to increase returns. Number one on the list was “driving up B&Q’s profits”.
But profits have been slipping lately, thanks to the precipitous fall in the housing market. As Retail Week went to press, Kingfisher was due to update on its fourth quarter and analysts expected a resilient performance.
But in the year to February 2, 2008, retail profit at its UK arm fell 16.3 per cent to£153m, while like-for-like sales increased 0.4 per cent. In the six months to August 2, 2008, like-for-likes fell 4.8 per cent.
In the seven months he has been in the role, Sutherland has made a series of significant changes to lift profits, including putting a “real focus” back on the stores. He noticed there was a “real consistency issue” with B&Q when he joined, so addressed that across the board.
He produced a staff handbook, for instance, outlining the standards expected of each store. All stores are tested each quarter and any that fail have two weeks to “get the store back in check” or face financial penalties.
He has also introduced a new uniform for all B&Q employees, including black trousers as opposed to jeans. But the trusty orange apron, synonymous with B&Q, remains unchanged. Sutherland seems quite attached to it. “The board teases me, actually, as the only time I ever wear a suit is at the board meeting. I’m usually dressed like this,” he says, pointing to his B&Q uniform.
In fact, all head office staff have to wear it if they are visiting stores, which is something Sutherland tries to do most mornings before work, as well as on Saturdays with his sons. “It gives me that intelligence about what’s going on,” he says.
The green agenda
Perhaps one of the most important roles Sutherland must fulfil is that of trailblazer for the green agenda – hence the groundbreaking New Malden Extra fascia in Kingston, London, where Sutherland is being interviewed. B&Q prides itself on its innovative, eco-friendly stance and is one of 12 UK organisations to achieve the Carbon Trust Standard.
Although Sutherland says the New Malden store is a trial and that “we’re not going to sit here today and say we’ll have wind turbines on every roof”, he insists the recession will not dampen its green trajectory. “Environmental and ethical concerns are one of the top things our customers want us to think about,” says Sutherland. “The green agenda is an enduring concern so there’s no way we’ll take our foot off the gas.”
But leading the charge on innovation can have its downsides. This month the retailer pulled micro turbines from its shelves after a report found they did not work as efficiently as first thought. Does this compromise the giant turbine adorning the New Malden store? Not at all, says Sutherland, who describes the resulting press coverage as “a bit of a storm in a teacup. Not everything at the leading edge will work, technology moves very quickly. This thing,” he says, pointing to the store’s mammoth wind turbine behind him, “is very different to the micro turbine we put on the side of your house.”
Whether the turbine turns out to be economically viable remains to be seen, but other initiatives on show at New Malden seem to be paying off.
With the reserve and collect service, for example, the average transaction value is£80, compared with£25 when customers shop in the store. Cheshire regards it as “an incredibly important, big source of growth”.
Self-checkout is proving a success too, with 40 per cent of transactions going through these tills.
B&Q’s world of home improvement seems a far cry from Sutherland’s last role – chief executive of AS Watson’s UK division, including health and beauty retailer Superdrug. But he maintains that the two are not so different. “It’s just a different type of makeover,” he says. “Superdrug was about girls’ toys. This is boys’ toys.”
One initiative that he has brought from his days at Superdrug is his blog, which B&Q launched this year. Staff can add comments, which, according to Sutherland, means “people feel they are being listened to and keeps us in touch with what employees are saying”.
Another way Sutherland stays close to his staff is his TEA sessions – which stands for Tell Euan About. They are a chance for store and head office staff, as well as suppliers, to talk to the chief executive about any issues they may have.
But Sutherland does not shy away from the harder side of retailing and has prioritised trimming costs and streamlining the business. This month B&Q made 40 redundancies across its finance, property and HR functions, which Sutherland described as a “correction in terms of where we need to deploy our people”. Other cost savings will come from realising buying synergies. “Together with Castoroma, Screwfix and the rest, we can use economies of scale,” explains Sutherland.
Elsewhere, the cost of store makeovers has been slashed. An average revamp now costs the retailer less than£1m. Previously it cost between£2m and£3m. Sutherland says the stores are now “using space better”. And more than ever, the retailer aims to beat specialist rivals at their own game.
Cheshire says B&Q is the biggest retailer of paint in the country and its flooring department is “comfortably out-ranging the likes of Floors2Go”. He wants the tool shop to be the best in the market and says B&Q’s tile shop is “benchmarking to be somewhat cheaper than Topps Tiles”.
The retailer believes that bedrooms represent a “big opportunity”. As such, it devotes about 25,000 to 30,000 sq ft to bedroom, kitchen and bathroom showrooms at New Malden – a space roughly the same size as an MFI store, according to Cheshire.
Sutherland says B&Q has seen its market share increase every month he has been in the job. “We’ve seen some consolidation with MFI going, and that might not be the last,” says Sutherland. “Continuing to take share is a key metric and that’s getting better and better. Value is absolutely fundamental and we’ve invested in pricing. We’re seeing that customers are trading down to us.”
He says snapping up businesses that hit the buffers is not out of the question. “If the right investment opportunity came along I’m sure Ian and I would talk about it,” he says.
The retailer is committed to growing its share in the trade market too, which Cheshire calculates to be worth about£20bn to£25bn. Kingfisher brought down the shutters on its Trade Depot chain last year, but directors believe Screwfix and B&Q can shine in this market. “Everyone talks about B&Q because it’s the icon brand of Kingfisher, but Screwfix is a really nice business,” says Sutherland, who describes it as being a “tradesman’s version of Argos”.
He believes Screwfix can “significantly drive the future of Kingfisher’s business” and he is “looking at how we can leverage all the great things about Screwfix and B&Q and put them together”.
Kingfisher aims to double its 3 per cent share of the trade market. “Understanding the trade customer will be a big part of the next couple of quarters,” adds Sutherland.
B&Q’s marketing strategy is another area that has been overhauled since Sutherland’s arrival. Employees are once again the stars of TV ads, while the plug has been pulled on its Olympics sponsorship and customer magazines. Instead, more money has been ploughed into TV sponsorship campaigns. “Marketing is very important and part of my background,” he says, describing the new strategy as “much more in line with B&Q’s values”.
Part of the message includes reassuring its customers that their money is safe with B&Q. “If you make a big purchase from us we’re not going to be like MFI – we’re still going to be around so trust us, we’re going to be one of the winners,” asserts Sutherland.
But even winners are finding it tough at the moment, so what could or should be done to help the retail sector weather the downturn? “I think the biggest thing Government could do is spend a little bit of time listening to retailers,” says Sutherland. While B&Q has no problems with credit insurers, Sutherland says “retailers need help with this. When things get bad the levels of cover seem to disappear. It’s a big issue”.
Sutherland, who trained as a beautician during his time at Superdrug, may not be your typical home improvement man. But while he admits his DIY skills could be sharpened up a bit, his retail instincts are well honed and he is not going to let a little thing like a recession get in B&Q’s way.
“We take a lot of pride in driving our own future, rather than being at the hands of the wider economy. We are very much about self-help,” says Sutherland, applying the DIY ethos.
As B&Q turns 40, Sutherland is determined that it will still be going strong at 60, 70 and 80 too.
Sutherland’s Tack
2008: chief executive, Kingfisher UK
2005: chief executive of AS Watson’s UK division
2004: managing director, Superdrug
2002: retail and marketing director, Matalan
1998: several senior buying and marketing roles at Dixons store group, including marketing director of Currys
1993: marketing roles at Mars and Coca-Cola
1992: graduate trainee, Boots
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