Just over two months into the role, Halfords chief executive Henry Birch sees opportunity to make the most of the retailer’s distinctive relationship with customers
This week, the motoring and cycling specialist’s full-year results came in a little ahead of expectations. Birch believes Halfords’ combined service and retail proposition, alongside keen cost management, mean it can motor smoothly despite bumpy trading conditions for the industry.
Retail with a difference
Halfords operates stores and garages. Service – and services – run through and connect both. Birch is enthusiastic about what he’s seen so far, put in place by predecessor Graham Stapleton, and the potential for growth.
He says: “What I really love about Halfords is it’s retail with a difference. We’ve got a retail business, but the majority of what we do has a service element.
“Someone comes into one of our stores – and typically they are coming into stores, probably more so than other businesses – because they want advice, or they want a roof box fitted. I think that’s different from a lot of retail. Then we’ve got a garages business that is successful and growing. There is customer synergy between those two and I think we’re starting to unlock that. I see more of that in the future.”
Fusion benefits
Such synergies are evident in Halfords’ Fusion garage format, which include more comfortable customer waiting areas and customer service focus, along with behind the scenes advantages such as higher ramp density. They epitomise how the stores and garages can complement one another. At present there are 50 Fusion locations, with another 100 in the pipeline.
Birch says: “The model really works on a combined town or city basis a local area where the store can feed customers into the garage.
“Services within Halfords can be everything from fixing a wiper blade through to repair on a ramp in a garage.
Actually, 80% of all the services that we do are done in a retail car park. So if I’m changing your wiper blade and I notice that your tires are worn or your air conditioning’s not working, I can book you into the local Fusion garage from the retail car park.
“Typically, we get twice as much profit out of a garage after a Fusion conversion. We get a two-year payback and, from a customer point of view, it’s a much better experience.”
Better buying helps keep costs down
“Landing at Halfords, it’s clear we’ve got a strong track record in managing costs. Last year we had £33m of cost inflation to mitigate and we delivered £35m. This year we’ve got £23m from the autumn budget to cap and we’ve got what I see as a very credible plan to deliver against that.
“A lot of it comes from what we have termed better buying, which is partnering with suppliers. A lot of what we sell is own-brand. We’ve got [more] flexibility perhaps than when I was at [online retailer] Very, where you’re selling predominantly third-party brands.
He says Halfords’ partnership relationship with suppliers through, for instance, striking longer-term and exclusive product deals, open doors to efficiency.
Serving customers better through data
Birch aims to mine the deep knowledge that the retailer holds.
He says: When someone comes to Halfords, we’re not just getting transactional and normal customer data. We’re getting information on their vehicle – not just their registration number, but what’s wrong with their vehicle, what they’re buying, etc.
“It’s an incredibly rich data set. Bear in mind that we’re interacting with them both across the retail side and the garage side. We can build a useful and compelling picture of our customers. I think we can serve them better. We can give them a more personalised and relevant experience.
“We can have a more efficient business and drive growth. We can move potentially into other areas around motoring. So, I think there is value that can be unlocked by focusing on that data piece.”
More mileage in loyalty
Halfords’ Motoring Club has 5 million members – including 55,000 premium members who pay £55 a year for services such as a free MOT – and Birch envisages revving it up, especially at the premium tier.
He explains: “They’re getting a lot of value, but in turn we’re getting about £18m of subscription payments from them, and then they go on to spend three times as much as a normal Halfords customer. Our focus moving forward, is going to be how can we get more people to become a premium member, and how we develop the club.”
Halfords has had some problems – adoption of a new third-party warehouse management system brought unwelcome and unanticipated costs – but the City was generally pleased with where Halfords starts from under Birch.
Broker Peel Hunt observed: “The new CEO… has taken over a business with some interesting options and plenty of levers to pull to increase returns.”
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