Aided by the surge in internet shopping, online giant Buy It Direct has turned e-tailer Better Bathrooms into a major success story since buying it out of administration in March 2019. CEO Nick Glynne talks to Tim Wallace about the dilemma facing mid-market showrooms, and issues a stark warning.
Q: How has the pandemic affected business?
A: Online has gone ballistic across the board. Total revenue this year will be over £400m, profit has gone through the roof. But getting hold of stock out of China and Europe is very hard. The factories can’t keep up and they’ve had staff issues. Plus the cost of landed goods in the UK has gone up significantly on big volume items. We were paying £2,000 for a 40ft container out of China last year, now it’s £11,000. Suddenly your landed price has gone up by £150 a bath. And getting stuff moved through Europe because of Brexit is very expensive, the trailer prices have spiralled and you’ve now got endless bureaucracy.
Q: How much has Covid speeded the switch from showroom to online purchasing?
A: What would have taken five years has happened in a year. It’s a permanent shift. The vast majority will now do their shopping online.
Q: So more showrooms need to embrace e-commerce?
A: Maybe but the barrier to entry on e-comm is so high. One of the myths is that it’s a low-cost route to market but it’s expensive – you need to be compliant, you need robust IT, good security. You need to ensure you ship securely and manage fraud. But ultimately, even online will only see a handful of survivors.
Q: So what’s your message to showrooms?
A: Get niche or get out. Even if you try to compete on Google traffic you’ll lose a lot before your quality score and conversion algorithms kick in. Unless you’ve got something very niche, service alone isn’t enough – and that’s what a lot of independents have always played on. But where’s their true value differentiator? Only those that can either do mass market and be price and service driven or find a value differentiator will do well. Unless they’re controlling that final mile experience and doing all the installation, they can’t differentiate themselves. We have no plans to do bathroom installation, it’s too complicated.
Q: Will there be a market upturn later this year?
A: That’s a big worry – a true recession is going to hit, you’ll have all the joblessness and all this competition for spend. There’s pent-up demand for holidays, cinemas, eating out. That’s where the money is going to go. It won’t go into hardware.
Q: Is the government doing enough to support KBB retail?
A: They’ll tax online to address the retail and e-tail balance. That is fundamentally wrong – it’s a tax on success. Its shortsighted to tax your wealth generators.
Q: What’s your longer-term outlook for the sector?
A: Business is utterly ruthless. You find a gap but it will ultimately disappear because someone will do it cheaper and better. It’s a constant reinvention because you’re in a fight. The only route is to be niche and high end – the higher it goes the more it can differentiate from online. Anything mass market is a pretty awful space, the model is so inefficient. The problem is we’ll all end up occupying the same space and fighting for an entry to mid-market product. It gets so saturated. Someone needs to have the guts to go into a higher space online. It will happen eventually – people will have no problem spending thirty grand online without meeting someone. The technology and competence will be there to measure up people’s homes remotely.
