Carpetright is without doubt one of the UKs brightest beacons of retail success, and even in a difficult economic climate continues to expand and develop its routes to market with no signs of slowing the pace.
The company was first formed by Lord Harris and the existing senior management team back in November 1988. It all started with a single store in Canning Town, operating from a central warehouse in Barking. In 1990 the company moved its head office and warehouse to Rainham and set up two small semi-automatic cutting tables, which were able to provide 1000 cuts a week. By the end of that year Carpetright had 71 stores trading from 690,000 sq ft, generating a turnover of 37 million and a profit of 400,000 a year. In 1993 Carpetright floated on the London Stock Exchange. At this point it was trading from 116 stores, with just one million sq ft of trading space, and turnover had increased to 79 million. In 1999 Carpetright completed the purchase of selected Carpetland and Allied Carpets stores, which were re-fitted and re-badged.
At the same time the company launched 30 Harris Carpets stores, adding its presence to the UKs High Street. In 2002 Carpetright entered into a joint venture arrangement with Interiors for Europe (IFE) giving it an entry point into the European retail carpet market, although Carpetright had been dealing with European manufacturers since the beginning. Holland and Belgium were chosen as the basis for this geographic expansion, as their markets are culturally similar to the UK as well as physically close, making delivery easier.
In October 2002 Carpetright bought out IFE giving it complete control of its Benelux operation. It also started to rollout its In-House Carpet departments into large department style high street retailers, and by the end of 2003 operated as a concession in a total of 38 stores across the UK. These flooring departments averaged 1600 sq ft and sold a wide range of carpet, laminate and vinyl flooring providing both value and a strong focus on service as a critical part of the offer. This rollout enabled Carpetright to reach a significant new market sector not then served by the companys out of town stores. In 2005, Carpetright bought the Mays World of Carpets stores, a long-established family business with three successful stores located in Abingdon, Swindon and Cheltenham. The Group has expanded the Mays business into a separate brand which focuses more heavily on the trade market. The brand now operates from 11 stores across the country and has recently launched its own Trade Card. In 2006, the company announced an agreement to provide House of Fraser with carpet stores in 19 of its retail outlets. Later that year, further expansion into Europe took place with the first opening in Gdansk, Poland followed weeks later by its second Polish store in Warsaw.
Continuing growth strategy
Despite such phenomenal growth over the past two decades, group commercial director Martin Harris continues to look for ways to ensure the company achieves even greater sales volumes through continuing to open new stores both in retail parks and in the high streets within the UK and other suitable countries across Europe. In the UK alone, Carpetright stores now total in excess of 600. However, Harris has learned that less can mean more in terms of the relationship the company has with its carpet and flooring suppliers. The carpet market has been completely oversubscribed for many generations, so weve worked very closely with a small number of suppliers over the past 30 or 40 years, but have narrowed the list down to around 15, he said. Some might think this is quite a small number for the size of business we are today, but it provides all the variations in carpet style and price range we need and I think it serves us and our customers well. Harris explained that around 60 per cent of Carpetrights suppliers are Belgian-based, with about 10 per cent being sourced from Holland and the rest from the UK. We tend not to stock from the Far East because of the time carpets take to be delivered, plus the fact that you have to buy in very large quantities to make it economically viable, he added.
Based on his 50-year-long experience in carpet retailing, his father and company chairman, Lord Harris of Peckham, famously predicted the current economic downturn before many economic observers. The truth is we dont have a crystal ball, but we have been in business long enough to see downturns coming before they fully arrive, said Martin Harris. I would say were fortunate because although we always go into any market downturn early we tend to come out of it early too. Two years ago we witnessed consumer demand slowly coming off the pace; it was very gradual and I think the market will improve in the same way. And apart from general market conditions, Harris explains that there are two main economic factors that affect the company. One is our competitors, although were personally fortunate in that our last major competitor has downsized by 150 stores. The second economic factor is the level of employment among our customer base. Unemployment figures are increasingly becoming a challenge, with the official figures nearing 2.5 million although when you include the long-term sick and jobless benefit non-claimants, the figure is I suspect more likely to be nearer the 6 million mark. Also on the customer front, tracker mortgages are coming to an end, so households that have enjoyed the benefit will soon find themselves with larger monthly payments naturally, this means less disposable income. Therefore, we as a company have to focus on promoting good value and service while continuing to look at fresh options to further improve the business for the consumer.
Carpetrights retail outlets are supplied via its main distribution hub in Purfleet, Essex. Harris explains that, previously, the company had three separate warehouses and a distribution centre near Huntingdon. The Huntington DC was, however, mainly used for the purpose of cross-docking. Harris pointed out that when the company consolidated its storage and distribution operations at Purfleet a little over a year and a half ago, it also set about automating all its core processes. By doing so, the company was able to reduce staff levels by 150, while also speeding up the whole delivery process by nearly five full days. Harris recollects that when Carpetright acquired its Purfleet premises, it effectively bought a building shell and little else. It only had walls, a ceiling, a concrete floor and a few struts, he remembered. However, this was converted into office and warehouse space very quickly. Ian Woosey, our director of IT, made sure everything worked from the outset not just the PCs but everything from the lights and printers to the kettles and toilets. Ian arrived on site on 17 December 2007. He and his team did an incredible job in a very short space of time, resulting in the whole team being able to relocate by the 17 January 2008, while much of the computer integration work continued for a few weeks thereafter.
In terms of IT hardware, Carpetright runs its own data centres in Purfleet. These largely comprise a series of HP servers. Ian Woosey takes up the story: We use virtualisation so we need far fewer servers, which saves a lot on energy and cooling costs. We have a team of operators that works 24/7, 364.5 days a year to manage the data centres. There is also a small in-house team of developers and a team of project managers and business analysts, plus some additional technical personnel. On the computer software side, the warehouse management system (WMS) used by Carpetright is a customised version of Calidus by Open Business Solutions (OBS), which is updated in real time. The company uses SAP for stock control and managing customer accounts, and so enjoys full visibility of this information in real-time. In terms of inventory levels, these can be split into individual SKUs, so staff know exactly how many physical roles of carpet are stored on the shelves at any one time; they even know the size of each role. As a customer places an order at one of our stores, we feed this data into the WMS, explained Woosey. The system will then tell us, for example, we have 20 different orders for the same carpet, so we know we can cut those roles to size for each of these customers in the most efficient time- and cost-saving manner.
The data provided by Carpetrights WMS and SAP systems is also used by Martin Harriss team to determine required stock levels and to help forecast demand. All software is fully integrated, including cutting machine software supplied by ETF. This software informs the cutter in the warehouse of the type and size of carpet required by each customer. The companys software systems are also integrated with some of the software that its courier of choice, DHL, relies on, such as Paragon Route Planner. In this way, we can automatically provide DHL with the appropriate route information on a daily basis, Harris pointed out. Carpetright also has wireless installed throughout its building and warehouse in Purfleet. All vehicles in the warehouse are fitted with Psion Teklogix truck-mounted wireless terminals that tell the driver which carpet to select and where to collect it from. These terminals also allow the drivers to scan rolls of carpet before storing them in the right bay and on the correct shelf.
In its retail stores, Carpetright runs a customised version of Microsoft Dynamics Navision point-of-sale (POS) software. Woosey outlines the operational procedure: Customers come into our stores and place an order for a room or several rooms. They may also place an order for underlay and gripper bars, and they may at a later stage decide to change this order to some extent. All this data is captured on Navision, which then relays the information to our SAP software for stock control purposes. We replaced about 15 different applications of various sorts with SAP in 2005. The strategy was to sort out the central systems as they were very old and expensive and not particularly reliable. Our store systems were creaking and this was at the time when we were expanding rapidly. So we sourced Microsoft Dynamics Navision for our POS requirements and went live with a customised version of the software in the early part of last year.
Steve Johnson, Carpetrights central operations controller, added: With our old legacy ordering system in our stores, we only had one piece of software, and the hardware situated behind the customer service desk the rest of the customer-facing operation was manual. For example, invoices were written out by hand on an invoice slip and someone behind the main desk was employed to input this data onto a computer. So, not only was this time inefficient, there were also occasional inaccurate data transfers from paper to computer, which meant a customer could end up receiving the wrong colour, design or size of carpet.
Johnson pointed out that, previously, the customer-facing experience had its problems, too. When we were serving customers in, say, a 10,000 sq ft unit store and needed to take cash or debit or credit card details, the customer had to be escorted from the carpet showroom area to the main customer service desk. Once confirmed, he or she was then taken back to the showroom desk so the order could be finalised by the sales person. This whole process could interrupt the sales persons interaction with the customer and take up too much of the customers time. Now, by using our bespoke version of Microsoft Dynamics Navision POS software, we have accelerated the ordering process and improved both our customer service and order accuracy rate substantially.
Woosey adds that the company also has an intranet system. Previously, we had posted envelopes to our 600 or so individual stores. Apart from phone calls, just about everything was communicated by paper, or even fax; which can be even more expensive. Weve largely done away with this methodology and almost everything is now done electronically everything from surveys to staff time & attendance is relayed via our intranet. This has naturally proved much more efficient in terms of time and cost savings. At Purfleet, the company now also enjoys fully centralised printing. Previously, there was an array of different systems such as personal printers and network printers, said Woosey. Now, on each floor there is a centralised printing bay with two very large printers. The result of this is that we have cut our volume of printed material by a third and our printing costs have been reduced by 50 per cent.
And what of Carpetrights relationship with resellers and systems integrators? Sometimes we deal direct with the system vendor and sometimes with one of their channel partners, said Woosey. We largely use systems integrators to get the software up and running, although our own team always has ultimate control and oversees the whole operation, said Woosey. He added that Carperight sources some product through Fujitsu, even though it is not Fujitsu kit. In terms of the HP servers, these were bought through reseller Genesis. The support contract for the servers is also with Genesis, although this is backed off to HP, said Woosey. The Microsoft Dynamics Navision POS system was sourced through reseller K3. Because there is nothing on the market that does what we wanted our POS system to do as standard we engaged K3 for the customisation of the software K3 also integrated it with our SAP stock management system, said Woosey. In terms of the SAP stock management software, Carpetright buys user licences from SAP direct, while system implementation and ongoing support is largely dealt with by Axon.
E-commerce the next step
In addition to the companys ongoing store expansion strategy, Carpetright also plans to add e-commerce for customers that prefer to order goods online. By using our e-commerce facility, customers will not only be able to order carpets and other types of flooring online, they will also be able to choose from a wide selection of beds which is a relatively new market for us, explained Harris. Whereas buying a carpet is a little like ordering a handmade suit, choosing a bed is more like ordering a pizza, with all the size and topping options first you choose the basic model as a single, double or king-size, then you decide what colour you want and whether you want drawers, etc. I think e-commerce suits this pattern of choice well. Of course, some customers may want to look at the website to see whats on offer, then actually place an order in one of our stores rather than online. Either way, we think e-commerce will work well in making our customers even more aware of what we have available.
As for the future from a marketing perspective, the company has recently looked at a select group of new business verticals to target; such as the house build and insurance sectors. New target areas are a bit like gardening; you plant a seed and then maybe a year down the line the green shoots start to appear, reflected Harris. Business decisions in sectors such as insurance dont turn around very quickly they take a long time to change. So the tiller has moved but the ship is still steaming ahead in a straight line at the moment. However, our business is on the whole in very shipshape order.