The economic crisis is nothing new for Witchery and Mimco chief executive Iain Nairn, who has weathered two downturns in the last three decades. While he predicts tougher times ahead, the retailer believes the fashion group has the strategy to survive and
By Emily Ross
The economic crisis is nothing new for Witchery and Mimco chief executive Iain Nairn, who has weathered two downturns in the last three decades. While he predicts tougher times ahead, the retailer believes the fashion group has the strategy to survive and thrive.
Iain Nairn, chief executive of women’s fashion chains Witchery and Mimco, knows that local fashion retailers are in strife when he starts receiving a steady flow of information memorandums from businesses desperately seeking cash injections or a buy out. Nairn estimates he has looked at 20 such memorandums in the past few weeks alone.
“They aren’t looking for advice,” he says. “They are saying ‘will you buy me?’ or ‘will you help me?’”
And his own position? “We are a hugely cash-generative business,” he says. “And we are not afraid to invest.” He even has a list of target companies that the group would be interested in snapping up.
Nairn still has the smile on his face from the Witchery staff Christmas party, where more than 300 people danced to 70s and 80s hits high up in Melbourne’s Eureka Tower. “Morale is fantastic,” Nairn says, while pointing out the party was “low cost”.
While sales in both his brands have certainly slowed of late – and he has trimmed orders slightly in anticipation of a tougher winter 2009 season – Nairn still sees potential for growth: 50 to 60 more Witchery stores, more offshore Mimco opportunities, and another project underway he is keeping secret (signs of planning are all over his office but he’s keeping mum).
After almost three decades in the rag trade, Nairn maintains that in any economic climate it’s all about the product, and keeping costs tight. His Melbourne workspace is sparse, with powercord chaos under the desk and even mould growing up one wall. Nairn is wearing this season’s Christian Dior shoes, but they were, he says, “40%” from US retailer Barneys. It’s another sign of the times– a year ago there was no way in the world any deluxe retailer would have contemplated discounts in the lead up to Christmas.
Nairn has always worked on a lean business model, learnt in his early days in British retailers including Next, River Island, Burton Group and Hepworths. He says that through the boom times of the last few years, the owner of the chains, private equity firm Gresham, made sure that the debt level was appropriate for managing through the inevitable cycle of tougher times.
Nairn began running Witchery in 2006 when Gresham Private Equity bought the fashion brand from Peter Lew for $130 million. The business is 90% owned by Gresham, with 10% held by Nairn and nine other Witchery executives. Nairn also sits on the Gresham board. The plan for Witchery was to open 10 stores per year for four years.
“Just based on that it was a very good acquisition,” he says. Sales and margins were so good Witchery’s store numbers have accelerated, from 79 at the time of acquisition, and including Mimco will be at about 220 by the end of 2009.
Witchery acquired Mimco from Amanda and David Briskin in August 2007 for an estimated $45 million.
“They got a good price at the time and we got a great business,” says Nairn.
While he won’t release any figures, he does reveal that profits for Mimco have doubled in the past 12 months. Store numbers (excluding department stores) have increased from 17 to 39 standalone stores in 15 months.
Nairn is currently back in Melbourne office after a stint in Britain overseeing the roll-out of six new Mimco stores in London and a string of in-house Mimco stores in prestige department store House of Fraser. The Mimco British invasion is being funded through cashflow.
The idea to launch Mimco in Britain came from a ragtrade mate of Nairn’s who sits on the board of the House of Fraser and saw potential in the brand – a quirky, creative brand pitched and priced half-way between the luxury brands and the high street brands.
Nairn knew that Mimco would quickly reach saturation point in Australia and saw potential for the brand in the British market, turf he knew well. In early 2008, he went to London where House of Fraser loved the Mimco range. It made sense to move forward. House of Fraser has one million customers on its database and some of the best retail sites in the country. A concession agreement was drawn up and plans were made for complementary Mimco shops.
This is Mimco’s second attempt at the British market. Under the Briskins, Mimco had made it into stores such as Selfridges but the scheme didn’t work. Nairn puts this down to their use of a fashion agent “who didn’t have the passion for the brand”. From Nairn’s research, prices went too high, most likely to cover agents’ fees and it flopped. This time around, Nairn will use his own team to ensure that the quirkiness, the attitude and the high service levels of Mimco are maintained.
Within months of the initial meeting, Mimco stores had opened up in House of Fraser stores all over Britain as well as six Mimco standalone stores in London and Brighton. “We have virtual coverage of the whole country,” says Nairn. The brand has had influential editorial coverage in British Elle, Vogue et al to help with buzz.
Unfortunately Mimco launched in Britain at the exact moment the retail market went into freefall. Westfield’s mammoth London shopping centre White City opened on 30 October 2008 – right when retailers say sales just dropped overnight. Yet while sales are below original targets, “we are performing in line with their very best brands”, says Nairn (who obsessively checks sales figures when they come through on his BlackBerry at all hours). British sales account for around 5% of Mimco’s total.
While other retailers have been looking to cut costs, Nairn has been investing more in the product (“fashion is all about product”, he says) with better fabrications, better styling and more emphasis on Witchery’s younger, more fashion-conscious customers.
Nairn works on what he calls a “three horizon” strategy, simultaneously looking after the core business, developing new initiatives in the core business, and seeding future investments. “We always have to have things that are off the wall; you need to have something for the future. If you don’t do it, you don’t have a future.”
In the face of the grim retail outlook, Nairn doesn’t look phased. It’s going to be an interesting year in retail. Those shoes he bought at 40% off at the beginning of the month have been reduced again. Barneys is offering up to 75% off now. There go the margins…
The Nairn approach
- In fashion, it is all about brand and product
- Constantly nurture new ideas
- Ensure strategy is fluid, that plans can adapt in volatile markets
- Structure riskier parts of the business in cost-effective ways
- Measure value and benefit in every part of the business
- Remember cash is king
- Be out in the field, constantly survey stores (and your competitors)
- Company morale matters
- In retail, no one cares what the back offices look like, it’s the shop front that matters
- Remain constantly curious about customers
- Stay inspired, stay passionate.
>> Related story: Shouldering the drive and passion
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