Chris Thomas, the managing director of Cloggs.co.uk, faced the nightmare of administration. But he persisted, found a buyer, and his company is now bouncing back. Steve Dyson reports
It was during a family crisis in 2002 that Cloggs, then a small shoe shop in Birmingham, was spotted as a huge online opportunity.
The late Russell Thomas had for decades owned the huge, sprawling Oasis – an indoor, market-style shopping centre that had become one of the city’s most popular youth fashion haunts. But when he fell seriously ill, his two sons came home to sort out the business for their mother. One of them was Chris Thomas, who’d got a first class honours degree in Civil Engineering, and was training to become an accountant at KPMG in London.
He recalls: “Dad was very ill – he was not going to recover. And so Nick, my brother, and I decided to take career breaks for two years to make sure mum wasn’t left with onerous demands from dad’s business when he died.
“Oasis was a good business, and dad was effectively landlord of 40-odd stores, five or six of which were his. One was Cloggs, mainly selling shoes, and we noticed that dad had set up cloggs.co.uk online.”
These were largely pre-broadband days, when the internet commerce was very slow and clunky, and so the Thomas brothers were amazed when they found that Cloggs was doing regular business online.
“It was a terrible website, completely out of date, with few products and taking 30 clicks to make transactions – but it was getting emails from everywhere and making five to 10 sales a week. It was compelling and so we started improving it, increasing products and introducing search engine marketing. It started to grow – from £10k a year to £100k, and then to £250k. We both said if it reaches £2m by 2005 this is serious stuff and we’ll commit to it. It did.”
As well as footwear, Cloggs sold anything the business could get its hands on – from jeans to jackets, T-shirts to women’s clothes, and sunglasses to rucksacks.
“No brands we were selling knew anything about online,” says Thomas. “And so from nowhere, this little shop called Cloggs in Birmingham was doing huge amounts of business, getting a presence and attention that national chains were getting, supported by brands without them really knowing about it.
“But around 2007 to 2008, brands started to understand the online opportunity, and things started to get more complicated because of the scale and the brands’ questions. Then the recession began, and suddenly banking was very strained in a crowded market, making further growth very difficult. We tried to invest with a new management team and to present Cloggs as a national operator for brands.
“We were saying: ‘Look, we’re a serious player, a partner for the long term for brands to exploit the benefits of online.’ Our elastic shop front supported more products for the brands, like a convenience store where customers could find the product they wanted, and we offered the quickest deliveries.
“But new deals made our business quite restrictive. It was like having 10 MDs – the bosses of different brands – and I could no longer make one business decision. We had to become multi-dimensional.”
This complexity and the investment needed, combined with the credit crunch, meant Cloggs became over-geared financially. “It had been very easy to grow with the banks,” remembers Thomas. “Then suddenly, in 2008, the finance was turned off, which meant to carry on growing you had to find more and more debt. We were always one season away from something more critical happening.”
The family sold Oasis in 2008, and to spread Cloggs’ reputation they opened a store in the Bullring Shopping Centre in 2009, but this was a mistake: “It was a good news story when we opened in 2009, but by the end of our third year they’d allowed three of our top five brands to open right on our doorstep – Dr. Martens, Vans and Ugg.
“We had £1.5m revenue from the shop in the first year, then £1.2m to £1.3m the year after, but in 2012 we only traded between £850k and £950k, which meant the store was a significant cash drain.”
The company went into administration by the end of 2012 – a fate Thomas still blames on the Bullring: “That’s the thing with these big, glitzy shopping centres: the landlords like the big brands in there. It makes sense for them, but not for us. It hit trade, but we couldn’t get out of our five-year lease, a real dispute. It was a massive lesson learned.”
Administration meant around 40 jobs were lost, with Cloggs’ staff of 75 reduced to 35. But the company continued trading and big buyers were interested. In February 2013, leading UK fashion retailer JD Sports bought the company out of administration.
“I took our collapse very personally,” says Thomas. “But I soon realised that many firms were feeling this pain in the recession. We’d made such progress online – it made sense for a national retailer to take us into their organisation. And for us it meant rebirth.
“It was like the tap being turned on again. So many things I’d been trying to do but couldn’t because I didn’t have the cash. Now it was a clean slate. JD could see the restrictions, and sat down and asked ‘what would it look like?’ We gave our vision and they bought into that idea. Since then, while JD have an active interest, they’ve just let us get on with it.
“Since last February, six months of rebuilding had to take place. Rebuilding trust with our suppliers, because all brands lost some money out of the administration. All thought ‘why would we go straight back in with you?’ So we had to patch those relationships. ‘We’re the new Cloggs,’ we told them, and explained why this was a better version.
“It was basically two things: we’re the best at buying product; and we’re the best at doing e-tail. Previously, we’d not had the money to keep up with the big boys when the internet exploded, and between 2010 and 2012 we quickly went out of date. We couldn’t say we were the best any more. But with JD Sport behind us, we could.”
Cloggs originally worked well as an e-commerce model, stocking everything from the very cheapest to the most expensive products. But as online markets developed, brands wanted to know that they sat next to other brands that were right for their image. So Thomas rethought the ‘who is our customer?’ question focussing it to become a 35-plus, female-branded business, with up to 65% of products serving that market.
“The likes of Converse, FitFlops, Timberland, Ugg and Dr. Martens,” says Thomas. “A higher price point for loyal customers prepared to pay for well-made brands, and wanting something for different parts of the week. We’re talking about the mum who’s looking after family, perhaps working as well.
“She’s walking the dog, playing with the kids, going to work, going out in the evening, relaxing at the weekend, wanting to treat herself. It’s now all at Cloggs, and that’s working. Beforehand, we thought we could do it all. Actually, you can’t. Brands want the right shop, so we had to cut the value end out. Our average spend is now £70 a product.”
With the customer sorted, Cloggs also spent time developing modern technology and refining its warehouse management, with the biggest breakthrough being its ‘responsive’ website design.
“This is a website that responds to the size of a customers’ screen,” explains Thomas. “Since the iPad and iPhone, the percentage of customers viewing and shopping on tablets and mobile has grown massively to 50%. How do websites handle this? There are loads of different solutions, for example a mobile site with a separate URL.
“But the newest solution is a ‘responsive’ website. You have to sacrifice certain things, like the design detail when viewed on a desktop. But because it uses blocks of content, the device a customer uses instantly changes how these blocks are put together. “We launched this in August 2013, and it’s working. No other retailers are on it yet, so we’re ahead of the game. As a result, despite a drop in turnover last year, we took more money in mobile and tablet transactions this Christmas than we did last Christmas. It’s now being marketed by Google as best practice for enhancing the customer experience. Much of 2013 was down time for us, working with the brands, buying stock, developing the business, but 2014 is going to be big.”
Cloggs’ biggest trading year was £14m turnover in 2011. In 2013, effectively the recovery year, turnover was just £6m, but Thomas says that will become £10m in 2014 and £25m by the end of the third year.
Cloggs is also investing in new physical stores – but this time in traditional high streets rather than modern shopping centres. The first opened in Shrewsbury in December, with Sutton Coldfield now in the pipeline.
“The old company was a substantial shoe business but not that many people knew about it,” says Thomas. “The new company needs a high street presence. It’s all about selecting the right demographic profile, then building the Cloggs brand. Part of it is being the best at e-tail, but also becoming multi-channel.”
Thomas calls Cloggs’ owner JD Sports “an incredibly impressive organisation” with “all the skills and the backing if you can show them it’s working”. An example was the Shrewsbury store opening, which happened four weeks after contracts were signed thanks to a JD project team.
As 2014 gets under way, Thomas says Cloggs’ staff has already increased to 40-plus as growth continues, and Nick, his brother, who left during administration but is still a non-executive director, may return to the company. Thomas is now aged 34, and is married to Cheryl, aged 27. The couple live in his home town of Sutton Coldfield, and are expecting their first child in May.
Asked what advice he’d give to other struggling business chiefs, he says: “Trust your own instinct. If I had the chance again, I’d do what felt right for me. If it doesn’t feel right, don’t do it.”