Go with the customer

Go with the customer

Fighting the supermarkets is a battle at best of times, and at this particularly testing juncture customer focus is the sharpest weapon, Nigel Mills tells Brian Nicholls.

It’s an avant garde yet tasteful building for a seaside suburb, its glazed entrance shaped like a ship’s prow, taking on whatever waves will strike.

But maybe that’s appropriate for Mills House, headquarters of Mills Group, as it steers skilfully and vigorously among communities it serves extensively; it reminds you how, on the great sea of uncertainty called Essential Shopping, there’s still room for others besides the Tescos and the Asdas.

Turnover, with its new supermarkets, is expected to top £156.3m this year - £93m from product sales and another £60m or so from services too, such as lottery sales and cashpoints.

What began in the North East as 11 newsagent shops is now, 24 years later, a very mixed, developed and flourishing group of 85 supermarkets, convenience stores and other diverse outlets - spread down much of England and penetrating Wales.

Its employees number about 2,400 when you include its newspaper deliverers.

Retail awards almost overwhelm a table in management’s reception area of the Monkseaton, Whitley Bay, headquarters.

But group managing director Nigel Mills, a former Tyneside and Northumberland Business Executive of the year, finds in them no cause for complacency as he, like store bosses everywhere in these particularly competitive times, battles to raise takings.

Just how has recession changed customers’ buying habits? “They’ve become a lot more value focused,” he explains.

“Where we used to sell 15-20% of our food products on deal - price reductions, two for one, things like that - we now sell up to 35% of that on deal. There’s a significant shift towards looking for value, and a big push back to healthier eating.

“We note 46% of customers have said in market research that they’ll buy if the price is right. So in theory it’s easier to sell more if you have the right price point. The challenge then is to ensure you make a reasonable margin with what you’re selling to cover overheads.” So sales are still there. And while price is a determining factor for customers, so is location, the convenience, availability of products, customer service, and store ambience.

Mills, who is from Gosforth, attributes the group’s progress to customer focus. “As consumers change we’ve changed,” he says. “The secret to staying in business is follow the market, constantly study what you do and constantly change. We read all trade magazines, we are given or subscribe to market research, attend trade shows and conferences, talk to our competitors – mostly independents. They’re more willing than supermarkets to talk.

“We also ask our customers directly. We’re part of an annual market research project in which 1,000 of our customers are asked what they think of us, of our prices, and all the rest. From that, we assess what we do. So we use lots and lots of information as well as analysing our sales data. Is it delivering what we hope? If not, we look into it.” And retail is always about location.

“Most of our growth has come by taking over and developing existing stores. We’ve talked about but haven’t started greenfield growth yet. But we shall look at brownfield and greenfield and probably go with that.

“It’s a question of finding the right sites. You study the demographics, the competition, the nearness of main roads, parking, the proximity of complementary businesses such as hairdressers, a fish and chip shop and other takeaways.

There can be up to 18 months’ gestation between finding a suitable site and opening. We’re only at the start of that process.” Nigel Mills talks assuredly, as if he’s been behind a counter from day one. In fact, he’s a qualified chartered accountant who was earlier with PricewaterhouseCoopers, in Newcastle and London. Newsagents were in the family though, as far back as 1938, when his grandfather Fredrick William bought his first such business at West Monkseaton.

There were 32 stores when grandfather died in 1972, and these were sold to Thomson Regional Newspapers. The family flame re-ignited in 1986 when Nigel Mills joined his father to launch a new company, Mills Newsagents Ltd. Nigel Mills has driven change throughout. The original stores were CTNs (confectionery, tobacco and news) – a model developed until 1994.

Then three significant things happened – the newspaper industry was deregulated, allowing anyone thereafter to sell newspapers. Sunday trading laws also came in, enabling the deadly rivals, supermarkets, to open seven days a week. These developments worked against the like of Mills, previously enjoying some exclusivity in selling reading matter and being among relatively few businesses trading on Sundays.

However, a big positive for Mills was getting in at the launch of the National Lottery. It has since sold more than £300m worth of tickets, enabling it also between 1994 and 2003 to develop the CTN alcohol and services model (the services including also utility payments and cash machines).

Change loomed again in 2003 when Tesco brought in Tesco Express, redefining the modern convenience store in the UK; very much focused on food, especially fresh and chill.

So, closing some smaller stores along the way but opening many bigger ones, the group now has four trading models; CTNs with services including sub-post offices, smaller CTNs with off licence and services, convenience stores now with more emphasis on food, and more recently, eight supermarkets with a full food offering - fresh, chilled, ambient - and non food too.

They’re spread from Durham to Warwickshire and Yorkshire, and Mills makes it no secret they’re proving a challenge. But he adds: “That’s like any new acquisition. We know where we are with them.

They have costs but have very much given us the opportunity to develop our food offering, not only in those stores but in the other stores we trade from. We’re very positive about their outcome.” Every challenge, then, a new possibility...

Previously Mills had traded from stores of under 3,000sq ft. Now the supermarkets take Mills up to 10,000sq ft of opportunity at a time. The bigger format becomes increasingly an option, turning minds once more to brownfield and greenfield prospects.

So will start-ups in Scotland or Ireland be considered? Mills thinks not yet, as he explains: “Northumberland down to South Wales and over to Cumbria, plus yorkshire, East Midlands, south Birmingham and down into Gloucestershire and Worcestershire... That’s where our management infrastructure is and where, ideally, we’d like to infill. It’s fairly big geography. Step outside your immediate geographical region and you have to buy scale with the support and infrastructure needed to supply and manage those stores.”

He’s not saying they wouldn’t look elsewhere, just that they’d need to be sure of sufficient returns to justify the extra infrastructure to manage it. As training staff to offer better service and value to customers is already a prime objective, reluctance to adventure is understandable.

Mills says: “Because we’ve changed our model so often over 23 years we’ve often left our people behind in their perception of where the business is and what their role is in it.

“We must now gather that all up, bring them up to date and equip them with the right skills to be able to deliver on something very different from 20 years ago. We’ve already restructured head office. We sat down with a blank piece of paper and asked what we should be doing as to support our people.

“What we thought we should have was not what we had. The support structure had evolved instead of being planned. So we’ve changed that over 12 months. We’ve also focused on where responsibility for the training lies in a changed management.

We concluded 70% must come from line managers, 20% from on-job experience and 10% from a formal classroom-type environment.” That approach to communication and training responsibility has brought a review of the competences of its management team, and some changes.

“Within the business now everyone is aware whose responsibility and duty it is to manage the change and train the workforce within the business,” Mills says.

“It used to be said before, ‘the company isn’t training me, the company isn’t training me’. The company was but it wasn’t clear where that training would be delivered from.” It is now.

Will the group, run by five directors in all, defer further developments until the economy brightens? Mills says with no pause: “If you wait for the sun to shine it never will. We’ve a full agenda of things we must do.

“We must improve our skills base, understand better what our customers want in 2010 (that’s very different from what they wanted in 2007); develop our four retail models to serve the customer base even better; ensure our supply chain and product range are still fit for purpose; and review our retail price margins and strategy, to ensure it delivers the value our customers want and the margins we need to make the profit needed to pay our debt and provide our investment.” You feel scores more will get onto the agenda if the boss can fit them in, and you can understand why.

As he says: “The way consumer shops constantly change, not least because of all the technology out there now - including access to product range and price - people are a lot more savvy.” As for online competition: “Consumers still like one-to-one interaction, and quality of service. Our supermarkets offer grocery deliveries. The customer picks the product in store. We deliver.”

Given the daily cut-throat competition, does he regret his career switch into retail? Is he working harder than an accountant? “I think Price Waterhouse works everyone pretty hard,” he says.

“To be honest, for me it was out of the frying pan and into the fire.” A co-founder, board member and enthusiastic mentor of The Entrepreneurs’ Forum nourishing self-starters in the North East, Nigel Mills’ personal progress chart is a pretty good one to study.