In a large building tucked behind Manchester's Piccadilly train station, there's a home-shopping giant in the midst of a quiet revolution. The publicly-quoted N Brown group is better known for its catalogue brands, such as JD Williams, Shapely Figures and The Shoe Taylor, and for catering to the fuller-figured, older woman. This focus on a fashion-buying niche poorly served by the UK high street - half N Brown's customers are at least a size 18, and many of these are aged 45 to 65 - has served the company well. In the year to March, revenue rose by 16.6 per cent to £610.9m, while operating profit increased by 20.3 per cent to £91.8m.
But behind such a downturn-busting performance has been a sustained programme to take N Brown beyond its hinterland. Faced with the fact that internet-fuelled home shopping now attracts a more upmarket clientele, the group has been acquiring and launching high-end catalogues in a bid to appeal to a younger audience, as well as the middle-aged.
In 2004, N Brown bought midmarket homewares seller House of Bath, followed in 2006 by the purchase of upmarket womenswear catalogue Gray & Osbourn. The company has also grown organically, with the launch last year of Marisota and Jacamo, the latter a catalogue aimed at young men.
The clothes catalogue Simply Be, aimed at women over 30 sized 14-32, and part-fronted by fashion consultant and TV presenter Gok Wan, typifies the company's more affluent positioning while retaining the message that larger women can be satisfied with their bodies and look sexy. Simply Be's Divine Outline body shaper, for instance, retails at £45 and was sold out at the time of going to press.
Understanding a broadening customer base is just one of the challenges facing N Brown marketing director John Hinchcliffe. But such diversification is necessary for the company, as it seeks to differentiate itself from home-shopping behemoths Shop Direct (owner of Littlewoods) and Germany's Otto (see box, above). "Our strategy is about picking off niche groups of consumers or products and building business units around them. N Brown is the master at that," he says.
Observers believe that Hinchcliffe, a 25-year home-shopping veteran who has clocked up stints at Grattan and Freemans, is a master of customer management. In a recent listing of the top 100 marketers based in the North-West, Hinchcliffe was ranked 12th, with judges praising his "long history of understanding the customer".
Large and proud
Is Hinchcliffe bothered by typical media descriptions of N Brown as a provider of catalogues "for bigger ladies"? He smiles. "No, because larger sizes have been our USP. But many of our ranges start at size 12, or even 10. To stock a dress in three colours from sizes 10 to 30 is a hell of an investment. You'd need a very big shop to compete with that."
Top of Hinchcliffe's list of challenges is channel management and dealing with the internet's seismic influence on home shopping. "The internet has brought a new market to home shopping," he says. "Rather than it being about poor people needing credit, the web has provided a great opportunity to identify and chase niche consumers."
N Brown, like its rivals, has had to adapt its direct selling skills accordingly - 31 per cent of its sales are now conducted on the web. "The catalogue is still our most important channel, either for generating telephone sales or getting people to go online," Hinchcliffe says. "But we also use affiliate marketing, pay-per-click advertising and TV ads for customer recruitment. All these channels interrelate."
Managing such a complexity of channels is a key priority. "We do watch how customers come to us, via the internet or the phone. People on the web may have come via Google after being driven there by a TV ad."
Catalogues such as Simply Be, Marisota and Premier Man have been promoted with direct response ads on satellite TV because, Hinchcliffe says, "the barriers to entry are lower than terrestrial TV". The company has advertised during GMTV, but finds less popular shows "operationally easier" because of the high number of telephone responses their ads generate.
N Brown's average internet order value is 27 per cent higher than that for telephone sales, which Hinchcliffe attributes to the wider range of clothes available online and the fact that the company is attracting a younger audience.
With 40 websites to manage, digital absorbs a growing proportion of Hinchcliffe's marketing budget. "We move money from online to offline, and vice versa, depending on our results. We spend more on catalogues than online, but the assets we use in catalogues are used online, too."
Pay-per-click, Hinchcliffe says, is a tool that fits perfectly with N Brown's niche proposition. "If someone wants to buy a 40DD bra and searches for it on Google, our sites come forward. We often bid on words that are less important for other retailers because we're a specialist company."
Affiliate marketing, on the other hand, has delivered "mixed success", Hinchcliffe says. "It generates demand, but usually from customers we already have, so there's a question mark about its incremental worth."
Aside from using Mediavest for its pay-per-click and general media buying work, N Brown eschews external agencies. It prefers instead to be self-sufficient in database-driven marketing, creative and the development of its websites. The subliminal message from Hinchcliffe: we do it our way.
N Brown's in-house digital headcount will soon rise to 40, part of the 200-strong team covering DM, catalogue production, photography, design and database marketing. Hinchcliffe says the debate about such a large team is "rarely held" during board meetings. "Home shopping is a specialist business and as a consequence it develops its own specialist teams and routines," he explains. "While we do use external agencies for media buying and some digital work, we have to know our business and so we invest in our team. Usually it's relatively easy to demonstrate that a catalogue page designed in-house is more cost-effective, because of the volume (we produce)."
Digital agencies would no doubt argue that N Brown risks losing out to rivals by not seeking external help for its websites, but Hinchcliffe begs to differ, and insists the in-house team is the best placed to ensure good functionality on its portals. And though the digerati may groan, N Brown is happy being an adopter of best, rather than cutting-edge, digital practice. Hinchcliffe's digital team audits the functionality of competitor sites, and those it admires. "We then use that analysis to define the functionality we want to develop," he says.
Hinchcliffe does not rule out setting up a social network based on N Brown brands, but is content for now to observe the behaviour of customers on existing sites. "It's gratifying to see us being described in blogs as a great source of larger sizes."
Sales may be the ultimate metric for home-shopping success, but for N Brown, the number of people on its marketing database is also a yardstick. "The size of our database is a leading indicator of our prospects," Hinchcliffe says. The company seeks new customers via DRTV, press ads and catalogue inserts in an effort to offset any natural attrition. The database currently numbers five million individuals, up from two million in 2002, and features customers and lapsed customers of two years' standing.
Response rates and lifetime value are more highly prized measures of success than average order value. "At the end of the day, we want to get a customer onto the database so we can sell to them in the future, rather than make a quick profit on that one sale," Hinchcliffe says. "Once a customer is in, a preference model triggers a chain of offers suitable to their profile."
Cold list rental has been successful for some of N Brown's upmarket brands, and it has participated in data pooling, but Hinchcliffe says the first port of call is the company's own database. "We can use lapsed customers from one brand to activate another," he explains.
Thirty per cent of N Brown's database have email addresses, but postal data remains vital - the company sends 100 million pieces of mail a year. Catalogue marketing consultant Andrew Wilson denies that such a reliance on direct mail is anachronistic in an age of eco-awareness. "You must remember that much of N Brown's target market, and the market it is adept at selling to, is still at the higher end of the age scale," he says.
That is the trick that Hinchcliffe and his team must pull off: balancing the marketing required to reach its traditional base of older, less affluent customers, while drawing in upmarket and younger prospects. At the same time, N Brown is determined to remain a niche operator, rather than a "spray and pray" retailer, as Hinchcliffe calls generalist catalogue firms.
Much like its larger-sized customers, N Brown is comfortable in its own skin. But with home shopping set to account for a third of all retail sales, it cannot afford to sit still. Hinchcliffe says the company's biggest marketing challenge is identifying the next niche to try. "The niches in which we are weakest are the 'very young' and 'very upmarket' spaces," he admits.
One gets the feeling that, judging by N Brown's recent form, plans to plug this gap are probably already well advanced.
Shop Direct
£1.5bn 2007/08 revenues
Additions Direct; Choice; Empire Stores; Great Universal; Kays; Littlewoods; Littlewoods Direct; Littlewoods Ireland; Marshall Ward
N Brown plc
£610.9m 2007/08 revenues
Aged 30-45 brands include: Simply Be; Naturally Close; Viva La Diva; Marisota; Jacamo.
Aged 45-65 brands include: JD Williams; Heather Valley; Shoe Tailor; Shapely Figures; Premier Man; Home Shopping Direct; House of Bath; Gray & Osbourn; Home Essentials. Aged 65+: Special Collection
Otto UK
£403m 2007/08 revenues
Freemans; Grattan
Sources: www.shopdirect.com; www.nbrown.co.uk; Otto Group press office; Shop Direct press office
Brown by numbers:
3,059 The total number of staff employed by N Brown
40 The size of the company's in-house digital team
31% The percentage of N Brown's sales transacted through the web
HINCHCLIFFE'S DAY IN THE LIFE
6.45am: Leave home. I live in West Yorkshire and so have to show my passport as I enter Lancashire. As I drive, I ring people up to gather the previous day's sales online and offline.
8.15am: Arrive at work, armed with a good handle on our trading figures. I have ten direct reports and I prepare to spend time with them throughout the day.
9.30am: Talk to catalogue designers about the look of the next catalogue.
10.45am: Meet with head of database marketing to analyse results from our direct marketing testing programme.
12 noon: Time to review our contact strategies - that is, what we're spending on each channel and what we're getting back in return. Make an adjustment based on current trading.
1.15pm: Lunch in staff restaurant with team members
2pm: I'm giving a presentation at ECMOD, the home shopping event, at the beginning of October so I sit down and give some think time to that.
3.30pm: Review functionality development on our websites with the e-commerce team.
4.45pm: Prepare for tomorrow's meetings.
7pm: Leave work for one-hour drive home. Listen to BBC Radio 5: I wonder if there's any news about Leeds United?
POWER POINTS
- N Brown is diversifying beyond its core home-shopping market of larger, older women
- It has had to adapt to the rise of internet shopping, but is committed also to its catalogues
- The priority is to turn customers into repeat, long-life buyers.