In focus: Richer Sounds

What Best Buy aimed to achieve when it launched in this country had in many ways been trailblazed years earlier by a domestic retailer – Richer Sounds.

The business, originally a hi-fi specialist, was built from day one on delivering outstanding service.

But the quirky electricals specialist, which typically operates from  425 sq ft stores, faces the same issues that have beset bigger rivals: increasing competition as new competitors such as grocers and etailers move onto its patch.

Richer Sounds has not been immune to the market downturn, suffering a 5.4% decline in sales for the year to April 2011.

Pre-tax profits have been sliding since 2007, when they were £6.1m, to £2.4m in 2010/11.

Operating margins also dipped to 2.5% in 2010/11 and turnover, which had been growing, declined in 2010/11 to just below £140m.

They are all signs of how tough retail is, even for a retailer that is legendary for the high customer service standards that have been at its heart ever since it was founded in 1978 by eponymous entrepreneur Julian Richer.

Its continued success on the service front is evident from the fact that Which? magazine voted Richer Sounds as the best place to shop in the UK in 2010 and 2011, and rated Richer Sounds’ staff the most knowledgeable among electricals retailers.

The aim is to drive profit by keeping customers loyal as a result of sparkling staff service, and employees are rewarded for their performances with the use of company-owned high-performance cars and holiday homes. Aspects of Julian Richer’s ground-breaking approach have been replicated by other retailers, notably Archie Norman when he was turning around Asda.

Richer, whose innovative approach to staff and service led to him becoming a sought-after speaker on the subject, no doubt aims to hold on to its customer service standing as rivals in the sector – most notably Dixons – also seek to focus on that as a differentiator.

However, the prioritisation of customer service in Richer’s stores may have, to some extent, constrained development of retailer’s online operations.

Its transactional site is focused on driving customers in-store, offering bricks-and-mortar shoppers exclusive offers and featuring advertising banners that highlight the positives of in-store product demonstrations and advice from staff.

Richer Sounds’ acquisition of online brand Empire Direct in 2009 expanded the retailer’s multichannel offer. Trading as Empire Direct by Richer Sounds, it sells discounted brown and white electrical goods.

However, combined online sales remain low, and made up just 1.7% of total sales in 2010/11 – that was a 28% increase on the previous year.

Richer Sounds’ focus on customer service as a big consumer appeal makes sense as retailers with stores – including Dixons – emphasise the benefits of giving advice on complicated technology to consumers. This way they are able to display product to best effect.

And although Richer Sounds has broadened its product range and now sells everything from iPods to flatscreens, it is still able to leverage its original specialist credentials by stocking lines more difficult to come by elsewhere, such as accessories including speaker cables.

As the retailer heads into 2012, consumer confidence remains low, but the Diamond Jubilee and the Olympics may bring a fillip for sales of goods such as TVs.

That may help improve profitability in the short term, but the retailer will need to ensure it pushes ahead in a market place that will continue to remain fiercely competitive.

Options open to Richer Sounds may be to deploy multichannel resources to sell a greater range of products online while making the most of its shops and reputation for service to emphasise what makes it different.