Moët Hennessy’s Chandon: now made in India

November 19, 2013 4:02 pm

Moët Hennessy’s Chandon: now made in India

By Jonathan Moules

Julian Richer is fretting about catching a train. “I have to be in a taxi at 10,” says his email, explaining that he has an economy ticket for the journey home to York, which means he can travel only on the 10.30am from Kings Cross. He will have to leave our meeting at The George, his Mayfair club, prompt­ly. He usually forswears taxis too, he later adds. He is making an ex­ception today because he is squeezing the meeting in between a visit to one of his shops and hosting a Bible study group at his Georgian mansion in the Yorkshire countryside.Mr Richer is one of the UK’s most successful retailers, although a lack of overseas outlets makes him little known beyond the Channel.

A regular on the UK’s rich lists, he was 23 when he bought his first Rolls-Royce, adding a private jet not long after. Now 54, he lives in a house in 40 acres of land – all thanks to the proceeds from Richer Sounds, his hi-fi and television chain, of which he remains the sole shareholder.

The havoc wreaked on the industry by the buying power of and the exodus of shoppers from high street consumer electronics chains in search of bargains online has failed to fell Richer Sounds, which last month filed the best set of annual results in its 34-year trading history.

The company’s London Bridge shop – the first, opened in 1978 – has for more than two decades held the Guinness World Record for most sales per square foot of any retail outlet, main­ly because it packs so much expensive audio kit into a tiny space.

The right prices and the right people

Prices and people are leitmotifs of the business model of Richer Sounds 
●Not surprisingly, the founder who buys economy train tickets is adept at getting a good price on whatever he buys. Julian Richer says his chain offers exceptional value on top-end hi-fi kit and televisions because his team secure significant discounts direct from the manufacturers. He involves himself in negotiating these deals, even though it is not an essential part of his job as managing director.
● Another obsession of Mr Richer is customer service. Richer Sounds staff are not only expected to be cheery and knowledgeable about the equipment they sell, but will also give you a lollipop or earphones, even if you choose not to buy. “I’ve got a wonderful sales force, albeit we’re not perfect and we make mistakes,” he says. “Of the 12,000 customers we get a week, I can’t remember a week when I’ve had three complaints . . . and that’s with me encouraging them. It’s easier if you don’t encourage them.”

Prudence has been critical to the David and Goliath victory of Richer Sounds over the commercial power of purely online retailers.

Operating profit at Richer Sounds was up a fifth for the 12 months to April at £7m, on turnover of £173m. Key to this was that Mr Richer personally owns the freehold on 46 of his 52 shops, thus shielding the business from the rent rises imposed by UK commercial property landlords in recent years. “Our overheads are only 12 per cent of sales,” Mr Richer says. “We can’t find out Amazon’s costs in detail but we think they are broadly 10 to 12 per cent. But because we do such high volumes from such inexpensive stores and we are so efficient, it means that I’ve got much deeper pockets than most of my competitors.”

There is also a personal reason for thrift. After a comfortable childhood in Hampstead, north London, family life was thrown into turmoil by his father’s failed attempt to become an entrepreneur with a textiles import business. At a time when business failure in Britain attracted terrible stigma, Mr Richer senior was forced to declare bankruptcy.

At the time, his son was boarding at Clifton College in Bristol, an experience he loved so much he is now a governor. He started selling hi-fi hardware to fellow pupils mainly to help his hard-pressed parents meet the school fees. “When you start with 10 quid you never want to waste money,” he says. “You never forget the value of it.”

He confesses that he was left with a chip on his shoulderthat drove him on to prove he could succeed.

His school days had another lasting effect: philanthropy is a large part of his life, which he attributes in part to the ethics instilled by his “socialist” house master at Clifton College.

The business gives 15 per cent of net profit to charity each year, and much of Mr Richer’s spare time is spent on charitable interests. These include a foundation that helps more than 200 good causes a year, and Acts 435, a website designed to make charitable giving cheap and simple, which he founded with John Sentamu, the Archbishop of York.

Richer Sounds has had its rocky pat­ches. A decade ago it made a £1m loss after the first wave of ecommerce hit sales, spurring Mr Richer to ret­urn to a full-time executive role and cut staff, which clearly pained him.

He also had to pull back from foreign expansion after a failed attempt to make three franchised shops work in the Netherlands. “The legislation is different and the culture is different.”

At breakfast at The George, his open-neck shirt and jeans and long, swept back hair stand out among the Savile Row suits at the other tables and mark him as the idiosyncratic entrepreneur.

“There’s still a bit of rock and roll in me,” he says, pulling out his iPad to show me the cover art for the new album of the band he formed with Rosie, his wife of 30 years, which will be performing that evening in York. He plays drums.

Nowadays, wealth is a “measurement of an indicator” driving him to build on his business success, now that he feels he has the respect of his peers. In fact, he says he has more money than he can spend. His circle of business friends includes Archie Norman, former Conservative MP and current chairman of ITV, who sought Mr Richer’s advice on customer service when he became chair of Asda, the British supermarket chain.

Mr Richer’s interest in performing, as opposed to selling music players, seems to have replaced the material signs of wealth that he acquired during his youth. “Insecurity made me want to go for the trappings of wealth,” he says. “I gave my first Rolls-Royce to my dad as a present when I got my second one. But we’re going back 30 years ago now, and I haven’t driven a flash car for many, many years. I cycle everywhere on my Brompton now.”

At the end of breakfast, he settles the bill by handing a £20 note to the maître d’ to distribute among his team bef­ore paying the cashier. Tipping staff ahead of time is one of his top management tips – he claims to tip hotel staff upon arrival.

“The most important and most neglected people in any business are the employees,” Mr Richer says. “And the most important – and most neglected – of these are the ones who actually deal with the customer.”

Who is more important, the customer or employee? “That’s a trap and I’m not going to fall into it,” he shoots back. “They are obviously two completely different things. It’s like asking which of your children you like best.”

Mr Richer has no children of his own. The succession plan for Richer Sounds is to hand the reins to Julie Abrahams, his IT director, but Mr Richer has also put in his will that he would like the company turned into a John Lewis-style employee-owned trust after he dies. “I cycle around London and it’s very likely I could die,” he says. “Not likely perhaps, but possibly.”

For now, he is happy to focus on minimising the cost of living. I leave him haggling with the cashier over the bill. “That seems a little steep for a few coffees,” I hear him complaining as I walk out the door.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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