G
Graham
Guest Shopper
<img src="/images/MH.jpg" border="0" alt="Mike Hancox" title="Mike Hancox" hspace="4" vspace="4" align="right" />Mike Hancox, Ideal Shopping Direct PLC's Chief Executive has said that Customer Service is key, the comment was made as part of his review following the companies Preliminary Results which were released today.<br /><br />"The 2008 financial year witnessed a very challenging economic environment and sales fell by 2.0%. This is a disappointing performance given the optimism that existed through the first three quarters of 2008. At the end of the financial year, Fashion and Jewellery categories had declined with sales down 18% to £9.0 million and 45% to £3.8 million respectively. Home, Leisure, Health & Beauty remained broadly flat at £47.3 million and Craft showed strong sales growth, up 23% to £21.0 million.<br /><br />Profitability declined during the year to a net loss of £13.2 million; this includes an underlying trading loss of £4.0 million and exceptional costs of £9. million. The exceptional items include stock, doubtful debt and returns provision increases following policy review, costs associated with decisions made by previous management such as investment in IT systems now deemed not wholly fit for purpose, impairment of goodwill associated with the acquisition of Superstore TV (since renamed Ideal Sourcing Ltd) and costs associated with the aborted planned building of a new warehouse. They also include legal, professional and staff costs in the restructuring of the Board and Senior Management and ensuring that the business is appropriately structured for the future. Finally, they include the expected loss of deposits held with Kaupthing, Singer and Friedlander.<br /><br />TV shopping as a market continued to grow, at circa 3% during 2008 (source Electronic Retailers Association). The market is driven primarily by consumers gaining access to TV shopping channels as they switch over from analogue to digital television. We estimate that the size of the market is now approximately £1.4 billion at retail sales value of which we have a share of approximately 6%.<br /><br />Our internet sales in 2008 were £22.7 million. Our customer profile is predominantly in the age 50+ category, which in internet sales is the fastest growing consumer area of the market. We see this as a significant area of potential growth and a key part of our strategy is to reposition the businessas a multi channel retailer, rather than predominantly as a TV shopping company.<br /><br />Craft is now the largest category at Ideal Shopping, representing 26% of total product sales in 2008. The market for crafting in the UK exceeds £2 billion and we see this as a major area of opportunity in a fragmented market place.<br /><br />During 2008, our Ideal World channel was launched on Freesat thereby increasing our potential audience. Our Sky Vitality channel was also re-branded as Ideal World 2 and Ideal World 3 was launched on Sky. Together with Freeview, Sky and Virgin cable, we now broadcast to approximately 23 million homes, representing 89% of all UK households.<br /><br />The Ideal World and Create and Craft websites were re-launched in mid 2008. Both sites however, will require further investment and operational focus to establish them as destination sites. <br /><br />The introduction of new IT systems in 2007 caused significant operational problems throughout 2008.The systems fall short of the functionality required for the range of products that we offer, and options, including possible replacement, are currently under consideration.<br /><br />We have had success with a number of products during the year but have become over reliant on a small number of successful lines. More airtime has been given to products that sold well but this has resulted in a lack of variety in our scheduling. We have already started to address this by expanding our branded range and broadening our categories.<br /><br />We continue to recruit new customers to our TV channels and websites at the rate of almost 1000 new customers a day.330,000 new customers were recruited in 2008, up 6.6% on 2007.<br /><br />To improve our poor customer service experience our call centre operation was moved back to the UK from India in October 2008. An automated phone ordering system was introduced in September 2008 and customer feedback has indicated that this was an unpopular initiative. As a result, we have re-introduced the option of customer agents for call handling from March 2009. Improving service to customers will be a key focus of the management team in order to increase customer retention in 2009. For example, a revised process for handling new customers will be introduced in April 2009 and improved delivery times are expected from May 2009.<br /><br />We have reviewed our sourcing strategies and logistics solutions. With regard to sourcing we are now minimising firm sale purchases and proactively working with suppliers on sale or return, direct despatch and supplier held stock business models. This strategy reduced our reliance on Ideal Sourcing Ltd and has reduced gross stock levels to £6.1 million in February 2009 from £9.5 million in February 2008. By reducing stock levels we have been able to withdraw from a number of warehouse facilities and now operate from 3 sites compared to a maximum of 9 sites in 2008. Annualised cost savings from this are around £0.5 million.<br /><br />During 2009 we will work with our 'final mile' delivery carriers to improve delivery times and the overall customer experience. Throughout 2008, promotions offering free postage and packaging were consistently run to drive sales. In contrast, during 2009, free postage and packaging will be restricted as a promotional tool and consequently overall gross margins will show improvement.<br /><br />In order to maximise profit, some overnight airtime is sold to third parties. During 2008, overnight Freeview airtime was sold to Smart TV Broadcasting but this arrangement ended in November 2008. A new contract with Game Network BV has been agreed to replace the Smart TV contract and this should begin in May 2009.<br /><br />The scale of losses in 2008 has led to a re-evaluation of strategy and direction. We have restructured our Board and Senior Management team, and strategically we remain well placed to exploit the convergence of broadcast and online media. Our Create and Craft brand is showing exciting growth potential.<br /><br />To grow our business profitably we need to focus on the business qualities that initially made the Company successful: customer service, retail entertainment and excellent product. In doing this, we will ensure that the Company operates with the appropriate controls and with a focus on cash management.<br /><br />We know that our customers want us to provide engaging and demonstrable products, exclusive deals and a convenient shopping experience across a range of price points. We have already introduced new branded products such as Sony, Apple, Ann Harvey, Littlewoods, Vitamix and Polti, and this activity will continue in 2009. We are also extending our gardening and food categories and trialling broadcasts with a number of other high street and catalogue retailers. This enables us to offer our customers extended ranges of branded products without stocking the products ourselves, thereby avoiding stock risk.<br /><br />Our primary growth opportunity lies with the internet, and we will focus on driving our existing TV shopping audience to our websites, as well as employing other established marketing and e-commerce tools. As Ideal Shopping develops from a TV shopping business to being a multi channel retailer, we will implement best practice home shopping strategies that maximise sales from all customer touch points, whilst at the same time reinforcing our brand values of family, friendship and fun."<!--StartSdNewsForum--><br /><br />
