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When on 21 November 2008, Bridisco trading as BDC Independent went into administration, three of its directors - Jeff Moody, Ray Taylor and Steve Gallagher - prepared a management buyout of the company confident in its inherent strengths and in its long-established relationship with its customers - electrical independents.
BDC 2008, with 65 staff and five distribution centres, is considerably smaller than the old BDC which traded from 31 centres, employed 650 people and turned over £137 million. Yet Jeff believes that the size and the tight control of the cost base and stock are the greatest strengths of the new company.
"The first six months was a consolidation process - making sure that we have costs under control, which included slimming down or relocating our warehousing space (on our five sites), and defining the product range. We will have our own labels in heating, ventilation and accessories, including Powerelecric and Micromark. We will also be launching our own range of white goods.
"This new beginning was an opportunity - which is rarely afforded by any business - to stop and examine all business operations to see what we wish to continue and what wasn't good business at all. For example, we analysed all our customer accounts to see with whom we traded profitably and who paid us on time."
The new business model
The business model of the new company is significantly different from the old one. "Putting together our business model we investigated our customers' expectations and asked ourselves: do the retailers want 65 brands and 7,500 products or key brands supported by excellent delivery and collection service? That's why we took a decision to concentrate on our core product range which is confined to white goods, that deliver good volume, and accessories which deliver attractive margins. Our accessories range from cables and lights, to ventilation products. Brown goods do not fit into our new business model. The white goods business is much more sustainable for a distributor today. It has a replacement and trade-up market. Brown goods only have a trade-up market and their prices erode almost overnight so people who stock them lose money. Meanwhile almost every manufacturer of white goods has put their prices up, and an increasing number of CE retailers have started stocking domestic appliances. Moreover white goods are a twelve-month business, while sales of brown goods are seasonal."
The USPs of the new company are: guaranteed stock, free 48-hour delivery, and competitive prices. "Our prices include cost of the product and cost of the delivery. Our minimum order value is only £75 (which is the lowest order value in the market) and we also pay for all collections of damaged products and credit the customer. What value will you put on this?
"We also made a considerable investment in our new website which is very interactive and differentiates the prices depending on the status of our clients. Importantly, our website only shows products which are currently in stock."
All their centres are located within the M25 to keep the costs down, although the company is considering three more sites outside this parameter. BDC 2008 doesn't have its own delivery fleet (which cost the old BDC several thousand pounds a month in petrol only) and uses national delivery services.
Distributors in recession
Jeff sees the recessionary times as an opportunity for distributors. "In a recession distributors always grow - for two reasons. First, manufacturers have started the process of stock reduction but they don't want to lose their market share so they look for the most cost-effective ways of reaching that market. Also, retailers reduce their stock levels so there is greater demand for distributors' services. This time we also have the credit crunch and business credit is the biggest challenge for any retailer for the next 12 to 18 months."
Advice for independents
However Jeff believes that independents who run a tight ship while focusing on their core competencies will be winners when the recession ends. "Keep your stock as tight as you possibly can and make sure that you have more than one trading relationship with distributors. Key to keeping a sale is speed of delivery. Also, don't rely only on margins but make sure that you make good return on your investment - your profit."
