How to Run a Successful Equine Business in a Recession
My Lords, Ladies and Gentlemen,
Thank you for asking me to come to speak to you today on what was originally going to be the grand and far-reaching title: “How to run a successful business in a recession”. When I first heard that title, I wondered if I should presume to pontificate on such a topic.
By adding the modifier ‘equine business’, the subject moves away from the standard and the mainstream towards the niche, the specialist, the quirky – which is an area I’m much more familiar with!
I also feel that the very notion of an ‘equine’ modifier is something of theme in itself – to which I will return: The distinction, if there is one, between ‘our world’ and ‘the rest of the world’.
I’m sure the academics amongst you would expect a well-prepared student to gain extra marks by attempting to substantiate or even challenge the premise of a question before going on to answer it.
The most problematic of all the terms in the title is the word ‘recession’. Firstly, the UK is not technically in a recession, as I speak – although we’re still wary of a ‘double dip’ taking hold. Whether or not the equine economy is in recession, nobody really knows and yet, for a “£4bn economy”, it strikes me that we should know much more than we currently do. We have a variety of surveys but no real indices of performance.
Does recession put us at most at risk of belt-tightening or will our customers deny themselves everything but their horse? Are any more people taking up riding today or are many riders walking away? I really don’t know. No organisation seems to be measuring these effects in any meaningful way. Whatever is being measured, could certainly be better shared.
Regrettably, there is almost no regular, independent data about the equestrian retail economy. We piece together a permanently changing hypothesis, based on our own experiences and morsels of information from trusted suppliers.
I can’t claim to be too frustrated by this, as it has always been thus but I am a little envious when I see more concerted attempts to quantify the ongoing performance of other specialist markets.
I’d also question what our definition of ‘successful’ is these days. Significant growth is usually the simplest determinant but in the current circumstances, many would argue that profitability will do just fine. To others, it may even be just surviving in business for another year.
If this sounds unambitious, I would urge you to leaf through the Plimsoll Report on our Industry. It paints a grim picture of an industry seemingly over-populated by mediocrity and apparently tolerant of the reduced margins that accompany an over-supplied and stagnant market.
In the quest for success in any economic environment, I’d say that businesses have only three basic forces that operate on us, over which we have some control. The economist’s twin favourites of Supply and Demand are there – as well as the bit in the middle, Operations.
Our Supply trade is still something of a cottage industry which remains heavily skewed towards the small operator. It seems that we are only now at the beginning of a period of consolidation that has been in effect over the last two or three decades in other, comparable, specialist markets, such as the camping and cycling markets.
In a downturn, difficulties are most keenly felt by those who are smallest or least professional – and I appreciate that those two terms do not mean the same thing.
It’s important, then, that every company should tread very carefully in their dealings with any suppliers that are the most susceptible to the icy economic winds. There are too many small companies offering too many alternatives of similar products, resulting in too much undifferentiated competition and resultant commoditisation.
This magnifies the risks of suppliers’ difficulties adversely affecting retailers who placed too much reliance upon them.
Whatever the economic climate, it’s always good business sense to think very carefully before deciding about which suppliers to appoint and which to retain. In a recession, that process becomes even more crucial.
Your operations, literally, are everything you do and ‘you’ is the operative word here. It’s the area over which you have the greatest control. You can have an effect on your processes simply by deciding to have an effect on them. Suppliers and customers can be influenced but very few companies would ever claim to be able to control either party.
In the good times, there is always the reassurance that growth is there to be achieved, as long as it can then be handled. Whether it’s extra computing power, a new fork-lift truck or an administrative position, these are significant step-changes that accompany linear growth. You can very often go from struggling to cope without the resource in question to struggling to justify having it when it arrives. Generally, as long as the problem your new resource leaves you with is better than the alternative you’ve avoided, you’ve made the right decision.
As the economic cycle slowly turns, aspirations for the future are not as easily funded – every resource needs to be justified by the present, in case that’s all you can reasonably expect. If that means the fork-lift goes back and the admin tasks need to be shared out again, that’s not an admission of failure, it’s just a recognition that the context has changed.
The level of demand is expected to reduce in a downturn. When demand reduces, it risks becoming outstripped by supply and so, prices must fall. You must lower your prices and in doing so, probably your margins. It’s simple economics.
Well, I can’t wholly say that’s not true but I can say it’s not the whole truth. Simple economic effects will only be solely in evidence when the world is full of simple economists and, happily, that’s still not the case. The Marketing world is a much subtler and more nuanced place to live than the Economist’s world. We also deal in products that are decisions of the heart more than they are of the head and with customers who have a living, breathing horse to care for rather than an asset to maintain and protect.
Yes, price competitiveness is perhaps of greater importance today but companies ignore at their peril the importance of customer service, whatever the market conditions. Reducing prices and margins is not an adequate justification for also reducing efforts to build a positive customer relationship. If all around are losing their heads in this regard, now is exactly the time to make sure you care more about your customers, if you want to see them more often.
We pay attention to the price points for each category of product we sell. It won’t shock you to learn that we sold far fewer rugs over £100 last year, compared to the year before. Nor will you be astounded to hear that rugs under £50 were much, much more popular over the same period. Such effects have only to be monitored as closely as possible in order that an ongoing strategy can be formulated around them. The effects may seem fairly obvious, but with the benefit of a few specific numbers, you can be surprised to see by how much these ‘obvious’ effects are in evidence.
The absolute favourite tactic of retailers everywhere to stimulate demand without appearing to reduce prices is ‘Bundling’ and it’s used everywhere: 3 for 2 offers, starter kits, family packs and software packages.
Bundling does come at a reduction in margin – the lower unit cost is what makes it attractive to the customer – but it’s a means of eliciting more value more quickly. Who really needs a stock of three bottles of shampoo in their bathroom? Or, for that matter, two? We’ve grown used to it because as consumers, we’ve agreed that if we pay up front for more stuff, we get even more of it free.
I appreciate that not all business are too concerned with issues such as holding stock but even service sector businesses need to understand that price points are vital to continuing to attract customers who now can’t justify the prices they used to pay. If the price tag is the barrier, offer reduced options that are cheaper but at the same margin, one-hour riding lessons instead of two, that sort of thing.
If you want an example of service bundling, how about that idea that was invented to keep football teams afloat in the years before sponsorship and television money – the season ticket?
Whatever the state of the economy, businesses always have to perform or eventually, they will cease to exist. Recession merely brings a heightening of this ever-present reality, a greater possibility that your company will fail. At the same time, it brings a greater possibility that your competitors will fail, which in turn presents extra possibilities that your company will succeed. We tend to think of Opportunity and threat as polar opposites but they never exist in isolation of each other.
I mentioned earlier a theme: the curious relationship between the ‘horsey’ and the ‘non-horsey’. If we are truly to achieve success for equestrian businesses, I must take this opportunity to impress upon us all to better engage with all those in our world and become more inclusive to those from the wider world.
The sphere we inhabit is different from the wider, mainstream world and yet it is a subset of that world. In the horse, we share a key differentiating factor from the rest of the world. We believe it gives us a common reference point and a set of shared values that are distinct to the non-horsey world.
It’s very reassuring to see the equine community gathering together on occasions such as this but like any community, we must acknowledge that ours has had its fair share of net-curtain-twitching and perhaps even the occasional garden-fence squabble over the years. With all that in mind, one might take the view there is less solidarity across our community than we’d like to think.
One might go further and conclude that the very notion of a single, convenient ‘equine’ umbrella to distance ourselves jointly and defiantly from the rest of the world seems more than a little illusory. ‘Riding’ is really a multifarious, mongrel construct, made up of a slew of different disciplines and, of course, the unaligned, much-maligned ‘happy hackers’.
Even if the horse does define us all as an extended family, such a kinship is both a blessing and a curse. Like an island community, we very often seem to draw comfort and strength from our differences from the ‘mainlanders’ who “don’t understand our ways” and we are often quick to highlight our differences from the mainstream.
I’ve heard many ridiculous statements over the years like “horsey people don’t have time for the internet” or “our customers don’t want that kind of service – they can get that at ASDA”.
If you looked at our customer database – of over a quarter of a million people – you’d see that many of them live in normal houses in suburbs or even towns and cities. You’d know that most of them are able to use the internet and you’d conclude that when they’re not around horses, they like to immerse themselves in the subversive counter-culture by visiting such places as Tesco, McDonalds, IKEA…even Primark. I would add that many of them wondered what all the fuss was about during the hunting debate and a significant proportion even believes, quite firmly, that hunting should remain banned.
It’s very easy to overlook the huge number of riders and horse owners who, rather inconveniently, don’t care about any of the disciplines and wouldn’t recognise a British Olympic rider if they met one while out on a hack. This part of the market, our customers, our community views their horse, as an escape from the rest of the world, not as an outward expression of belonging to an artificially-constructed ‘horse world’ or, heaven forbid, any reason to indulge in competitive activity.
Should that really be such a surprise to us? Do we really want our community to consist solely ‘the right sort’ of people if it is to flourish? Can we afford to be too choosy in a recession? In fact, forget the economy. Do we dare risk turning away the very people who may even assure the future of equestrian sport itself?
I’ve always felt that above all else, business in general – but retail in particular – demands and thrives on brutal honesty. If too few people are visiting your shop, who or what do you blame? The weather? The economy? The Government? Suppliers? Perhaps even the stubbornly unco-operative customers themselves? There comes a point where you have to accept that by doing things differently yourself, you can improve the situation.
Honesty itself won’t add a penny onto your revenue but it has a strange habit of pointing you towards the ideas that do put more money in the till.
As a marketer, it’s natural, even tempting to want to segment the market in which one operates and the horse world with its myriad of different sports seems ideally suited to this.
What can be less easy to do is to gain that same level of connection with all customers at the same time, from those who would define themselves by their chosen discipline but crucially, also those whose passion is just as fulfilled by ‘looking after’.
Faced with this challenge, the few elements that I’ve observed to be truly common across the whole of the horse world appear to be grooming, mucking out and a compulsion to support anyone who helps horses. A common denominator seems to be to do with clearing up a mess of one sort or another. It strikes me that it neatly highlights a necessary pragmatism that defines those who spend their time around the horse and it’s very similar to the kind of pragmatism that seems to me to be one of the most vital factors in achieving success in any business at any time, not just an equestrian business in a recession.
Thank you for listening.