The Original way to succeed on high street during a recession

Inside a branch of The Original Factory Shop, the mid-market discounter is benefiting from consumers’ relentless search for a bargain.

Just before lunch on a working day, the store is not yet busy, but a steady stream of customers mill between the tightly-packed aisles.

Racks of women’s clothes with the labels cut out – which are sourced via agents from chains including Marks & Spencer, and sell for roughly half their original price. With 80 per cent of its customers female, these are big sellers for the chain. In the menswear section are brands including Kangol, DKNY and Kickers.

TOFS chief executive Angela Spindler points to a rack of high-tech breathable Adidas T-shirts – bought in bulk from the sportswear giant – which sell for £12 instead of the normal £19.99.

“We’re really good value for money and we pride ourselves on that,” she said. “It’s good product at big savings rather than cheap product.”

Roughly 60 per cent of the chain’s sales are fashion and footwear. It suffered in 2011 when poor buying left it lumbered with a clothing overload which it had to discount very heavily to shift.

But now the chain is bouncing back. Sales at stores open for more than a year were up 5.5 per cent in the three months to the start of July – in part flattered by the weak performance a year ago.

Total sales grew 12.5 per cent and underlying earnings were up more than 20 per cent. The demise of northern discount chain TJ Hughes, which went into administration a year ago, may also have helped.

The private equity-owned chain is also opening 15 new stores this year, compared with a trend of shop closures among retailers. It snapped up about 35 stores from the failed Woolworths chain.

It is also stepping up its online presence, selling bigger goods such as TVs, mattresses and vacuum cleaners over the internet and an in-store catalogue.

Ms Spindler believes TOFS is taking market share from bigger retailers – including M&S which recently reported a 6.8 per cent quarterly fall in general merchandise.

“We’re probably considered a fly buzzing around their head rather than a competitor, but we know we are (taking market share) because we ask customers where they shop.”

TOFS, which opened its first store in Keighley in 1969, was established as an outlet for Peter Black’s, selling factory seconds, including some M&S lines.

Today, its 181 stores are dotted across the UK, typically in towns with a captive population of around 15,000 – the very towns high street multiples eschew. Each of its stores stocks thousands of individual lines.

“This is an emporium of cleverly-sourced brands,” said Ms Spindler. “We are able to be very responsive to sales trends.”

Ms Spindler holds up a camel-coloured Caterpillar boot. At £79 a pair, it’s one of the most expensive items in the shop. But it’s considerably cheaper than the £200 the rugged leather boots would normally command.

“We ask customers what matters to them. ‘Durability’ is right up there,” she said. “We position ourselves as mid-market quality brands at factory shop prices.”

Randal Casson, retail partner at PwC in Leeds, believes “perceptions of value change in a recession”.

“The pressure on the consumer means they are looking for savings so the value retailers are doing better,” he said.

“The longer you’re in a recession, the longer you’re in the new normal. The first response to the recession might well have been to only buy the cheapest thing you could find. Maybe as the recession goes on you see consumers going to the middle.”

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