Bernard Ginns: From seconds to first as Factory Shop outpaces mentor

OH the irony. A retail business founded on surplus and seconds from Marks & Spencer is thriving, while the Grand Old Lady of the High Street is struggling.

The improving fortunes of the Original Factory Shop seem inversely related to the travails at M&S, which last week reported its worst performance in clothing and non-food sales in more than three years.

Like many top UK retailers, both businesses started out in Yorkshire.

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Michael Marks opened his first bazaar in Leeds in 1884, joined forces with Tom Spencer in 1894 and together they built a company based on the principles of quality, value, service, innovation and trust.

The Original Factory Shop, meanwhile, grew out of Peter Black Holdings, one of the biggest suppliers to M&S. Its first shop was in Keighley, next to the original Peter Black factory, and was simply called the Factory Shop, selling footwear, luggage and bags originally destined for M&S.

“Everyone loved the idea that you were getting M&S stuff but cheaper,” recalled a customer.

“Because M&S were so hot on quality there was virtually nothing wrong with the stuff you were buying.

“You could buy a pair of M&S shoes from the factory shop, with a stitch that had come away inside, something that was going to make no difference to you, but they could never accept it to be sold at full price.

“Everyone used to flock there and get their cheap M&S gear. It did very well.”

Peter Black Holdings, formerly chaired by the brothers Thomas and Gordon Black, developed the factory shop business from its formation in 1969.

Rival factory shops started to spring up, so the Black brothers had the idea to rename theirs The Original Factory Shop as they opened new stores. As Peter Black expanded its operations, so too did the wares on offer at The Original Factory Shop.

In the 1980s, the group moved into homewares, toiletries, gifts, cosmetics and furniture, in turn enhancing the range of products on sale at the stores.

The Original Factory Shop has since grown to become a familiar and established presence on small-town high streets.

Peter Black eventually disposed of the business, and was itself sold to Chinese trading company giant Li & Fung in 2007.

The story continues today under the ownership of private equity firm Duke Capital.

The Original Factory Shop now has 180 stores, which are performing well with their range of surplus products from the likes of M&S, Next, Warehouse and BHS. Angela Spindler, the chief executive and a resident of Harrogate, said: “We are swimming upstream strategically and bucking the trend by opening stores and trading strongly on Britain’s small town high streets.

“We bring our customers something unique – they are delighted to have the opportunity to shop for quality brands and a full non-food assortment.”

She sees scope for a network of 600 stores across the UK over the medium term.

No-one disputes the quality on offer at M&S food halls, but with clothing and non-food sales struggling with issues around poor lead times and over-complicated product ranges, might The Original Factory Shop, the business that started out as an outlet for M&S surplus and seconds, be seizing some of its hallowed ground?

IS it really four years since the run on Northern Rock?

August is traditionally the silly season, the month when everyone goes on holiday, but not many of us will forget the sight of people queuing to withdraw their savings in 2008.

Robin Smith remembers it well. He was on holiday in Portugal at the time.

He took a phone call one morning to inform him, as chairman of Leeds Building Society, of the extraordinary scenes taking place in high streets up and down the land.

He was told of the queue forming outside the Northern Rock branch in Morpeth, which happened to be opposite a branch of Leeds Building Society.

Mr Smith recalls another call later on, this time to inform him that a queue was forming outside the Leeds branch over the road.

“They were paying money in that they had taken out of Northern Rock,” he said.

Good for Leeds – and good for the mutual movement in general.

Since the onset of the credit crunch and the near total destruction of the banking industry’s reputation, the sector has seen its stock rise, in metaphorical terms of course, since mutuals are owned by members, rather than shareholders.

As such, they are free to plan for the long term rather than worry about profits in the short term. And that’s precisely why they have largely endured.