What was behind the decision to re-launch Zavvi?
We tried to get the Woolworths name back in December – and we were keen to reinvent both them and Zavvi as online retailers. They are both such strong brands – Woolworths phenomenally so.
But Shop Direct came in for Woolworths, and we just couldn’t compete. So we continued with Zavvi, and that has worked out really well.
What we intend to do with Zavvi is take this established brand, and their database of over a million customers, and try and capitalise on it. Zavvi was heading towards £25 million sales online, and even if we’re half as successful to begin with – following the brand damage it will suffer – we’ll still be in a good position.
The Zavvi site now features new products such as electronics, perfume, lingerie and sportswear. Some people may think that this is a huge departure. But we know from our experience with TheHut.com, that we can make a strong offering on alternative categories away from entertainment, and we’re really pleased how the first week has gone.
Do you feel that Zavvi will replace TheHut.com as your primary own-brand ecommerce site?
No, we’re going to keep both going. We have a tiny share of the market in reality, especially compared to Amazon and Play, but it is a very big market. TheHut.com is now more accepting of a broader range of products, and focuses on a different demographic to Zavvi.
We’ve taken TheHut.com from zero and we’ve done very well with that. But we feel Zavvi can give us that extra bit of scale to get us established with suppliers with better buying terms and so forth.
And what about marketing for the Zavvi website?
The marketing team is doing presentation after presentation and are looking at the level of spend they’d like to do.
It won’t just be online marketing, as we’re eager to build a skill set for offline advertising as well. We’re not strong in offline marketing in the slightest, and so we will put a budget behind that.
How key is the video game market for The Hut Group?
Gaming is at the heart of what we are. Last year the games market saw fantastic growth, so it is at the forefront of what we do.
As for music, we’re still doubling our sales every year, but of course music is starting to go through a challenging time. We will be buying one or two businesses in different product sectors, but I don’t see anything changing in the foreseeable future in terms of our games focus.
So what percentage of your business does games account for?
Two years ago, the games sector accounted for less than ten per cent of our business. Today, it accounts for about 40 per cent. Now that we’ve launched all these new categories, it could drop to around 30 per cent.
Will the new Zavvi site have a big video games focus?
Definitely. We want to differentiate it from TheHut.com, so it might focus on different platforms. We’re still finding out through the database what the best selling titles and platforms for Zavvi.
Looking at your white label business, you have an eclectic client base, including indie chains like CHIPS. What makes The Hut an attractive proposition for small companies?
If you are a small retailer we deliver, without any real investment, an online proposition to rival the biggest websites. It gives them a revenue stream and credibility in a difficult time when they need to be looking at online but don’t want to make a massive investment.
The guys at CHIPS have been working closely with us on the site, and what we do is give them an offering they couldn’t get on their own, with no risk. Equally for companies like CHIPS, they can look at doing extra product they couldn’t find space for in store.
What about your bigger clients such as Asda? What do you offer them?
What we can do for big retailers is an extensive online offering, which would require significant internal infrastructure, at zero risk to them. So it is profitable from day one for all of our partners, but not necessary for us.
Like Play and Amazon, you have a warehouse in Jersey. How vital is having a Jersey base in trying to compete online?
We do all our distribution from Jersey, and we’re invested out there. So it is important from that angle. The real winner is the consumer. Entertainment is the most tight margin business out there. Anyone making money out of £6 CDs must be doing very well.
What are The Hut Group’s plans for the rest of the year?
We want to have a very strong entertainment offering, with a strong focus on games. We want to improve our content, so the ability to see trailers is something we’re working on.
We want to introduce reviews too, to get user generated content on the website. If we continue to offer the best value, with an excellent experience, then I think we’ll be significantly improved.
What are your financial targets?
This year we’re aiming for sales of £75 million. I think in gaming we can make some real headway by strengthening the team with key appointments that will underpin our planned sales growth.
We’re a quarter through the year now, and we’re getting visibility on where we will be at year end. As long as we continue to bring in quality staff and invest in the infrastructure, I think we’ll hit target.