A story of M, a failed retailer: We'll give you a clue – it rhymes with Charlie Chaplin Gather round, those who think you could make a go of it in tech retail or are currently working in the sector. Let's hear the tale of all that went wrong – and right – for Maplin Electronics Ltd, a once engaging and highly profitable business that smacked headfirst into a brick wall in 2018. Much has been written about its …
For those who are interested in reading further about the story behind Maplin's demise this is a worthwhile article which includes the original mail order history. It is involved (like this story) but also a fascinating insight to what happened. (Spoiler alert: The die was likely cast back in about 2001 - "In fact it has been insolvent for a very long time. It is a zombie company.")
As an aside I think of two types of private involvement in companies.
1. Buying up a tired or unloved company/brand, investing in it to restore it to good financial and business health, then selling it on at a profit as a stable going concern; where the profit is recompense for the hard work involved in restoring the fortunes of said company. (Rightly or wrongly I refer to this as venture capital)
2. Buying up a healthy company, loading it with debt to fund a bumper payout to the new owners, mortgaging any assets they can lay their hands on to fund more payouts, cutting CapEx and OpEx to the absolute bone to artificially flatter the accounts in the short term, then selling it on to some mug as quickly as they can before the whole house of cards collapses under the weight of its own debt, spiraling investment needs and imminently tanking revenues. (I look at this as Private Equity - this is what Maplin suffered from since at least 2001, along with many other companies on the high street).
Yeah, and that 2) is possible is... perverse. You buy a business from somebody and then put that price as a debt on the company you bought. Essentially, you bought the place with its own money (well, a promise that they will pay you back the money you paid for them - with interests).
Essentially, this kind of operations should be forbidden. They became available when debt could be unpacked and passed along (like subprimes), so who lent the money won't sustain the hit when the debtor defaults.
They should be allowed only it the debt stays wholly outside the bought company - backed by the assets of those who actually asked for the money.
Essentially, this kind of operations should be forbidden. They became available when debt could be unpacked and passed along (like subprimes), so who lent the money won't sustain the hit when the debtor defaults.
Not quite true. In Maplin's case the people who took a hair cut weren't innocent retail bond holders saving for their pension, they were the private equity outfits themselves taking a writedown on their own misguided investment.
And before we get into "think of the workers", I'd point out that despite not being viable or sustainable, Maplin's owners created and sustained several thousand jobs for probably a decade more than the underlying economics would justify. Whilst that was driven by optimistic opportunism, the net effect is almost socialist job creation.
So all in all, the right companies took the financial hit, and a lot of people got a good few years retail or back office work. Suppliers shouldn't have been hit other than through their own foolishness since the writing was on the wall for years and trade credit was withdawn months before the end. And if the retail unit freeholders lose out, what do we care? They've been pillaging retailers since the beginning of time, and deserve it once in a while.
"Yeah, and that 2) is possible is... perverse. You buy a business from somebody and then put that price as a debt on the company you bought. Essentially, you bought the place with its own money (well, a promise that they will pay you back the money you paid for them - with interests)."
But it's not all that different to how most people buy a house.
You borrow £100,000 that no bank would ever lend you on your own, but because you have a solicitor involved they trust the solicitor to let you buy the house and attach that debt to the house.
To be fair, both of those are private equity. There's also (3) investing in early stage firms.
(1) and (3) account for most private equity investments.
Unfortunately the effect of (2) is much more visible. Strangely it always seems to have the same firms associated with it - you'd have thought they would run out of buyers after a couple of failures.
@ARGO Agreed - yes my term for 1. is more accurately used to refer to your 3. funding early stage companies (e.g. Pied Piper). That's just my way of trying to separate "Good" Private Equity (the 1. type) from the "Bad" Private Equity (the 2. type) even if the terms aren't quite accurate.
You're spot on with your assessment of 2. I guess there is an ample supply of greedy mugs out there?
2 is exactly what is happening to my former employer - a software company. After a couple of rounds of private equity buyouts that have done exactly this, it is now with another new owner.
Having bought the company form the previous PE owner, who sold at a loss, they were able to buy for a price where the interest on the loan to pay it is less than the value of future revenues that are effectively locked in by existing client support contracts - once the have eliminated OpEx entirely by simply abandoning all sales activities and development of the product.
"I thought Maplin always had a store in Westcliffe-on-sea in addition to the mail order"
I think the store opened slightly after the mail order business, along with another one just after in Hammersmith.
One of the problems with their mail order business, I think, was that when it started up it would sell to anybody, while companies such as RS and Farnell would only sell to companies with a business account. When RS and Farnell started selling to anyone with a credit card and had a larger and more competitively priced range of components than Maplin, I suspect Maplin couldn't really compete in the mail-order component business any more and the tat content of their shops increased to compensate.
Maplin started as a mail-order business many, many moons ago - that distance-selling mindset should have helped with the on-line. Ironic that a business that was originally not about retail sites was killed off by the retail side...
Live by the sword, die by the shoddily-made blunt penknife which is available for the same price as a sword.
I always found Maplin stores to be very good from a customer point of view and the staff surprisingly knowledgeable about their stock and what you need.
The problem is that the only things I ever need from Maplin are small items that I suddenly realise I need (USB stick, SD Card reader, cables, a mouse...) and isn't worth making a special trip into town for. So I open a new tab, find the item on Amazon and know that it will be with me in the morning.
"The problem is that the only things I ever need from Maplin are small items that I suddenly realise I need"
I found that the things I suddenly needed from Maplin would often appear in the on-line search as being in stock, and then would mysteriously not be in the shop when I got there, even though the shop assistants could still find them on the computer.
My closest Maplin was a short walk from home, so if there were in my hand in 30 minutes and I could get on with a project, I didn't really mind if they were a little bit more expensive than waiting for a delivery.
Or instead of next morning next month as you find you’ve accidentally order something shipping from china. Unless your making sure you only picking prime items.
Really gone off Amazon as it’s really easy to buy fake rubbish unless you make sure your picking only prime items, not sure your even safe then.
Usually you can buy the same stuff same brand cheaper elsewhere, think they’ve got to the point where people think they the cheapest so they don’t have to be anymore.
I remember fondly visiting their first premises (before they got an actual shop) in Hadleigh Essex. It was a 1st floor location above another shop. When I walked in it was a mess of boxes crates and reels of wire. I was there to get some components to repair my CB radio and was greeted by a really helpful guy who knew just where everything was located in the jumble. Then a few years later I was at the grand opening of their 1st shop in Westcliff (on the outskirts of Southend-on-Sea). Grand times. It was after the mass expansion of the company that they lost their small business feel and I believe that was the root of their eventual downfall. They became too expensive and non competative plus they lost those people that were a mine of great kmowledge in their core business - components. The guys in that first shop were hobbyists as well and so knew their stuff. For me that was the main reason I shopped their because of the staffs wealth of knowledge. Sadly they lost sight of those values that made them stand out from the rest and so were destined to fail.
Back when I was using Maplins for kits and CB spares (1980-84) the place was a warehouse-sized building a-la Comet located almost all the way to Birmingham. I had to be serious about my needs before setting out, but they always had what I needed.
I'm appalled that Maplins couldn't see the way forward was the WWW and an Amazon-like store for electronics like the now-defunct Radio Shack had. I shrugged when RS folded its tents. Maplins was a harder blow, even though I haven't used them for three decades. I would often moan that I wished I had a local Maplins when all I had was the web or the local RS.
Then again, I was appalled at how slow the UK retail industry in general was to climb onto the Highway of The Future. At the first GW tournament in Baltimore in '97 I asked Jervis Johnson when GW would be opening a web store (by then a standard retail model for the Eastern US) and he said something along the lines of "We're looking at it but don't really see the point". This from a representative of a niche hobby with expensive components, while standing amid about 400 people with demonstrably large sums of disposable income who couldn't just "nip to the store".
I sometimes by N Scale model railway (yes, sometimes I let m inner anorak out) stuff from UK retailers and time and again am confronted with bollixed UIs that can't cope with non-UK customer requirements. Hell, I can't get one UK-based interest forum's "webmaster" to understand the need for HTTPS on the login page.
I have trouble reconciling the lack of oomph in the retailers websites with the levels of acumen usually demonstrated in the El Reg comments.
Radio Shack (https://www.theonion.com/even-ceo-cant-figure-out-how-radioshack-still-in-busine-1819569077) was in a somewhat awkward position. They predated the big-box Best Buy and other electronics retailers, they had large amounts of space in each store dedicated to inventory that moved very slowly (2.3k ohm resistors, anybody? anybody? they're 5% tolerance, honest!).
People lost interest in "building" stuff (though RS later tried half-heartedly to join the Makers and 3D printing bus)
Then their attempt to become a mobile phone store drove away a large part of their customer base.
"From a gross profit perspective, Maplin was incredibly profitable (the full accounts made up to 28 December 1996 show gross profit of £15.6m on turnover of £32.6m), a result, perhaps, of its broad appeal to a mix of different clients "
I'd say the reason for the profitability was the ludicrous prices charged in Maplin stores. And there lay the roots of the demise. It wasn't "online" that killed Maplin it was "competition". Maplin had originally, in the catalogue days, been both competitive and extremely helpful. The catalogue was a brilliant source of information and something I looked forward to receiving each year. The many examples, plans and technical info sections in the catalogue encouraged experimenting and that lead to buying components, cases, etc from Maplin. The shops were originally the same, staffed by people with an interest and willing to help. The shops were also well stocked.
The rot set in partway through the 90s. The knowledgeable staff started to drift away, the availability of stock became intermittent. By the 00s that had turned into guaranteed unavailability of almost everything. I recall wanting some aluminium knobs only to be told that they weren't a stock item and the wait for delivery was two weeks. I could buy them online for a tenth of the price and have them delivered next day.
The suits were more interested in pushing very expensive tat and gouging on the price of cables and cards. I suspect that many customers stayed on though inertia but eventually everyone gave in to the fact that you can buy the leads at a fraction of the price in a supermarket / DIY store and any "unusual[1]" components like knobs, resistors, cases, PCBs, etch baths etc. could all be obtained faster and cheaper via eBay/Amazon.
The shop staff in my local store in Bristol were pretty knowledgeable, but given the massive range of stuff they sold, there's a limit how in depth anyone's knowledge could be.
Of course, the big reason I didn't go in there much was the prices, but they did have one advantage which was speed. If I needed (eg) a SATA cable on a Saturday morning, I could pay a couple of quid to get one from Amazon, but it would take until Monday. Or I could walk five minutes down the road and spend about £8, but be home and plugging in my harddrive five minutes later.
There is also something to be said about not trusting things to the average delivery company. I used to buy blank DVDs at Maplin - their prices weren't significantly more than the equivalent at Amazon (this was a few years ago!) but made much more sense as the one time I bought from Amazon they sent the caketin of blanks in a big box with very little padding. By the time YoDel (or whatever) had played football with it and it got to me several of the discs were unusable so the whole lot had to go back for a refund. While I wasn't out of pocket it was still a hassle which made the Maplin surcharge fairly reasonable in comparison.
I remember one of my attempts to upgrade my own PC going disastrously badly because I just didn't do enough research on compatibilities.
I got a new i7 CPU. Didn't fit my motherboard, so I got a new motherboard.
Motherboard didn't fit the case. Got a new case. PSU didn't fit in the case (!??).
Got a new PSU. Oh, the RAM doesn't fit either. New RAM it is!
...motherboard didn't have the right bios version for the CPU. I got a dirt cheap i3 CPU that did work, got online and updated the BIOS (I later found out there's an easier option via USB stick).
And then, finally, I had a working computer that was somewhat more improved than originally planned.
Because Maplins was down the road, all of that palava took place over a long weekend. I could probably have saved ~50 quid if I'd taken a fortnight to ordered bits off Amazon each time, but, well, that's the price of convenience.
Yes, overpriced goods, product range and mistakes in online are usually what everyone talks about whenever Maplin comes up, but what I got from this article is that this author asserts it was problems at the corporate finance level that actually (or additionally) led to the death-spiral. The balance sheet numbers showed increasing sales every year up to 2014 and gross profit being maintained at around 50% which means they were still selling stuff and making a profit from what they sold despite being "expensive", but the whole time corporate debt and increasing liability for interest on the debt were catching up with them.
The buyout by Rutland in 2015 enabled them to reset some of the debt and interest liability, albeit with lower sales and gross profits (though still around 50%), but the years following showed exactly the same pattern - sales and profits going up but debt and interest going up much faster. The debt scared their suppliers into withdrawing credit supply arrangements, and if you have nothing to sell you have no business. So actually, customers were still going in and buying stuff, but the author's contention is that spiralling corporate debt killed them.
"...customers were still going in and buying stuff, but the author's contention is that spiralling corporate debt killed them."
It always seemed to us that Dragon's Den was just entertainment - a sort of censored happy slapping for TV. Apparently not though - the disease is real after all. Hubristically overpriced valuations of businesses leading to unfathomable exposure to debt. The result being the business raises prices far above any realistic expectation for the market they operate in and effectively killing their own business.
It's still an amazing achievement for Maplin though: according to the second table in the article they made £135m profit on just £269 of sales!!
;-)
"The suits were more interested in pushing very expensive tat and gouging on the price of cables and cards."
Another cause I've heard proposed- but not mentioned in this article- is that Maplin's opening of "big box" stores in retail parks (and other prominent, high-rental locations)- meant that they essentially *forced* themselves (#) into having to be a mass-market retailer of more mainstream tat at high markup, since even the most successful seller of components is never going to have enough turnover to support those sorts of costs.
(#) No doubt at the pushing of their private equity owners, mind.
From personal experience, I've largely used Maplins on behalf of employers as I've been too cheap to use them when I know I can get better quality stuff cheaper elsewhere.
We used them when we needed stuff fast - cables, hard drives etc. And generally we would buy their entire stock and go to the next store for more... Expensive but cheaper than delaying major pieces of work.
Over time, suppliers have become more reliable (i.e. delivering what we asked for with UK power cables rather than EU etc..) and equipment has become less user serviceable so the need for Maplin components naturally diminished.
Companies have also became less tolerant of additional last minute costs or are prepared to wait for cheaper alternatives.
Add in the VC debt burden, increases in credit insurance, reduction in credit and competition and the result was inevitable.
While the VC debt model is clearly flawed, the biggest issue is that it makes a company unable to address changing conditions, forcing it to "hope" the market will change while its competitors adapt and prosper.
"While the VC debt model is clearly flawed, the biggest issue is that it makes a company unable to address changing conditions"
Funny you should say that, as that exact reason has been pinpointed as a likely contributor to Toys R Us' failure. Yes, they probably *did* suffer due to their failure to move with the times (which lazy mainstream media reports parroted as the cause of their demise), but as others noted, this is quite likely because it's hard to invest in- and concentrate on- required changes like that when you're trying to keep your head above water servicing the owner-imposed debt in the first place.
(That said, I also read somewhere that Toys R Us' UK operation wasn't doing all *that* badly by market standards and its demise- shortly before the US stores also went under- was due to the American parent sucking cash out of it.)
Maplin's opening of "big box" stores in retail parks (and other prominent, high-rental locations)- meant that they essentially *forced* themselves (#) into having to be a mass-market retailer of more mainstream tat at high markup
...
(#) No doubt at the pushing of their private equity owners, mind.
I wonder how many of those private equity owners were also investors in those retail parks? Another nice little way to siphon money out of the firm in the form of ground rental.
It wasn't about the components and cables, they had become a sideline.
By the 2000s the components and cables Maplin were selling were a fraction of the store. By then their shops was packed with more consumer items and toys, from battery powered toddler vehicles, off the shelf RC toys, mirror balls and disco lights, USB vinyl conversion turntables and in car entertainment. Then on the checkout counter there would be a box of multi-tip screwdrivers or some other flashlight/torch or multi-tool. A spindle of 100 cheap CD-RW, and a 12 pack of cheapo AA cells. The components were never ever going to grow and sustain the business, all that profit was made on these other toys.
I've walked into a Maplins, seen something I wanted to buy, seen the price of the item and walked out again without buying it.
Simply put they were too expensive. Not just high-street-markup expensive, but taking-the-piss expensive. Sometimes 5-10x markup, especially on cables and AV plugs.
If their clientele were idiots then maybe they'd have gotten away with it, but I suspect most of them were technically proficient and quite capable of looking up stuff on the internet and ordering from there instead. Even their own website was expensive possibly because they were scared of cannibalizing store sales. Dumb idea.
My thought exactly. £1.50 for a 13amp plug? I would often see their own brand products on Banggood with exactly the same packaging bar the branding for a fraction of the price. A £25 LED strip from Maplin, absolutely identical item under £5 on Banggood if you can put up the shipping time.
£1.50 for a 13amp plug?
But comparable to what other high street stores were wanting.
No, Maplins couldn't compete with on-line for price but nor can most retailers. And, with China "shipping for free", there's no longer "it's the same once you've paid postage". Only "it's instantly yours to take home and use" which is what usually has people paying £1.50 for a plug or more from anywhere they can get one.
The problems for Maplins were multiple but I believe it was mostly that they were tipped over the edge and there was never going to be any way back. In fact it's quite impressive they held on for so long when others facing similar problems and competition had folded far earlier.
"£1.50 for a 13amp plug?
But comparable to what other high street stores were wanting."
Not really. Both Screwfix and Toolstation charge 80p-90p for a standard 13a plug now.
£1.50 was generally over double what you would pay elsewhere back then. Unless you compare to generic high Street stores, which is maybe the problem with the high price perception.
Maplin was supposed to be a specialist store but had started selling at high 'generic clueless customer' prices.
People who still buy a 13 amp plug won't go to Screwfix and queue and wait for someone to fetch it for you and then voice all their personal contact details in front of a queue of strangers. They are pickup items in Wilko or similar.
But needing a plug nowadays is becoming less necessary.
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