MY FATHER STARTED McElhinney’s in 1971 when he opened a very small, 500 sq ft shop on a side street in Ballybofey, Donegal.
Before that he used to travel around the countryside selling out of a van, so he really did start off from nothing and built McElhinney’s into the 90,000 sq ft store that it is today.
I remember when McElhinney’s was quite a small shop before all the extensions were added, back in the early 1980s. I grew up in the shop and, for me, it was always part of my life.
I worked on Saturdays and on summer holidays whether I wanted to or not. It’s a family business so you have to pitch in.
I wasn’t obliged to go into the family business when I was older. I actually went and did my own thing in college and then trained as a management accountant in Athlone, however, I felt there was a lot I could bring to the family business so I came back.
Accountancy is incredibly useful as nothing gives you a deeper understanding of how a business works than the numbers, but it turned out retail is in my blood.
Overcoming our efficiency
The business has changed an awful lot since I joined in 2004. We had a couple of blockbuster years in the lead up to the recession, but to be fair, I learned more in the last eight years than I have in my life prior to that.
Back in 2007 and 2008, we saw our sales fall by about 30% almost overnight. They were certainly difficult times, but we realised that we had to be better and really had to show our mettle.
Going into the recession, there’s no two ways about it, we were inefficient. It meant we had to work a lot in terms of making the business more efficient and really drilling into our processes and the numbers. Everything had to be scrutinised.
In terms of productivity we had to look at how we were doing the day-to-day stuff and in terms of what stock we were buying in, we had to get better at that too. Terminal stock filling up warehouses is no good to a small department store like ourselves during a recession.
The answer was online and it got to a stage where we couldn’t wait any longer. We were at a point where if we didn’t launch an e-commerce site soon, it would become a threat to our business as our customers were demanding it.
Like most retailers, we had been talking a lot about getting online but just hadn’t taken the leap.
I was sitting in a meeting one day a number of years ago with one of my colleagues, Róisín Woods, and we were talking about some terminal stock we had warehoused that we just couldn’t shift. We were discussing what we were going to do with it.
Róisín suggested we use eBay. To be honest, I was a bit dismissive initially as I had tried to do something similar before and it didn’t work, but Roisin had the belief that she could make it work and to her credit she did. Within a short period of time everything had been sold.
That was the beginning of McElhinney’s selling online. We lost money on every item of the stock we sold on eBay, but what we gained was an excellent grounding in selling online.
We learned how to list product effectively, photograph items, manage logistics, stock control and customer service and everything else we needed to know before we launched Mcelhinneys.com.
There are so many moving parts and it can be quite difficult for a traditional retailer like us to get our head around them. Creating a beautiful website is the easiest part, getting the infrastructure behind the scenes running properly is the most important, and expensive, facet.
All through the recession, we continued to reinvest in the business. While everyone else was squeezing pennies as the world was ending, we were refitting departments and improving our customer experience in the store.
We knew that just like the boom, the recession was going to end. We wanted to put ourselves in the best possible position for a recovery. And that really has paid off because a lot of businesses were understandably terrified and stopped investing.
Unique family businesses
Running a family business is very different and diplomacy tends to go out the window sometimes. You tend to be a lot more upfront, whereas if you are not related you might hold back a little bit.
To me, that’s quite healthy. Every business needs those open, honest conversations. If you surround yourself with ‘yes’ men and women, that is extremely dangerous.
The other thing with McElhinney’s is that we have never lost that small business mentality. We employ over 200 people, but we still regard ourselves as a small business in that we are very reactive, we can be very ad-hoc and can make a decision today and make it happen today.
We’ve always tried to look at the longer term, and because we’re a family business it’s easier to do that. We only answer to ourselves, we don’t have to keep any shareholders happy and can think about the future.
We don’t believe much in hierarchy. I can name every one of my staff, and every single one of my colleagues has a vital role in the success of the business. If we want to get something done, we get it done.
It is an agile operation, but since it’s a family business, there is also a lot of pressure to get things right. McElhinney’s has to provide our customers with the best possible experience through all the channels of our business. When it’s your name over the door, you tend to take things personally.
Retail has changed dramatically since I joined McElhinney’s and the only thing we are guaranteed is that retail will continue to change radically. The challenge to retailers is how we respond.
We were inefficient and I think we’ve reacted well. Some of the highlights of my career with McElhinney’s, like winning the Retail Excellence Ireland overall store of the year in 2011 and coming out ahead of 500 other stores nationwide, demonstrates that.
We also won the Drapers Award for best independent department store in the UK and Ireland twice and the Landy award for best overall SEM Initiative in the small business category in New York this year.
I don’t ever see us going entirely online, but in the future I don’t think it will be possible to succeed in our industry being solely bricks and mortar. The future is omni-channel and our customer demands the best of both worlds.
The shop over the years has grown along with the business and we put a lot of effort into building all these beautiful departments, but we didn’t pay much attention to the back of house and having storage for everything. So we have just completed a €2.3 million extension to the store to house all our warehousing and e-commerce operations.
The online sales are exceeding our expectations for this year. We saw a three-fold increase in sales on the website during 2015 and all things going to plan, we’re expecting to double that again this year.
Martin McElhinney is the general manager of McElhinney’s Department Store. This article was written in conversation with Killian Woods as part of a series on business mistakes and what can be learned from them.
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