At the start of this year this Cheshire company was fairly unknown. In March, it pounced on the failing retailer Zavvi, acquiring the rights to its brand name and its online database. It now runs Zavvi.co.uk alongside its own website, Thehut.com, selling home-entertainment products as well as sportswear, perfume and lingerie.
Chief executive Matthew Moulding and chief operating officer John Gallemore launched the Hut Group in 2004, both having previously worked for the mobile-phone retailer Caudwell Group. They established the company to sell home-entertainment goods, using £500,000 of personal funds, and buying the domain name Thehut.com for £3,000.
The company dispatches CDs and DVDs from a centre in Guernsey. As Guernsey is outside the European Union, it can offer products without charging Vat on them.
However, most of the company’s revenue is generated by building, running and maintaining e-commerce websites that sell home-entertainment products for the likes of Asda, Dixons and Argos. The Hut Group provides the website for a fixed fee, sources the merchandise, sells the product, collects the revenue and pays the retailer a commission. The company runs 15 of these websites, which it endorses through partnerships with price-comparison sites. It claims that at least one will be listed within any price-comparison search for home-entertainment products.
In the past year Tesco and WH Smith have also signed up and now sell products through the Hut Group’s online platform. It is perhaps no coincidence that these contracts were obtained soon after Moulding won the Bank of Scotland’s 2008 award for entrepreneur of the year. The prize was a £5m interest-free loan and four days of mentoring from Sir Tom Hunter, the retail entrepreneur and co-founder of the private-equity house West Coast Capital. The Hut Group has yet to spend the money offered by the bank, but claims that the guidance from Hunter has been invaluable, stretching beyond the four days originally promised.
The company is now looking to pave the way for international expansion. Within the past 12 months it has almost trebled its staff and made several key appointments. Richard Chapple, who was formerly marketing director at Play.com, has taken the post of commercial director. Darren Rajanah, formerly with the Caudwell telecoms group, has become finance director.
The Hut Group says it already has the structure in place to operate a multi-language, multi-currency website, and believes that partnerships with overseas retailers could be made in the next few months. It is looking to hire staff with language skills to provide after-sales service. It is also in talks with shopping-centre owners about the possibility of launching unstaffed stores. These would be the size of a juice bar and would incorporate touch screens and a chip-and-pin reader.
When Moulding and Gallemore launched the Hut Group, their long-term aim was to become a leading international player in online retailing. They have some way to go to fulfil that ambition, but the company plans to expand its online range quickly—it is planning to add mobile phones and beauty products in the next few months —and claims that it will have 30 websites running by next January. It says that it is also close to signing an agreement with a private-equity firm that will take a minority stake in the business.
The Hut Group has had impressive sales growth of 189% a year from £997,000 in 2005 to £24m in 2008. These figures represent combined figures from the company’s UK and Guernsey operations.
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