After Mark Smithson floated his online fridges-to-washing machines retailer Marks Electrical on the London stock market, the self-styled lad from Leicester was asked what kept him up at night. His answer was unequivocal.
“Selling more. That’s it. I just want to sell more,” said Smithson, 58.
On that basis, Smithson will have slept easy in recent years. Since he listed his eponymous online retailer on London’s Aim market in 2021, the entrepreneur who started selling second-hand cookers out of his Dad’s garage has been nabbing customers from larger rivals such as John Lewis, Currys and AO.
Marks Electrical, which sells everything from televisions to range cookers, has been spending heavily on advertising online and across the London Underground and Manchester tram network. That’s helped it grow sales by 22 per cent to £88.9 million in the nine months to December 31, against the backdrop of a shrinking market.
What’s more intriguing is that, notwithstanding a difficult end to last year, Marks has been making fatter profit margins than rivals more than ten times its size. So, how does Smithson do that in a cut-throat industry where giant brands like Sony and Samsung have strong pricing power?
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Unlike his rivals, Smithson serves customers nationwide from a single warehouse on the outskirts of Leicester – an arrangement that saves Marks millions of pounds in costs running satellite warehouses.
However, this thrifty setup exacts a heavy toll on the retailer’s drivers. In order to cover the long distances to customers’ homes, they are subjected to shifts stretching out for as long as 16 hours a day.
Smithson is capitalising on weak regulations. The rules state that drivers of 3.5-tonne vans, which carry out the vast majority of Marks Electrical’s deliveries, must not be on duty for more than 11 hours a day. However, the regulations were designed to cover vans with one driver, rather than the “double-manned” vans operated by Marks.
The retailer argues that when its drivers are in the passenger seat they are effectively taking a break, which keeps their hours on duty below the legal threshold — even though they may have started at 4:30am and finished at 8pm.
Smithson’s approach is at odds with industry norms. John Lewis, AO and Currys, which all run double-manned deliveries themselves, operate nationwide networks of distribution centres and limit their drivers to 11-hour shifts.
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“Driving for prolonged periods can cause fatigue and stress both physically and mentally. The driver and employer should be aware of how dangerous this can be,” said Nicholas Lyes, director of policy and standards at IAM RoadSmart, a charity that seeks to enhance road safety. “In the worst case, drivers can fall asleep at the wheel with catastrophic consequences”.
At the depot
Marks Electrical’s warehouse sits adjacent to its head office and showroom on an industrial estate close to the M1 in the so-called golden triangle of the logistics industry.
Despite storing all its stock in this single facility, Marks offers next-day delivery to over 90 per cent of the UK population. From 4:30am, vans begin streaming out to begin a long day delivering bulky household appliances.
Over the course of two separate days, The Sunday Times recorded the departure and arrival times of a total of 61 vans delivering goods for Marks. Vehicles, on average, were out for 12½ hours.
It was commonplace for vans to leave the warehouse at about 5am and not return until 8pm. In the most extreme example, a pair of drivers were out on the road for 16 hours, 20 minutes.
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Marks Electrical denies any wrongdoing and says that its driver requirements and rest periods are compliant with those for double-manned delivery crews.
A company spokesman said: “Marks Electrical is unique in operating four days on, four days off shift patterns, which allow extended periods of rest for its employees. Marks Electrical does not exploit a self-employment model and, instead, chooses to employ all its drivers directly to ensure it can provide the right level of pay, benefits and driver welfare.”
About ten months ago, Marks is understood to have called its drivers and engineers to a meeting, where they were told the company had faced an unacceptable amount of accident-related claims since the start of the year. This prompted Marks to introduce a rule for its shifts stating that drivers could not work late and then start early the next morning.
But Smithson has no plans to abandon his lucrative single-site distribution model, which he hails as a key competitive advantage. If Marks outgrows its current facility, the company has told investors, it will simply expand it.
Industry sources said the cost of running an “out base” — an industry term for a regional distribution centre — comes to about £850,000 a year, rising to £1 million a year in London. Currys operates 18 out bases, while AO has 17.
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Saving on such overheads, as well as a focus on higher-margin electrical appliances such as washing machines and cookers, has helped Marks report fatter profit margins than rivals more than ten times its size. Before its current financial year Marks reported an average underlying profit margin of 8.1 per cent, compared with just 3.7 per cent at AO and 6.2 per cent at Currys, over a five year period.
The boss
Smithson may not be a polished FTSE boss, but he is a canny trader. From his Dad’s humble garage he branched out to open a washing machine repair centre in Leicester, aged 21.
The Leicester City fan, who had a 12-foot-high mural commemorating the club’s historic Premier League title painted on a wall behind his shop, struck deals with manufacturers to take appliances with dents in them and sold them on for a profit. He began selling online in 2003.
His eye for making a quick buck extends beyond appliances. The East Midlands entrepreneur once paid £15,560 for the registration plate KHA 1N in the hope of flipping it to one of Leicester’s many residents bearing the surname Khan.
Today, he monitors his company’s stock levels — and rivals’ prices — from his desk using a bespoke piece of company-designed software that enables him to react to opportunities in the market quickly.
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Smithson, who spends more of his time haggling with suppliers than dealing with the City, saw his sales almost double during the pandemic, when lockdowns forced shops to close and the nation turned to online retailers to buy electrical goods. Smithson cashed in, launching his company on the stock market in a £115 million million float that landed him a £25 million payday. He retained a 71.7 per cent stake.
The industry upstart has enjoyed the trappings of wealth, splashing out on a Sunseeker yacht and a blue Lamborghini SUV, and even racing a Radical racing car for his own team, Marks Electrical Racing. Yet he claims he doesn’t enjoy the limelight or giving interviews. “I’d much rather I was in the pub leaning on the bar, chatting all night long with mates, having a laugh, buying drinks, buggering about … I just want to build my business without anyone interfering,” he told The Sunday Times last year.
It has not all been plain sailing, however. Smithson’s stock market honeymoon came to an abrupt end last month. Shares in Marks lost almost a quarter of their value in a single day after the company revealed that, despite maintaining healthy sales growth, its underlying profits would fall from £7.5 million to between £5 million and £6 million this year. The blame was pinned on consumers trading down to lower-margin products over Christmas.
With performance faltering, and questions swirling over his working practices, Smithson now has plenty more to worry about than simply selling more dishwashers.
A driver’s story: ‘I spent so much time in the van’
“Marks tells you it’s a 6am to 6pm job but, 95 per cent of the time, I started my day at 5am and finished at 7pm. You’re expected to make your first delivery at about 7am and it’s often in London, which is two or three hours away from the depot in Leicester. I lived a long way away from the depot so I was having to get up by 3am to get to work on time.
“They send you a text at 8pm each evening telling you what the route is for the next day. One day I went from Leicester to doing jobs in central London, then Norwich and then Peterborough! I was always arguing with my supervisor about the long routes. I spent so much time in the van.
“You do get a break during each shift but if you take it then you just end up getting home even later. I tried to finish my shift as quickly as possible because I still had to drive home after I got back to the depot. Some engineers were finishing at 9pm and starting at 5am the next morning.
“I left because of the working schedule. It affected my life because I wasn’t properly rested, I was tired the next day. It was good money, but health-wise, family-wise it’s just not worth it. Money is not that important — your life is what’s important.”
Marks Electrical disputes this account and says that many of its drivers joined the business because of the pay, benefits, driver welfare and training it offers. It also said many of its drivers say the shift pattern at Marks suits their family needs.
