Faisal Lalani has just received a text: “Galaxy, 250g bars. Price-marked at 99p. Four thousand cases available at 64p per bar (excluding VAT). Full date. We anticipate this stock will go very quickly.” He grins and keys in the response: “Done. 500 cases.” He usually likes to drive a hard bargain, but for once, he is not interested in bartering. “It’s a no-brainer,” he tells me. “They’ve got a full date on them and I can easily make the margin I want.”
The buying director of 99p Stores admits he can come across as a bit of a Del Boy character sometimes - he’s dealing largely with clearance goods, after all.
But the wheeler dealer demeanour disguises a serious business mind and one that is dealing with a very different set of challenges than those that faced the family’s earlier businesses.
Set up by his father Nadir in 2001 (Faisal’s brother Hussein is commercial director), 99p Stores is the family’s first discount venture. The family were previously known for two premium retail outfits.
The first was Europa Foods, a 35-strong convenience chain that Nadir sold in 1989 and was eventually bought by Tesco in 2004. There was also Whistlestop Food and Wine, the 27-strong c-store brand built up over 11 years at railway stations and airports. That brand was sold to the Compass Group just before the current venture was launched.
Lalani’s father was actually visiting the Whistlestop store at Birmingham New Street station when the idea for 99p Stores was born. “Dad did something he hadn’t done in 30 years of retailing. He walked into a discount store,” says Lalani. “He was taken aback. The Poundland was packed and the prices told him this was a business we could work in.”
Though there was talk of the next venture being in organic foods, Nadir’s Poundland experience convinced the family otherwise. “Dad felt we couldn’t compete with the supermarkets on organic, but discount is an area he definitely felt we could play in.”
Within days Faisal Lalani became buying director. At just 23 years old and with experience only of working for the family’s toiletry company until that point, his appointment was a risk - but clearly one that paid off. The first store was opened in January 2001 and Watford became home to the 56th store last month.
If the family has its way, it will be the first of 15 new stores this year. “We need to open at least that number every year - and at that rate we’ll double turnover by the end of 2010,” he says. “We’ve relocated our HQ to a new 150,000 sq ft base in Daventry, which gives us the capacity to go to 120 stores with our existing infrastructure, so we’re halfway there.”
Turnover last year topped the £100m mark, each store contributing about £250k to 99p Stores’ profit before tax. It’s hardly surprising that the family wants to expand the business. But another 60 stores? Lalani acknowledges it’s an ambitious goal. Securing the right locations will be key, he says, adding that it’s targeting “pretty much anywhere there’s a ‘pound store’ and a Primark - if those stores are there, we want to get right in among them”.
Poundstretcher and Poundland are very much rivals. With 140 and 160 stores respectively, they are currently the bigger brothers in the discount arena, but there’s an important difference between their business models and 99p Stores’, says Lalani.
“The others are selling products for far more than a pound, but all our stock is 99p. And that’s the way it will stay. Our shelves are always full with a wider range of better-quality products than other value shopping chains,” he says, adding: “We have the best relationship with our suppliers.”
Lalani doesn’t need to advertise for new suppliers because he already has 450 suppliers and when a new store opens he has ‘jobbers’ - middlemen - knocking at his door. “The people we deal with don’t want us to um and ah over an order for three months, three weeks, or even three days,” he says. “They want a decision there and then. And that’s what we give them.”
Lalani has no time for people who waste his time either. The suppliers he has are trusted - “more often than not I don’t need to see the stock” - but, old or new, all his suppliers can expect Lalani to drive a hard bargain.
“If I get offered 80,000 teapots at 60p, I’ll set my stall out at 50p. Who else is going to take that many there and then? I’m giving him the chance to clear his stock - that’s what clearance is all about. My selling price is fixed, so I’ve got to do all I can to push that price down,” he reasons.
And he rarely budges.
Lalani is keen to challenge the assumption that discounters are by definition high-volume, low-margin businesses. The minimum margin he’ll work with is 20% - and that’s on food. Grocery accounts for more than a third of the business by turnover.
Given that most of the stock is clearance, short-dated stock, grey market and cancelled orders, he is limited in what he can buy in. But not that limited. “Fresh food is obviously a problem, so we only really do eggs at the moment,” he says. “But if you look at everything else we stock, then we are doing many of the other products in The Grocer 33.”
Lalani is also keen to banish the stigma that discount stores “just sell chocolate”. The chain plans to expand own label, but it’s the big brands that bring people in, from Kellogg’s Crunchy Nut Corn Flakes to Robinsons squashes.
“People know what these things cost at Sainsbury’s so they know how much cash we’re saving them,” he says. Lalani also works closely with manufacturers such as Wrigley to create products specifically for the discounters.
Though the hikes in raw material costs are starting to bite with manufacturers, Lalani has found a way to avoid passing the cost on to his customers. If there’s a quibble on the price, he downsizes his order, buying Tracker bars in 6-packs rather than 8-packs, or eggs by the dozen instead of 18s.
Not all big manufacturers are fond of discounters. Lalani admits he has had several run-ins with big brands for selling stock imported from Eastern Europe at a fraction of the price it can be bought for here. The business also sources a third of its products from the Far East, offering better value and gross margins of “up to 50%”.
Lalani spends four months a year globetrotting and looking for new sourcing opportunities. The family even has an office in Shanghai, home to 20 staff, and he is “very excited” by the opportunities in Thailand. “Thailand is the new China,” he says. “Thirty years ago the policy was to become self-sufficient in food, but now the country has massive oversupply and I can really put big numbers down there.”
The downside is the longer lead-in times, which means he has to get his demand forecasting absolutely spot on. But the size of the company is definitely an asset when it comes to negotiations. “Other companies are buying by committee, but that really isn’t our style,” he says. “We get first refusal from most of our suppliers and that puts us in a strong position. It’s risky and I make mistakes, but not often.”
Like Del Boy, Lalani is a wheeler dealer in the best sense of the term. And he’ll no doubt try and drive a hard bargain the next time his phone beeps. Del Boy got rich on a £1 lottery ticket. Lalani and his family are doing the same, but for a penny less.nsnapshot
Name: Faisal Lalani
Education: Read economics and politics at Goldsmiths, University of London
Career to date: Joined the family’s toiletry business in 1998, then co-founded 99p Stores in 2001, becoming buying director
What’s your claim to fame? “Helping to build this business from scratch has to be up there, but I was chess captain at university.”
What do you like doing in your spare time? “When other people are playing golf or football on a Saturday, I’d rather be checking up on the stores. I’ve tried bringing in other buyers but would rather do the job myself. But when I am not working I do enjoy skiing and watching motor racing.”
What was your best-ever deal? “It has to be the Easter eggs. I put a silly offer in for 46 truckloads of Cadbury’s, Mars and Terry’s eggs 10 days before Easter. They took it and we managed to shift the lot across the 36 stores we had then - at a margin of 38%.”