Gerald Ratner: Geraldonline.com
He ruined his career with one terrible speech, but now he's back with a new venture
It's easy to forget Gerald Ratner was a good businessman. In fact, he was one of the country's most successful, building Ratners Group into a jewellery business with sales of £1.2bn.
And if he'd chosen his words more carefully, the entrepreneurial community would probably bracket him with Philip Green, Dyson and Branson.
Sadly for Ratner it doesn't, but after 13 years in the business wilderness, he launched his comeback last November with online jewellery operation Geraldonline.com. You won't, however, be seeing his name in any rich lists for a while and his business has a way to go before it can be regarded an unmitigated success. For now he's busy trying to set the record straight on the version of events that led to his downfall, hoping the ‘drip drip' effect of brand building and reputation re-building will reap dividends. And performance to date suggests this latest chapter will be a success.
Is he bitter though? “Yes. I'd spent my life turning a loss-making company into the world's largest jewellery business. To see it all blown away was the hardest thing.” He joined the family business in 1966 and was made chief executive in 1984. In less than 10 years he transformed it from a business with 130 stores and sales of £13m to a public company with 2,500 stores, 25,000 employees, the brands H. Samuel and Ernest Jones, and profits of £121m.
But describing a sherry decanter as “total crap” in a 30 minute speech to 6,000 directors at the Royal Albert Hall cost him his personal fortune, his job, wiped an estimated £500m off the company's value and turned the profits into a £122m loss. His family-named business was also re-christened Signet. A lifetime's work catastrophically ruined overnight.
Interestingly, he'd been making the same comments in his speeches, more or less, for five years. But in 1991 the Daily Mirror, pursuing an ‘anti-Fat Cat' agenda received an advance copy of his speech from the IoD and, sensing a story, had a reporter there to verify that Ratner uttered the immortal words. It chose his line as the cover splash the next day. The Sun then matched its rival in later editions and a media circus ensued. “They didn't let go. I understand they've got to add a bit of spice, I just kick myself I gave them the ammunition.”
The stuff of legend now, Ratner is still protesting about the injustice of it all, arguing it was a “jokey reference” embellished for the occasion and describing the outcome as “sheer bad luck”. “People claimed I said our jewellery was crap. I didn't. It was a harmless thing and nobody there said anything at the time. I think I'm a victim.”
However, it's hard to tell how much sympathy he'd get from the customers who felt affronted and cheapened by his comments. And he did also tell the audience that his company's earrings were “cheaper than a prawn sandwich from M&S”.
Yet you can't help but feel it was a relatively minor slip and has been at least equalled by other figures. “I'm the only one who's had to pay the price. When I was three year's old I fell over, cut my knee and said it's not fair. My mother told me ‘life's not fair'. That consoles me,” he says.
Isn't it about time he stopped feeling sorry for himself though? “You talk to anyone who has a life-changing incident,” he responds. “If you're truthful about it you're never going to pretend everything's fine. Ratners was like one of my children. I thought about it 24 hours a day, not like the chairman of Barclays who comes in for a while and then takes another job. It's what I lived for.”
And you can see his point. As he says, he didn't shoot anybody, didn't steal and wasn't greedy with his salary. As chairman, he was admittedly in the ‘Fat Cats' league, earning an estimated £600,000 a year and enjoying a luxurious lifestyle. Not criminal by any stretch though.
He says today, he's viewed almost as a road accident, a figure of curiosity. But notoriety has opened doors for the new venture. The episode also gave him the time to cycle and listen to music. “My first marriage and family life might have been more successful if I'd led that lifestyle beforehand.”
So, how did it affect his family and finances at the time? “Your family tend to get on with their own lives,” he says, which seems hard to believe when your partner or father is being castigated by almost every national newspaper.
Financially, he paid the price as well. His shares fell so far they were almost worthless, he says. Somewhat surprisingly, he owned only 1% of the business and claims £6m was wiped out. He had no salary, but did receive a year's pay on his departure, which he says, was not enough to support him. “I didn't have any money really. You spend what you earn. I had some debts and was in the midst of buying a new house, so it happened at a rather unfortunate time. People normally leave businesses like mine with millions of pounds. But it wasn't until I sold my gym in April 2001 that I was financially secure again.”
The health club in Henley-on-Thames, which was his first venture after his fall from grace, was sold for £3.9m only months before the New York terrorist attacks shook financial markets. He had had to borrow to purchase the space in 1997.
His only other sources of income in the interim had been the consultancy work he did for a Kuwaiti property business in east London's Tobacco Dock and a spell with French jewellery business Cotes d'Or, neither of which went to plan.
But what would have happened, does he think, if investors hadn't forced him out? Defiantly, he says he'd have soldiered on and believes he could have recovered from the ‘blip'. He even admits he still “regards the business as H. Samuel and Ernest Jones, the company I put together”.
You get the impression, whatever happens with Gerald online, he will always regard it as the child who could never live up to its illustrious sibling. “Geraldonline will never reach those dizzy heights. I'm 54 and don't have the drive I had in my 30s. When you're young you're almost prepared to kill to get on. I haven't got that anymore. The time to grow your business is when you're younger, although I'm still very ambitious.” Proof of that streak was in evidence the day before our meeting. He played and beat his 15-year-old daughter at tennis.
THE NEW VENTURE: Geraldonline.com
Launched in November last year, Geraldonline.com, which sells diamond jewellery, branded watches and hall-marked gold and silver, took more than ?3m in its first three weeks and recorded more than three million impressions. All without advertising. It continues to record weekly sales of around ?150,000.
It seems fairly obvious why it made such an impression, given Ratner?s ability to drum up press coverage and his decision to employ Max Clifford as his PR adviser, but surprising perhaps that customers were and are so willing to buy from the man who labelled one of his company?s products crap.
Ratner?s presumably relieved the slate appears to have been wiped clean. But he?s also aware that consumers buy on price.
The company achieves a claimed 40% discount on high street prices by having no outlets or rent, ?which is 10% to 12% of costs?, no security and staff costs, but mainly through the backing of SB&T, a publicly-listed Indian diamond manufacturer and exporter.
It also has the distribution might and heritage of Goldsmiths. ?If you add up all the overheads, it?s half the sales prices we?re dispensing with. SB&T aren?t putting a margin on the diamonds they supply as they own 60% of the business.? One of the reasons for the backing, says Ratner, is because of the publicity he can generate.
Concession stores are also part of the business model and the average ticket price is ?150, slightly more than the cost of a prawn sandwich. ?The internet is ideal for big purchases as that?s where you get big money savings. The people with access to it are the more affluent half, and that?s our customers, not mass market.?