26 December 2019
From “Niche operators show resilience in face of retail gloom” by Jonathan Eley.
The guitar wall at the Professional Music Technology store in Birmingham is something to behold. It features several hundred instruments, from Stratocaster copies for under £100 to an autographed replica of the “Bumblebee” used by Eddie Van Halen — yours for £15,000. At a time when many shops are contending with declining footfall, more than 300 people queued outside at the store’s grand opening in June. The company counts members of Radiohead and Stereophonics among its customers.
Large chains with broad offerings, such as Debenhams and House of Fraser, are having to reshape their business to boost sales as they adapt to changing consumer behaviour. But many niche retailers such as PMT and Games Workshop, the listed fantasy games maker that is now worth over £1bn, are lifting revenues and profits.
The kind of loyal fan base such operators can attract is one of the things that Jamie Roberts at YFM Equity Partners looks for in an investment. The Leeds-based group funded a £20m management buyout of PMT this year.
He said the group also looks for “omnichannel opportunity” along with a management team that it can support or expand. “And a defensive ‘moat’ is definitely something we’re after,” he added.
YFM backed camping equipment retailer Go Outdoors from a single store in Sheffield 58 locations before selling it to JD Sports for £112m. Like many other small private investment houses, it is looking for opportunities in niches where Amazons’s scale and pricing power are less of a threat.
Such sectors are often small, fragmented and relatively low-growth. “Musical instruments is a pretty flat market,” according to Mr Roberts. “So it is all about taking market share.” There are no more than five operators with any scale – including the quoted online operator Gear4Music – plus a long tail of independent shops that for their owners are often a hobby as much as a business.