Brian McBride: Retailers feel the heat from Amazon
The Business Interview: Amazon's business keeps growing while the high street shrinks, and it dwarfs the web traffic of retailers like Tesco – yet its UK chief says it has the atmosphere of a start-up company
Thursday 01 October 2009
Slough is now almost synonymous with the hit television series The Office, which gave birth to the fictitious paper company Wernham Hogg and the nightmarish boss David Brent. Less well known is that Slough, Berkshire, is the location for the UK headquarters of Amazon, the US online giant that launched on these shores in 1998.
While he eschews all Brentisms, Amazon UK's chief executive, Brian McBride, is a big fan of Slough and The Office. He not only has the box set at home, but he has also had its theme tune, "Handbags and Gladrags", on his mobile for the last three years.
More importantly, Slough has a typical high street, says Mr McBride, which lets Amazon keep a close eye on its high-street rivals, which have felt its powerful tentacles both in cyberspace and in their stores. "It is a great window for us," says Mr McBride, who was the UK managing director of T-Mobile before he joined Amazon UK in January 2006.
The scale and breadth of Amazon's operation in the UK is colossal. Partly through third-party retailers and sellers of new and used items, Amazon offers millions of products, ranging from shoes to power tools. Among online retailers that sell multiple items, Amazon's UK and US website receives more than 40 per cent of UK web traffic – streets ahead of Marks & Spencer, Tesco, Next, John Lewis and Debenhams, according to Hitwise.
Mr McBride says Amazon's fastest-growing products categories are those it has launched in the past 18 months, including jewellery, clothing and shoes. Speculation has been rife that Amazon UK is considering an online grocery offer, following a trial in Seattle, where its US parent is based. But Mr McBride says: "The jury is still out. Grocery anywhere is still an urban proposition and you still need critical mass. You have got some big beasts in the UK fighting over that market. So our propensity to dive into this market is pretty low."
While Amazon is cautious about online grocery, Mr McBride says the company's dynamic culture and chief executive, Jeff Bezos, were key reasons for him taking the job. "I met Jeff and the senior team in Seattle and was blown away by their enthusiasm. It was more the people and company that appealed to me rather than the industry."
Mr McBride has also learnt plenty about managing people from his role as a non-executive director at Celtic football club. A supporter of the Scottish club since he was five, Mr McBride has worked with Martin O'Neill, Gordon Strachan and the current boss, Tony Mowbray. "Most football coaches are probably among the best people managers," he says.
On the charismatic O'Neill's style, Mr McBride says: "It is a combination of putting his arm around them and putting the fear of God in them."
But after nearly five years, he plans to step down from Celtic due to time constraints.
As in football, planning is critical for Amazon UK as it gears up for its busiest time of the year, Christmas. Amazon starts planning in March for product orders and warehouse capacity. The scale of the task should not be under-estimated. On its busiest day last year, 8 December, Amazon received orders for 1.4 million items – equivalent to 16 items a second over the 24 hours.
As a result, the online retailer increases its number of workers, primarily temporary staff, by nearly half over the Christmas period.
Mr McBride explains that the work is not for the faint-hearted. He says that the average employee in its fulfilment centres walks between 12 and 14 miles a day. "You have to be pretty fit. We gear up for that peak period, and take on a lot of temporary workers, and we try to set expectations that it is going to be hard work," says Mr McBride.
While Amazon UK has in the past faced criticism from unions, Mr McBride is a staunch defender of its labour practices, citing the space and lighting in its fulfilment centres, as well as a vote taken by employees in recent years to take fewer breaks, in order to get paid more. "This is not a Victorian sweat shop," he says. Amazon UK has four fulfilment centres in Swansea, Marston Gate, Gourock, Scotland, and Glenrothes, also north of the border, but the softly spoken McBride says it is likely it will open another in the next 18 months.
While Amazon does not break out country sales data, it is understood that Amazon's UK second-quarter sales to 30 June were in line with its international growth of 16 per cent. Mr McBride says that its UK operation has continued to grow and has not been affected by the falling sales that has afflicted much of the high street during the recession. "We have not seen that slowdown," he says. According to IMRG, UK consumers spent £3.8bn online in August, a 16 per cent jump on the year before. "There is no sign that the move to online is slowing down," says Mr McBride.
Globally, Amazon delivered a 26 per cent jump in net income to $645m (£401m), on total sales up 22.5 per cent to $19.17bn for the year to 31 December 2008.
In the UK, Mr McBride remains undaunted by the burgeoning number of high-street retailers selling online. "If you look at Dixons, Tesco and HMV, they are turning people to online shopping, and it is good for us that there is a continuing movement in this direction." In fact, Amazon has embraced many high-street retailers on to its site, where retailers from the sports specialist Sports Direct to La Senza, the lingerie chain, sell their products.
In terms of the wider market, Mr McBride says one of the biggest changes with online shopping is the age of cyber shoppers. "The demographic has really widened. The internet has become so much more pervasive in our society. You see over-sixties using it far more."
As the web evolves, Amazon will not be standing still. This month, it launched in the UK a new subsite, Amazon Outlet, which sells thousands of leading brands of clothing, sportswear, shoes, handbags and jewellery. It also plans to launch its successful electronic book reader, the Kindle, which is sold on its US site, but Mr McBride declined to provide a timeframe. "It is doing for the book business what the iPod did for the music business."
The pace of life at Amazon UK certainly appeals to Mr McBride, 53. "I like the buzz and intensity of the place. It still feels like a start-up and a small business. It is pretty connected – there are not a lot of layers of hierarchy." Which sounds like a million miles from David Brent and Wernham Hogg.
Brian McBride: Career and lifestyle
*Joined Amazon UK in January 2006 from T-Mobile, where he had been UK managing director. Prior to this, he had spent 25 years in the IT industry, including being vice-president for northern Europe at Dell, as well as stints at IBM, Crossfield Electronics, Madge Networks, Lucent and Xerox, where he began his career.
* Has an MA (Hons) in economic history from the University of Glasgow.
* Lives in Camberley, Surrey, and is married with two daughters.
* Watches his beloved Celtic Football Club, where he is a non-executive director, up to 15 times a year, including away trips in Europe. He says there is "no doubt" that Celtic would be a top six team if they were to join the Premier League south of the border.
* His favourite scene from the TV comedy The Office is when David Brent does his whacky dance.
* His philosophy on management: "Recognise there are smarter people than you in an organisation. It is about developing their talent."
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