Gerald Ratner: "I don't assume it’s proper that there’s such a stigma hooked up to failure." It's a British illness.
Welcome to Small Business Snippets, the podcast from SmallBusiness.co.uk. Today's guest is Gerald Ratner, author, motivational speaker and businessman.
We discuss the decline of High Street and how Gerald reinvented himself after one of the biggest setbacks of his career.
Listen to it in the media player below.
You can also watch our episodes with:
- The entrepreneur and TV presenter Trinny Woodall
- Pub owner and bartender on Channel 4's first dates, Merlin Griffiths
- Founder and Chairman of Pimlico (formerly Pimlico Plumbers), Charlie Mullins
- Retail expert and former dragon, Theo Paphitis
- Author and boardroom expert John Tusa
- Digital guru and investor Sherry Coutu
- The entrepreneur and former dragon Rachel Elnaugh
- Businesswoman and Dragon, Deborah Meaden
- The Apprentice 2005 entrepreneur and candidate Tim Campbell
- Timo Boldt, CEO of Gousto
- Jackie Fast, entrepreneur and The Apprentice 2018 nominee
- Investor and former dragon, Piers Linney
- Investment fund manager Nicola Horlick
- Supermodel became an entrepreneur, Caprice
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Would you rather read Gerald Ratner's podcast interview?
Hello and welcome to Small Business Snippets, the podcast from smallbusiness.co.uk. I am your host, Tim Adler.
Today we have Gerald Ratner as a guest author, motivational speaker and businessman. Gerald inherited his father's jewelry business in 1984. Within six years, he turned a small retailer into a multi-million pound empire. Every main British street seemed to have a ratner in the 1980s. I myself remember buying a chic gold-plated Ratners tie clip as a teenager.
Gerald made Ratners so successful that it seemed like every main street in Britain had one of his stores or one of the affiliates he had bought out, H. Samuel or Ernest Jones. Ratner appeared to be the quintessential UK success story of the 1980s, where Gerald mingled with Margaret Thatcher until one fateful day in April 1991. As a guest speaker at the Institute of Directors, he spoke to 6,000 business people and journalists at the Royal Albert Hall. In a moment that can only be described as hubris, Gerald managed to undo not only his entire life but also his empire in less than ten seconds.
Gerald described how his company sold a cut-glass sherry carafe for only £ 4.95. People say to me, how can you sell this at such a low price? I say because it's total crap. "" Gerald ignored the maxim that his company sold a pair of gold earrings for less than a pound if you got in a hole and stopped digging. "Some people say it's even cheaper than a Marks and Spencer shrimp sandwich. I have to say the sandwich will likely last longer."
That caused huge laughs at the Royal Albert Hall that afternoon, but the next day the tabloids gutted him. Now I have to reveal a little bit of a connection to that moment when my wife was working on Gerald's PR account, and I remember the panic that broke out in her office the next day when Gerald was with ins for a Mea Culpa interview Terry Wogan was pushed to television, but the damage had been done.
Ratners' shares lost £ 500 million in a matter of days, 2,500 stores closed, and Gerald became both clinically depressed and ousted from his own family business. However, in a lesson for all of us on resilience and reinvention, Gerald bounced back from the owner of a fitness club that sold for nearly £ 4 million in 2001 before starting an online jewelry business.
Gerald has reinvented himself several times in the course of his life, from the jeweler to the gym owner to the online retailer and now to a speaker and author.
Last month Gerald had released a new book: Reinvent Yourself: A Brand New Guide to Reinventing Your Life. How to be successful, realize your potential and create lasting opportunities for business success.
Tim: Hello Gerald, welcome to the podcast.
Gerald: Hello Tim. Thanks for the invitation.
So you obviously had plenty of time to think about it. In retrospect, what did you learn from that moment?
Gerald: Yes, I had 30 years to think about and how they say sit in a rush and repent in your spare time. I was thinking that I should have been a little more careful when I was invited to give this speech at Albert Hall.
I tried to crack some jokes to make people laugh because somehow it breaks the ice when you give a speech. It was really before I made any speeches so I was a little nervous about doing it in front of all of these people. And once you've made a joke and people are laughing, they're on your side. So you feel more relaxed, the nerves disappear a little more, you are more self-confident. This way you will get feedback from the audience and approval from the audience. But I suppose in hindsight why should I try to choose this option? You don't have to do it. I was, as you said, a very successful businessman at the time, I didn't have to feel so insecure. But let's go – I was quite young then, around 40. It was just a mistake. What can I say?
It makes me think that we British have a strange attitude towards business failure.
I read an interview with a Dutch boss – that American tech company, Snowflake. He recently said that in the US, failure is considered a badge of honor. There is a huge social stigma in Europe. He said you will go broke in Europe and end up in economic slavery by the end of time. Do you think the UK needs to change the way we think about business failure?
Gerald: Well, I think failure is part of success that you are all right. In the States, if you look at all of the successful people – including Amazon – all of these successful business people. Amazon lost 90 percent of its value after the .com boom, but it didn't really bother Jeff Bezos because he had confidence in the business.
No one will sail through life without making mistakes or failures. And of course I learned a lot from my mistakes. And you are a better business. I would rather be richer and not so good, but the fact is, you are learning lessons and you are better at it. I don't think it right that there is such a stigma attached to failure that you will be written off. The first mistake you make. I think it's a shame and a bit of a British disease.
No i agree. I think you speak to Americans and they have a completely different view of business failure. Now we are obviously all trapped in this terrible pandemic. One of the things we saw is the deliberate support of buyers for small businesses and independent retailers. Do you think this will be a permanent change? That there will be a permanent change away from the big retailers? Or is that just a flash in the pan?
Gerald: Well, we are all creatures of habit. And as soon as we behave in a certain way, we like to repeat it. In no way do I think everything will be back to normal. Even so, it won't stay the same – there will be a shift back to our previous way of life. But I'm not thinking back to a complete shift.
My business of making speeches in front of an audience I don't think there will be that many and many of them are done online, retail is exactly the same. I think the share that online businesses have gained from this is not entirely lost on the first day of recovery.
Before the pandemic, you said the main street was pretty much dead. And the out-of-town malls would survive, and of those, John Lewis would probably be the last man standing. Do you still think the main street is dead?
Gerald: Well, I wrote this article – it was a page in the mail on Sunday – this year, believe it or not, just seems like a long time ago, but it was before the pandemic. Yes. And I said that the main street is dead. Turn it into houses. And I think this is even more relevant since the pandemic. I think the main street is dead and it won't recover. And it's just the weakest of all the ways we can shop.
I mean, there are the malls. There's the internet, there's shopping out of town. Finally, there is the main drag and the main drag offers the least. It's the least convenient in terms of parking. It is most inconvenient to walk around in the pouring rain. And it's the most inconvenient considering it's tired. Many of the high street stores are made up of charity shops that the government has falsely allowed with no prices and reduced rents because they weren't doing anyone a favor by not being an attraction.
In order for you to go onto the main drag you need a lot of things to wear – the banks maybe, but they are gone. But a charity isn't something you take a special trip to, and so are betting shops, and they're closing now, as are the lending shops that lent you money, pawnbrokers and the like.
There is just nothing. I think with the strength of the internet it just can't be sustained. I mean, I definitely feel like the main drag is gone. And I don't think this will be the first member of the four ways we shop. You know, I think if you look at the next few results today, they made up for all your lost sales from the high street online. You wonder why they are bothered with all of the expensive businesses and all of the staff and costs involved.
But do you think there are retail sectors that will survive as store experiences? And I think there are certain things that you need to physically touch or try on, like shoes. I would have thought this was difficult to do online, or perfume?
Gerald: Yeah, I mean, oddly enough, when I got my hair cut, my hairdresser said that he was very happy that he was the only business not affected by the internet. He is not a competitor. Now he's one of the few people who can't replace his business with online. So sometimes be careful what you want.
But yeah, I just think there is obviously something that people can buy. But it will just be like we started online and online like five or ten percent and brick and mortar 90 percent. I think that could well be reversed. We could get 80-90 percent online, five or 10 percent brick and mortar. I know that sounds absolutely extreme. But everything is pointing (in that direction) as technology just keeps getting better.
And then we have this green problem with traveling all the time. I think people will want to travel less. I just think this is, I can't take my time, but I just think it's inevitable. That's the trend.
Okay, so I'm guessing if you were to start all over now as a young man, an entrepreneur, an entrepreneurial young man, you probably wouldn't be going into retail
Gerald: No, not in retail.
If you started now, what business would you go into today if you started again?
Gerald: Well I think you have to do something. And timing is very important. Because I was in the jewelry business in the 80s. Now we have become the largest jewelry store in the world and we have been very successful. But it doesn't all depend on what we've done. We were lucky that the 80s was a great time to retail jewelry. There has never been a time like this.
Basically because young people who had demographics in sections 16-24 had a lot of disposable income and we cared about them which the other jewelers didn't. Still, we couldn't have done it so successfully today. Then he went into the health club business in the 90s. The time was right because there wasn't a lot of competition and it was just building, you know, people who just got health conscious. Not like today – a lot of people were not health conscious. There was a growing market there, not a lot of competition
Then I went online around the turn of the century, long before it was fashionable. And it became very cheap to get your product online, pay-per-click (PPC). We sold an eternity ring. Since there were only about 50 jewelers, it used to cost us only about £ 3 to buy pay-per-clicks for them. Today that same eternity ring cost us £ 250 instead of £ 3 because there is so much competition that I don't care.
The business I would go into is somewhere where there isn't a lot of competition. In the growing market that I think the market will grow in, but there aren't many people who have adjusted to it yet.
And you won't tell which company you identified?
Gerald: Well, it may have nothing to do with the internet, believe it or not, even from what I said. A friend of mine just sold his shop that supplies Marks and Spencer with hangers. He just sold his business for £ 60 million. Coat hangers are neither particularly technical nor annoying. I think the key is if you do something different and do it well, all you have to do is do it. You have to be an expert in your field.
I think I like to know about jewelry while other competitors didn't know back then. We basically displayed all of our diamond rings at 42 inches from the floor since the average woman was 5 inches 4 and the trajectory of our eye would drop off perfectly at 42 inches. Other jewelers wouldn't bother with such subtleties. It's the stupid little things that matter in business.
If you could go back in time as a young man, what advice would you give? What would you say to a young Gerald Ratner about business conduct, or if you have a maxim in business?
Gerald: Well what I did up to the point was, what I did was take risks, what you have to do. I mean, we're not teachers, cops, or hospital workers, however wonderful they are. We are people who can make a lot of money very quickly or lose a lot of money very quickly. We were born in a risk business.
So I was ready to risk everything. I went to America and learned that America was a graveyard for British retailers. And my shareholders said, "If you fail, we'll poison you." I didn't really have to go to America because I had 1,000 stores here, the 50 percent-dollar jewelry market, but I wanted to go to America. I like to take risks.
I think, as my co-author says in my new book, if you don't risk anything, you risk everything. And your business is about risk, calculated risk. I don't smoke – I would love to, but it's a risk. If it was only a low risk I would smoke. But as a businessman, the odds are not in my favor as this is a pretty big risk. So I can't do that. I look at the opportunities. But then you can support a horse that is three to one and can lose, but it is unlikely that it will.
That's how I see it, when a young Gerald comes into the business, don't try to think about your retirement. Don't try to think about safety. When you are sure you have the right formula, go out there, do it and do whatever it takes.
Tim: Well, that is very good news, Gerald, and thank you for your thoughts and advice. Thank you for joining the podcast. And you can contact Gerald at geraldratner.co.uk. You can also visit small business co.uk for more insight into the future of retail and business strategy. And thanks for listening.