Julian Richer: Britain's biggest small businessman

The retail entrepreneur, who recently gave the majority of his company to his employees, explains why “responsible capitalism” is better for business.

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When he was still a teenager, Julian Richer began selling hi-fi equipment from a small shop in London Bridge. By his mid-30s, Richer had turned that shop into the retail outlet with the highest level of sales per square foot anywhere in the world, taking almost £200,000 for every square metre of floor space. The business has since grown to more than 50 stores, with a turnover approaching £200 million a year, but Richer jokes that he remains, at five foot seven, very much “a small retailer”.

We meet in what Richer calls, with another grin, his “global headquarters” – a booth in a restaurant in Mayfair where he conducts most of his meetings. He continues to run Richer Sounds on the principles of a small business, attending the London headquarters just two days a month and visiting every store – “I don’t just pop in for a Royal visit. I do a whole team briefing on the store’s performance, I answer questions.” In more than 40 years in business, he has never really left the shop floor.

Richer’s gift is the ability to turn principles that other companies might see as old-fashioned or sentimental – prudence, the restraint of ambition, a profound respect for people and a commitment to fairness – into a business that can compete with the most ruthless retailers on the high street, and even the internet. While other chains splurged on leases in prime locations, Richer gradually built a chain of what he calls “very efficient sites” – small shops in secondary locations, on which the company owns the freeholds, “so we’re not controlled by rapacious landlords”.

More could have been done, he argues, to protect the small businesses of the British high street against such interests. “In France, they controlled the growth of superstores. It’s very difficult to get planning there – and they have thriving high streets. We just took the money off the big developers.”

But while some of the high street’s big chains “have a cost advantage, because they rip off their staff”, Richer has maintained for decades that treating employees well is the secret to Richer Sounds’ success. The company pays the Living Wage, refuses to use zero-hours contracts (which are widespread in the retail sector), and offers staff use of company-owned holiday homes. Its gender pay gap is slightly in favour of women and a “Helping Hand Fund” is available for staff who need financial help. The extra cost, Richer maintains, is more than repaid in the quality of service that leads to sales and customer loyalty. In a sector that suffers from high churn, low motivation and lack of experience, Richer Sounds employees know their products and stay for years longer than the average. The company’s chairman, David Robinson, started behind the till at the Stockport shop aged 16.

The company’s accounts record not only turnover and profit, but how long Richer Sounds takes to pay its suppliers and contractors. How a company is perceived is more than just marketing, Richer says. “There’s a very well-known fashion chain at the moment that’s got terrible, terrible problems – they’re asking favours from their landlords, and they’re not rushing forward to help, as I understand it. If you treat your staff badly, and you rip off your customers, and you don’t pay your suppliers on time, everyone’s going to think – you’re not going to get any favours out of me, mate. Life depends on good will.”

In the mid-1990s, Richer’s small business principles were tested on 70,000 employees – “‘colleagues’, as I wanted to call them” – as the new chairman of Asda, Archie Norman, attempted to rescue the supermarket giant from the brink of bankruptcy. Richer became a key consultant in what has been described as one of the most significant turnarounds in British retail history; Asda was eventually sold for £6.7bn to the American chain Wal-Mart. Norman has said that the self-esteem of colleagues and the belief they have in the value of their work are fundamental to revitalising a business. As the chairman of M&S, Norman has again asked Richer to advise on creating a happier, more motivated staff. Steve Rowe, the CEO of M&S, visits Richer at his restaurant table.

But Richer’s dedication to his staff is not based solely on the fact that it is effective capitalism. In fact, despite that fact that he has shown himself to be adept at it, he sees capitalism itself as “ghastly”. “It’s based on greed – not one of our most attractive characteristics,” he explains. And accepting the nature of the system means accepting the responsibility to improve it. “Anyone that works for me – technically, I’m exploiting them. I’m buying their labour to help me make money. The onus is on me, therefore, to treat them well, so they’re motivated, and don’t mind doing the job.”

Richer is not the only business leader to practice, as he calls it “responsible capitalism” in the UK. The shoe repair chain Timpson proactively employs ex-offenders and other marginalised groups and allows its more than 5,000 staff almost complete autonomy, including the freedom to set prices, while others including Riverford and Brompton have also found that the welfare of their staff is directly connected to the success of their business.

However, Richer is concerned that the current system of capitalism remains tilted in favour of larger businesses. One area in which this is a particular problem is taxation; repeated studies have shown that the UK’s small businesses effectively pay a higher rate of corporation tax than big businesses after tax relief has been used. As a smaller UK retailer, Richer Sounds was audited by HMRC in a “murderous” three-year investigation. “It cost a lot of money. It went back through millions of transactions over seven years.” But, he explains, if he had been less scrupulous and based the company offshore – as many large retailers do – “they wouldn’t have been able to do any of that.”

After reading The Great Tax Robbery by the journalist Richard Brooks, Richer contacted Brooks’ agent and offered to pay for an investigative think tank, Taxwatch, which was launched last year to bring corporate tax evasion to wider attention. But HMRC, Richer says, is bound by a lack of resources to “go after what’s in front of them”. Worse still, he argues, the government employs the same consultants that advise big business – and so, inevitably, “they go back and sell the loopholes to their clients. If I was employing a consultant, and I then found out that they’d advise my enemies, they’d never work for me again.”

Richer describes himself as politically independent. He previously donated to the Conservative Party in order to join the party’s “Leaders’ Group”, in which he met with Theresa May, Iain Duncan Smith and David Cameron, but found that he was “not comfortable there… what I saw was an awful lot of hustling by interested parties. And a lot of the conversation from the ministers was about, no we’re not going to spend time on that, we won’t get any votes for that, instead of caring what’s right for society.”

More recently he has been meeting with John McDonnell. “A lot of people are very scared of him, in the business world particularly. I get on well with him. He’s pragmatic, he’s respectful to capitalists. When he came up to York to give a talk, I said ‘do you want to stay in my beautiful home, before you confiscate it?’”

In May of this year, Richer pre-empted one McDonnell policy – the plan to use “inclusive ownership funds” to give employees a stake in the businesses they work for – by transferring the majority of his shares into an employee-owned trust. At the same time, every employee below director level received £1,000 for each year of service. The average payout was £8,000, reflecting just how good Richer Sounds is at retaining its staff.

Richer plans to spend more of his time working to popularise responsible capitalism in the wider economy. He supports the idea of a Good Business Charter, especially if the standard means that public sector contracts go only to companies that have been audited for their employment and tax practices. And while Labour has a manifesto commitment to ban zero-hours contracts, Richer is launching a court case that may see them outlawed under the European Convention on Human Rights – to which Britain will remain a signatory after leaving the EU – on the grounds that they prevent people accessing housing in the UK. “If I could leave that legacy, of changing those,” he says, “I’ll have done something really useful. Apart from selling stereos.”

Will Dunn is managing editor of the New Statesman.