In the blood: Theo Paphitis interview

It didn’t take long for Theo Paphitis to return to selling lingerie. But this time he’s back with a new retailing concept.

In a rare interview, he reveals to GrowthBusiness his plans for the chain Boux Avenue and explains why retail is going through its ‘fastest change in living history’.

It seems a strange comment for a renowned businessman to make, but Theo Paphitis says that being a serial entrepreneur is akin to being a murderer.

Halfway through discussing his latest venture, lingerie brand Boux Avenue, I asked Paphitis, who has spent most of his working life in cut-throat retail, how he felt about selling his first chain, La Senza, five years ago.

‘It takes you back to that statistic about murderers,’ he says casually. ‘Someone who has murdered once has got a high possibility and potential of murdering again. They find it’s a lot, lot easier. And it’s the same in business.

‘Once you have learnt to sell one business that you have started – that’s the hardest job of all – you have tasted the blood, then you understand it and it’s easier.’

According to the Sunday Times Rich List, 52-year-old Paphitis banked £100 million from the sale of lingerie brand La Senza to private equity firm Lion Capital in July 2006.

Now he is personally growing a new competitor to his former company with Boux Avenue. Does he want blood? Well, it seems this is a difficult question to answer.

Slow start

Paphitis started in retail aged 18 after spending two years in the City as a tea boy with a Lloyd’s of London broker, a period of his life that he describes as ‘total purgatory’.

‘It wasn’t me – it was boring,’ he recalls. ‘I was dyslexic, it was academic; I liked the outdoors, I was stuck inside; I had a Cockney accent, they were all posh; I went to a comprehensive, they all went to public school; everything that could be wrong was wrong.’

Then, after spotting an advert for a shop assistant with Watches of Switzerland in the London Evening Standard newspaper one Friday night, he turned to retail and ‘loved it from day one’.

Though further career moves took him into corporate finance and property, it wasn’t long before he returned to retail and made a name for himself buying struggling brands. These have included La Senza, Contessa Lingerie, Ryman, Partners the Stationers and Stationery Box.

While building a large retail empire and amassing a personal wealth that The Sunday Times this year estimated at £170 million, Paphitis has substantially grown his public profile, mostly because of his involvement as an investor on the BBC TV show Dragons’ Den.

He has also used his celebrity to promote entrepreneurship in the UK. In September 2009, he launched a new bachelor of arts honours degree in enterprise development at Huddersfield University to encourage young business people. Dubbed a ‘pracademic’ degree, it gives students the chance to learn by creating and starting their own business while they are studying.

Undercover deal

Paphitis’s latest venture, Boux Avenue, which sells lingerie, nightwear and swimwear, launched in March this year and already has seven outlets across the country. However, before setting up Boux, Paphitis admits he did attempt to buy back La Senza. At the time there were reports that Paphitis was waiting until a debt issue involving the private equity owners was resolved before going ahead.

He comments, ‘A few years back [I looked at making an acquisition] when [La Senza] were struggling and in trouble, but they got their act together and managed to reorganise themselves. They have repositioned the business – it cost them to reposition. 

‘I am always a believer that if something is not broke, why are you trying to fix it? [Not following] that is just some people’s mentality, I suppose. It nearly killed them, but I think they are back in the black now.’

Today, less than three years after he tried to buy the company, Paphitis’s new brand is in direct competition. The two chains are frequently located near to each other in the same shopping centre. In one case, at Buchanan Galleries in Glasgow, they’re actually next door, while at Gateshead’s Metrocentre they’re directly opposite each other.

However, he resists any attempt to read too much into this. ‘There is definitely something there, oh yeah – it’s called customers being used to going to that area of the shopping mall to buy lingerie. That is what it is.

‘And I don’t see why I have to try to drag them to the other side of the shopping mall, and make my job even harder, when there is already somebody who has established themselves there, and is drawing customers in. I don’t see anything wrong with that.’

He continues, ‘There is no less competition if you are 200 yards on the other side of the shopping mall. There are normally other lingerie shops around. I am quite relaxed about it. I don’t have a problem.’

Digital innovator

One reason Paphitis is hoping that customers will buy from Boux Avenue rather than La Senza is the way the company has meshed the online and in-store retailing worlds.

He describes Boux Avenue as an internet business that ‘just happens to have some stores’ and explains that e-commerce, rather than footfall, will drive revenue. In the stores, he has put the emphasis on shop fronts that look ‘very classical’ but incorporate the latest technology.

Instead of traditional cardboard point-of- sale advertising, there are computer screens, including a large screen featuring the brand’s website, as its main window display. There are also video cameras fitted throughout that are so finely turned that Paphitis proudly says they allow him to ‘read the labels off the clothes and see if they are in the right rack.’

With the touch of a button, Paphitis, who admits he is ‘incredibly hands-on’, can simultaneously manage promotions, both in- store and online, change the lighting, including the colours, and alter point-of-sale screens, all from his Wimbledon head office.

‘I can have one promotion in the morning, a different promotion at lunch, and another promotion in the evening – why shouldn’t I, that is what you do on the web,’ he continues.

‘Retail is probably going through its fastest change in living history, even more so than from the electronic cash register to EPOS [electronic point of sale, which monitors stock levels]. The way we shop now is totally different to the way we shopped before, and it will be different in the future.’

Long game

Paphitis says he is ‘still experimenting, still learning’ about the new technology, and he is frank about the prospects of a quick profit in Boux Avenue. ‘I am not going to make any money from this for two to three years at least,’ he remarks.

‘People say, “Why are you opening up in the middle of the biggest downturn in living memory? You must be mad.” Well, I already know that I’m mad – that doesn’t really matter – but these stores are opening not for today, they are opening for the future. One day all stores will be like this.’

Another notable difference between La Senza and Boux Avenue is that this time around he appears to be snubbing London. Current outlets are in Kent, Essex, Cardiff, Manchester, Sheffield, Gateshead and Glasgow. An eighth store is scheduled to open in Guildford this month.

Paphitis insists that this has little to do with not wanting to be in the capital and more to do with finding the right deal. The brand does ‘need to cover everywhere’, although he clarifies that it won’t be on every high street, and while he did find a store in Westfield London, ‘it didn’t work out’.

Eight further stores are currently planned. To fund expansion, Paphitis will continue to use bank debt, which he says is the way he has funded all his business ventures.

Expect the unexpected

Paphitis is philosophical about the vagaries of running a business: ‘I am investing in something that is really long term here, and certainly things sometimes go in a totally different direction to what you envisaged.

‘The great thing about being your own boss is you can accept those things and make a decision. You don’t have to sit there, spending half your day justifying it to someone else… who isn’t as close to the business as you are.’

He adds, ‘For something like this, to have done it with private equity would have been a nightmare.’ Asked whether retail works with private equity, he pauses before replying with a grin, ‘You be the judge of that.’

Looking to the future, Paphitis insists that he will continue as an investor on Dragons’ Den, now in its ninth year, but he adds that seeing his investments grow and develop has given him great joy.

He admits he couldn’t be prouder of his Den investments and that he ‘gets a bigger kick than if I’d made the money myself’. To illustrate his point, he says the Wellington boot brand WedgeWelly has grown its profits from £4,000 to £147,000 within three years, and Magic Whiteboard’s profits have soared to £202,000. Paphitis and fellow Dragon Deborah Meaden shared in a £150,000 dividend from the company last month.

Despite his own success, Paphitis decries the notion that people should follow in someone else’s footsteps: ‘Footsteps are always best when they are fresh. You can take direction – I think that is the best way – but actually to fit into somebody else’s shoes is a difficult task for anyone, whether you are management or in business. We’re all so different.’

Date of birth: September 1959
Place of birth: Cyprus (emigrated to Britain in the 1960s)
Family: Lives in Surrey with his wife, Debbie. They have five children and three grandchildren
Hobbies: Owns a small boat
Interesting fact: Holds two honorary doctorates, from the University of Middlesex and the University of Huddersfield

Todd Cardy

Todd Cardy

Todd was Editor of between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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