Whether you call it Main Street or the high street, whichever country you’re in, it is a hugely competitive space to do business. And in the wake of the Covid-19 pandemic, droves of consumers have started shopping online instead, which means that retailers now have to go even further to turn a profit.
More often than not, businesses that are family-run come out on top. The proof lies in the blatant fact that they have survived economic downturns, and those with a longer lineage, even world wars. So, what is the formula that makes a family business so successful?
Loyalty and reputation
A 2019 study from the National University of Political Studies and Public Administration (Bucharest) showed that consumers are less likely to purchase newly branded items as they can’t assess the previous encounters with the item, whereas family retailers have built a long-standing reputation over generations, deeming their products more trustworthy. It is this sense of familiarity that have made Clarks synonymous with high-quality footwear, and Nisbets with long-lasting catering products.
Family firms are typically viewed as risk-averse, traditional, and complacent. However, studies show that the opposite is the case. A study from Harvard Business Review showed that, on average, family firms have a smaller R&D budget than other organisations of similar size.
However, this does not mean that they are less innovative. In fact, family firms are more efficient in their innovation processes. For every dollar invested in R&D, they get more innovative output, measured by the number of patents, number of new products, or revenues generated with new products.
Vacuum cleaner company Dyson is one such example of a family brand that puts innovation at the forefront of their business model. Dyson believe that the company’s profits should be invested in R&D. In fact, in 1996, the company was spending six times as much on R&D than advertising. It is this commitment to innovation that has made them one of the most popular vacuum cleaner brands in the UK, and indeed, the world.
Knowing you’re building for future generations encourages the long-term thinking needed for growth and success. This long-term thinking is often bolstered by a family figure running the business. Family positions and seniority can determine and define the organisation’s leadership, paving the way for leadership longevity. Well-founded policies are delivered better if there is overall stability within the organisation. Co-founded in 1984 by Doug and Mary Perkins, spectacle brand Specsavers has benefitted from the long-term oversight and leadership of the family, who still run the much-loved high street fixture to this day.
Major family businesses are often more diversified than listed companies. Boodle Hatfield’s study shows that 24% of the turnover of the UK’s Top 100 family businesses – a total of £38 billion last year – is generated by groups diversified across multiple industries. This approach has fallen out of favour among listed businesses in recent decades, but is still common among family-owned groups. Because of this, there are a number of high street retailers that are under the management of family-owned companies that you might not have been aware of.
In 2020, Bestway acquired convenience store chain Costcutter. They also have diversified interests in cement manufacturing and banking. In the same vein, following their acquisition of home furnishings group Julian Charles, SKG and its founding team are earmarking more cash for retail investments alongside other family offices. Shareholders of family businesses often diversify in this manner to continue the business’s growth and protect their future incomes by expanding into new sectors.
What’s the formula?
The key to family brands’ success on the high street lies in their ability to instil strong leadership, garner trust and reputation, and spread their investments across multiple sectors. This inherently puts them at an advantage over less well-established brands, who have an uphill battle to match the same level of financial security. This is why we’re less likely to see a vacant, boarded-up family brand on the high street despite economic turbulence.