The Big Interview: Mike Welch, md of Blackcircles
Some 16 years since he started the tyre-fitting venture, Mike Welch finds himself in a very different phase of his career, passing on advice to others looking to launch their own business.
He warns such would-be entrepreneurs that it will be hard work, involving a great deal of sacrifice. But the rewards can be plentiful, and he admits that the stresses are in fact “part of the fun” for him. “The high-stakes risk, adrenaline, back against the wall – I love all that.”
Having sold Blackcircles to French giant Michelin for £50 million in 2015, Welch has now added online fashion to his business interests with the acquisition of Atterley’s assets from administrators at KPMG in 2016.
The female-focused site sells items from independent fashion retailers, with a network of just over 100 boutiques.
Welch says the firm had “got into a bit of trouble with its supply chain” but was an “inherently good brand and strong proposition”.
He explains that his ambitions in the fashion sector were similar to what he achieved in the automotive market in terms of “trying to create an online proposition and support the independent brands” in a market dominated by larger players.
He felt he could therefore bring an understanding of the infrastructure and how the business works, also noting that “the next generation of customer isn’t going to the boutique”.
After considering how he could take an online fashion retail brand and overhaul its delivery infrastructure, he rolled up his sleeves, going around the country signing up independent boutiques, who then became “effectively the warehouse for the products”.
These are sold “at a cost-per-acquisition that’s low enough that Atterley can make money and the boutique keeps their margin”.
Having recruited a team, he now helps and advises. Welch has also raised £1 million for the firm. “We closed on that two months ago, so that’s in the business and being put to work, which is great”.
The cash will go towards growing Atterley’s team so it can recruit more boutiques, and Welch points out that as far as its five-year plan is concerned, it is ahead on sales, cash and profit.
“What we want to do is have proven profitability in that first phase of funding and then we’ll scale from that position.”
Atterley is looking to gain traction in a competitive but lucrative market: one study predicted that by 2020, fashion will account for nearly a third of UK online spend, worth over £18 billion, while the global market is already worth an estimated £2.3 trillion. Atterley has made sales in 33 countries, with the majority of transactions coming from UK, German and Italian boutiques, says Welch. A quarter of sales are coming from the US, a market where he sees particularly strong growth potential, and 15 per cent from the Middle East.
“Really very quickly we’ve managed to develop a truly international sales spread, which is not what we achieved at Blackcircles at this stage, so it’s been really interesting to measure against the progress we had there.”
As for the transition from selling treads to threads, from practical to more emotional purchases, he admits that many factors are different, from the proposition and customer to shipping and logistics – people don’t wait 18 months to buy clothes as they do tyres, he says, laughing.
But he adds that if Atterley can offer the right proposition and price point, “and fundamentally if our customers buy into the fact they’re supporting the local boutiques… I’m pretty sure we can encourage people to use us more than once a year”.
Also on board as chief operating officer is Kenny Baillie, who was at Blackcircles in its early stages as finance and commercial director, and who also spent a spell heading up Scottish clothing brand Ness.
As for a return to working on a business in its earlier stages as opposed to the more developed Blackcircles, Welch recognises that technology has “definitely moved on, so we’re able to do things quicker and cheaper now than we could then. What is exactly the same, though, is the big focus that we must have on getting it right for the customers.”
He says such a concentration on customers is behind the success of Blackcircles, which he founded after moving to Edinburgh, having been recruited by Sir Tom Farmer to develop a website for Kwik Fit.
Welch had left school at 16, working as a tyre fitter, and had set up his first tyre business in his teens before his move to Scotland.
Once Blackcircles was up and running, a string of accolades for his entrepreneurial skills followed, and he gained support from other high-profile names including former Tesco chief executive Sir Terry Leahy and Kwik Fit finance director Graeme Bissett, who later became Blackcircles’ chairman.
“I had a really tight group of people who were very supportive and who educated me,” he says.
Customers of the “click & fit” retailer pick their tyres from its website, which are then delivered to a local garage (with more than 2,000 across the UK signed up) to be fitted at a time of the buyer’s choosing.
The acquisition of Blackcircles by Michelin was a landmark moment, with Welch saying at the time that the French group’s “strength… will allow us to underpin the multi-brand offering that we deploy in each garage, on every street corner”.
Looking back, the deal is understandably a career highlight for the Liverpudlian. “To start the business in Peebles with no money and to exit it to the world’s largest tyre manufacturer at the time in the way we did and everything that happened in between… as a single experience it’s going to be hard to beat”.
Welch admits that the decision to sell was the hardest he’s ever faced due to the implications for the business and its people. “It was personally quite difficult but it was the right thing,” he says.
Did it change perceptions of Welch? “From a marketplace point of view I think people were anticipating that things might change – but nothing has,” he believes. “If anything, the business has just got better and more capable of doing more things because we’ve got more capacity.”
Michelin is looking to “take digital to the next level” and in his opinion, Blackcircles “would be better-placed hitching a ride on their spaceship than trying to chart that route ourselves, because of the infrastructure, the support and just the bandwidth and everything that they have. The future’s really bright and it’s about picking the opportunities that are going to have the biggest impact earliest and the longest-lasting effect”.
While he sees plenty of scope to grow domestically, the business is now seriously considering potential for international expansion. He has in fact been in Asia “really assessing where Blackcircles – and other online entities – might work relative to what we’ve done in the UK”.
And he stresses his continued involvement with the firm. “My role is very much to help develop new business opportunities and to guide the existing management team in the UK.”
However, he has been handing over some duties, which “has meant that I’ve spent less time doing the things that I was doing but that I can devote more time to the future”.
His other activities include The Welch Trust, which provides grants to support children and young people, with a focus on adoption and fostering.
There is also work with The Prince’s Trust, funding the programme that gave Blackcircles crucial initial funding of £500, to help “people like me trying to start up and not able to find any funding”.
Welch was even credited by Prince Charles in a speech at a Prince’s Trust event, noting its role in getting Blackcircles off the ground and its sale to Michelin. The Prince said: “As you can imagine, I am rather proud of that.”
Welch’s charitable work was a factor in his being awarded an OBE, and he has also received an honorary doctorate for enterprise from Edinburgh Napier University.
His other interests include investing in property, supporting developers and some small businesses, and he has “a bit of a portfolio growing”.
As for whether he would consider starting another venture from scratch, it’s a case of never say never – he enjoys marketplaces “where there’s a big incumbent who needs to be disrupted. If you kick up a bit of a stink then it’s always a bit of fun.”
Staying current is crucial. “To stay fresh, to remain close to the market, to understand where technology’s at, to understand what customers are wanting because it changes all the time… Feeling that fundamental need to support customers in the right way, that’s really important if you want to continue to have fun doing what I do – and I do. I have no intention of slowing down.”