Such is Gerald Ratner’s notoriety that ‘Doing a Ratner’ now describes any business gaffe. But 16 years after calling his ex-company’s products ‘total crap’, the former jewellery king is resurrected and running a successful online firm. Financial Journalist Dan Martin spoke to the straight-talking executive about how he returned from one of the most public setbacks in UK corporate history.
Chatting to him, it’s clear that Gerald Ratner is a very reflective character. But that’s unsurprising given his extraordinary rise, fall and then rise again in a life story which serves as a reminder to us all that while you may feel it’s all over when business disaster strikes, there are often new opportunities around the corner.
His 1991 speech has gone down in the business history books as the most damaging gaffe of all time. He was riding high as boss of one of the world’s most successful jewellery businesses and being forced out of the company came at a huge personal loss – emotionally as well as financially given that he had been working in his family’s business since 1966.
But in 2004 Ratner arrived back in the corporate world with a bang when he launched Geraldonline.com, selling what else but jewellery. So how did he do it?
THAT SPEECH
What Ratner said during his address at the Institute of Directors event doesn’t need to be explained in detail. Anyone over the age of 30 is almost certain to be aware of how he referred to Ratners’ £4.95 sherry decanters as ‘total crap’ and said the firm’s 99p earrings were ‘cheaper than an M&S prawn sandwich but probably wouldn’t last as long’.
So, what exactly was he trying to say? ‘I was attempting to illustrate our markets,’ he explains. ‘We controlled 50% of the UK jewellery sector so we could run three different operations aimed at the up-market, middle-market and down-market.’
Unfortunately for Ratner, while the IoD delegates may have treated the remarks as passing jokey comments, tabloid journalists were in town. The Daily Mirror, which like the rest of the press had received an advance copy of the speech, sent along a reporter to confirm that Ratner uttered the infamous words. The next day, the story was splashed across the front page and Gerald Ratner’s downfall began.
Even though he had made similar gags a few years previously with little reaction, the early 1990s was a time when The Daily Mirror and its rivals were pursuing an anti-Fat Cat agenda. Within hours, several newspapers had followed up the story and it was soon all over the media. ‘It was 1991, there was a recession and a lot of negativity about company bosses,’ he says. ‘The media was looking for scapegoats.’
The furore led to around £500 million being wiped off Ratners’ value and within 18 months the chief executive was forced out. He initially fought his corner but in the end, he admits he ‘gave up’ and ‘didn’t want to play any more’.
It is clear that he very much regrets what he said but he continues to defend the comments as a joke. He is also keen to insist he wasn’t making fun of customers behind their backs. ‘I’d sent a copy of the speech to the press beforehand so the reports which claimed I said it in a private function are a load of rubbish.’
THE WILDERNESS YEARS
Ousted from a company he had dedicated his life to, Ratner was placed in a position he wasn’t used to – no job and no income. What did he do during those years in the business wilderness? ‘I cycled a lot,’ he admits.
His expertise however was in demand to some extent as Ratner managed to secure a couple of jewellery consultancy jobs. But, he confesses, they were ‘complete disasters’.
Despite the huge personal pain that being kicked out of his family firm obviously caused him, Ratner says his lowest point came while working as a consultant in France. Before heading off to Paris, he learnt French from BBC CDs. However, they proved to be of little help in the real world.
‘I was not very welcomed by the French. I used to sit in meetings for three hours and not understand a word,’ he explains. ‘They said I’d learnt conversational French and not business French. I was alright if I wanted to go down the Champs-Élysées and order a croque monsieur (grilled ham and cheese sandwich) and a beer but not in board meetings.’
The businessman does admit that it wasn’t all his French colleagues’ fault. ‘I’d previously run my own company with 2,500 shops but there I was a small cog in a fairly small wheel.’
THE COMEBACK
Back in the UK, Ratner searched for something to get him back on the road to success. It came in the form of a health club in Henley-upon-Thames, Oxfordshire. But he needed money.
After struggling to get finance for his new venture, Ratner came up with an ingenious way to secure it. ‘I found a site for the club and told an estate agent I’d buy it. I then put an advert in the local paper with a picture of how the club would look and advertised customer memberships. I sold 550,’ he says. The eighth bank manager he approached agreed to provide the cash. Luckily for Ratner, the manager’s wife had joined the club.
While persistence, luck and a good idea had contributed to getting the health club off the ground, Ratner realised his fame had played a large part in encouraging hundreds of sign-ups even before the club was built. ‘I got 20% of Henley residents to join - 2,500 members in a population of 11,500. That was massive: clubs normally only achieve 8%,’ he says. ‘It was purely down to the saturation of publicity. Everyone knew about it, even people who didn’t live in the town. It made me realise I could use my notoriety to achieve business success.’
In 2001, Ratner sold the health club for £3.9 million after reportedly investing just £175,000.
ENTER GERALDONLINE
Buoyed by the confidence afforded by his success in Henley, Ratner was convinced he could do it again and settled on the idea of an Internet business. But in the late 1990s when the idea of selling big-ticket items via the web was treated with suspicion, he failed to convince the City to back him. ‘I raised zilch,’ he says. ‘They all said it was too touchy feely.’
In the end, Ratner persuaded an Indian executive to provide £2 million for half of the business. With this investment, the site went live in 2002 when web retail was really starting to take off, again a piece of luck.
All in the garden looked rosy but come on, this was Gerald Ratner. More controversy had to be round the corner.
It came when the resurrected jewellery king had to decide on a name for his new venture - he opted for, what else, but Ratneronline. Signet unsurprisingly weren’t too happy and a legal battle ensued. Ratner eventually backed down and agreed to call the website Geraldonline.com. He hadn’t won but he was back in the newspapers and he’d learnt how to turn that to his advantage.
It worked. Within a month of its launch, the website received more than three million hits and sales of £3 million, success no doubt helped by the fact Ratner had Max Clifford on board as his PR adviser.
Like his previous business, Geraldonline aims to sell products much cheaper than the competition. With no outlets, limited staff – Ratner employs just 12 – and the backing of SB&T International, a Mumbai-based manufacturer, the company is able to offer what it claims are up to 60% reductions on high street prices.
Ratner admits to being ‘terrified’ that people wouldn’t buy from Geraldonline but said publicity and prices made sure they did. ‘I ensured the website was good enough and the prices competitive enough and one thing I do know about is the jewellery business,’ he says.
THE FUTURE
So where does he see the site going in the future? The company has only recently broke even and Ratner admits that summer sales were disappointing. ‘I think the Internet is changing completely. People are looking for more than just a product,’ he says. ‘Ratings and affiliates where you’ve got a bigger range so can buy from other people has become a factor. We’re changing the site and I admit we’ve maybe been a bit slow to move with the times.’
He also confesses that competition is a factor, something you would never have heard him say in the old days. ‘It wouldn’t have affected me at all because we controlled the competition,’ Ratner quips.
Does he believe Geraldonline will repeat the success of Ratners? ‘Not a chance,’ he proclaims. ‘The businesses we took over [H Samuel and Ernest Jones] had been going for a hundred years. That could never be repeated. I don’t think it has been copied in any industry. That’s the tragedy of the speech because we were in such a strong position.’
Despite this, Ratner hints that a return to the high street is not off the cards. Although his £350 million bid for Signet’s UK arm was rejected because, he claims, they ‘questioned our ability to come up with the cash,’ he says that he ‘will certainly buy a jewellers in the next 18 months’.
So, it’s clear that we definitely haven’t seen the last of the King of Bling.
Even if Geraldonline goes belly-up, he’ll likely continue to be a regular at business functions telling the story of how he overcame adversity. Ratner currently commits around two days a week to interviews and speeches about his career.
Gerald Ratner’s climb out of the corporate doldrums is a remarkable story and it’s likely audiences will continue to want to hear it. He has admittedly had lots of luck along the way but the tale shows that a disaster in business does not necessarily mean career suicide.
HOT TIPS - GERALD RATNER’S TIPS FOR BUSINESS SUCCESS
BUSINESS IS UNPREDICTABLE
‘Things never happen the way you expect them to, whether that’s good or bad. When things do go wrong, many people assume they’ve had it but there are always opportunities around the corner.’
BE HONEST
‘Don’t highball people. They will be put off if you say your new business is going to be worth £250 million and bigger than Bill Gates. Keep your feet on the ground. If it’s a good idea with sound prospects, the banks will wait.’
PERSISTENCE IS KEY
‘If I hadn’t got my health club I wouldn’t have got Geraldonline. I was turned down by seven banks.’
GET THE EXECUTION RIGHT
‘It’s not the ideas that matter. You can just be selling coat hangers or nut and bolts but whatever you’re doing, you must get the execution correct. Don’t be sloppy. The detail is very important.’
FURTHER INFORMATION
Dan Martin is the Editor of BusinessZone (www.businesszone.co.uk) and kindly allowed us to reprint this article. BusinessZone is published by Sift Media (www.siftmedia.co.uk).
Photography: Tony Cooper, Northern Photography. Contact northernphoto@btinternet.com. Gerald Ratner’s autobiography The Rise And Fall And Rise Again has just been published by Capstone.
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