Shop Direct’s decision to cut over 1,000 jobs reflects more than just the recession, says Bill Gleeson

SHOP Direct last night attributed the decision to cut 1,150 jobs on Merseyside to the “success” of its switch from traditional print catalogue sales to online retailing.

The majority of the jobs from the business, formerly known as Littlewoods, will go from its Crosby call centre in Kershaw Avenue.

And the company’s chief executive did not rule out further job cuts as the company restructures to an online focused operation.

Workers, 80% of whom are women, last night described the news as devastating, while Crosby MP Claire Curtis-Thomas said it was “appalling news for my constituents.”

“We have never, ever experienced anything like this,” said the Labour MP.

Shop Direct has enjoyed rapid growth of internet sales while catalogue sales have fallen alarmingly, with calls due to drop from 25m to 11m in two years.

Internet sales grew 44% last year alone and now account for 56% of its £1.7bn turnover, up from 18% just a few years ago.

The group wants to see online sales rise to 70% of turnover by 2011.

In contrast, catalogue sales are falling at a rate of 10% per annum. This means the group no longer has as much need for call centre staff to handle orders taken over the phone.

The group’s biggest call centre, at Crosby, opened in 1981, though some jobs will be lost at smaller call centres elsewhere. Around 1,000 staff are based at Crosby, which will close later this year.

In total, 1,150 call centre posts will go from across all divisions of the business, though 250 staff will be offered alternative jobs.

The company argues that the bad news, broken to staff yesterday lunchtime, has been made inevitable by the success of its switch to online trading. Chief executive Mark Newton-Jones told the Daily Post yesterday: “The measure of success for us is rising sales and ebitda (earnings before interest, tax, depreciation and amortisation – a measure of profitability).

“Our sales performance over Christmas was one of the best we have reported in a long time. We have not had to heavily discount prices to achieve those sales.

“All the work we have done over the last couple of years is coming to fruition with online growth.

“There is an irony with this. When you read all about failing businesses, particularly failing high street businesses, we are moving to a growth phase.

“But there is a human side to this and it is very difficult for the team in Crosby at the moment.

“We are adapting our business to the way the majority of our customers are now shopping. This is not a business in recession that is being forced to make cutbacks.”

Indeed, the success of the strategy was evidenced in a trading statement published before Christmas which showed that overall group sales rose for the first time in a decade in the year to March 2008.

Mr Newton-Jones refused to offer any assurances that this will be the last of the cuts.

“This business is still transforming and modernising at a hell of a pace. I can’t say there will be more jobs lost here or more lost there, but we will continue to change.”

YET, while the gloom affecting most other retailers has not forced Shop Direct’s hand, there is still a need to reap the efficiency benefits that online trading brings, a point demonstrated by the group’s most recent accounts filed at Companies House.

They show the business slipped further into the red, with losses increasing from £20m to £50m in the year to April 2007. More up-to-date profit figures are due to be published shortly.

Maureen Hinton, a retail analyst at Verdict Research, accepts that the recession is not the direct cause of yesterday’s job cuts, but she says it has not helped.

“The retail sector has become much more competitive over the last year and they will have to cut their prices to compete. They certainly won’t be able to pass on any cost increases to customers.

“All companies are looking for what opportunities they can find to cut costs.

“Shop Direct is the strongest of the traditional mail order businesses that are left. They have a high profile with shoppers.

“They are attracting many new customers to the online service, but also a lot of their growing internet sales will come from former catalogue customers who now shop online,” Ms Hinton said.

Shopworkers union Usdaw said it plans to challenge the need to make the cuts.

David Johnson, Usdaw national officer, said: “Our members are understandably extremely shocked and distressed at this announcement which the company made just this morning.

“We will be starting a consultation process with the company tomorrow and will be examining in detail their business case to close the Crosby call centre.

“The company maintains that the decision is not due to the current economic climate, but is necessary because of the steady decline of the traditional catalogue home shopping business as customers switch to the internet.

“Although the proposal to close Crosby puts all 1,000 jobs at risk, the company says it may be able to find alternative positions at their Aintree call centre for up to 250 staff and possibly another 200 jobs elsewhere in the business.

“Usdaw will be doing everything possible to try and minimise the scale of the proposed job losses, and to represent, advise and support our members through this very difficult time.”

In addition to Crosby, Shop Direct has call centres based in Aintree, Preston, Bolton, Burnley, Newtown, in Wales, Sunderland and Worcester.

Shop Direct owns a number of the UK’s most famous home shopping brands including Littlewoods, Kays, Empire Stores, Additions and Great Universal.

Some of the new jobs to be offered to staff will be based at Shop Direct’s Aintree call centre, where its financial services division is located.

OPINION: PAGE 8

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