Inverness retailer bidding to fire out the blocks

The company, which fulfils web sales from the company’s stores as opposed to a warehouse, has been working alongside data scientists at The Data Lab on the project.

Donald Begg, the company’s managing director, said that in broad terms the blockchain system it is developing will improve its ability to record and interconnect data within the business.

He said it offers significantly more possibilities for using than Excel spreadsheets, which often run out of room or lack interconnectivity, and highlighted as a key benefit the ability to see exactly where a product is within the e-commerce chain at any time, and follow its progress.

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“It is effectively using blockchain within a small business environment, which to the best of my knowledge I don’t think many business in Scotland have attempted,” said Mr Begg, an accountant by trade. “It is very ambitious. There is a reason why blockchain is used by the big guys of tech, and] there is a reason why it is difficult to access as a small business. But the guys we are working with, and us as a family, are confident we are getting quite close now to system that is functioning and live and would allow us to operate in a retail environment that has so many different potential shops and different potential ways of marketing ourselves as a business.”

Mr Begg, who hopes the system will go live later this year, added: “We could sell on Amazon, but within Amazon you could have a feed to America, France, Germany, Italy, UK, but effectively each one of those is a shop. To then manage that as a small business is exceptionally challenging. There can be translation issues, but with this database, if we translate the database, we would be able to control what we give to Amazon from all within a database that is flexible and can speak to various different shops quite effectively.

“That would allow us to speak to Facebook, Google, Amazon, eBay, which are all big drivers these days of e-commerce. It is an enable of a lot of things.”

Some retailers are losing up to 30 per cent of the value of their sock because they are unable to trac their assets effectively, Mr Begg said. “That really gives us an edge on gross profit margin over other retailers because we know what has happened to each individual asset, and we can manage them effectively,” he explained.

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Machine learning will also be factored in, so that stock can be moved automatically to stores where it is likely to sell faster.

The new system could cost up to £300,000 to develop, which will involve the employment of around five computer programmers.

“We’re hoping, actually, to make a software business off it,” Mr Begg revealed, explaining that the programmers brought in have been offered a stake in the new business as a means of financing it. “If we can prove it on Begg Shoes, we can prove it in various other applications, not just retail.”

Work on the project comes as the shoe retailer shows signs of recovery from the fall-out from the pandemic.

Mr Begg said customers had shown a great deal of loyalty to the retailer since the shops reopened after lockdown. “Footfall has been lower, no doubt about it, but the customers that have come in spent more than they normally would. Overall, we are seeing store sales getting not far off back to pre-Covid levels. On top of that, the website is performing very well.”

He added: “At the moment, we are really positive.”

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Mr Begg said running the current e-commerce operation from the company’s stores can put pressure on staff, as it is no uncommon for employees to arrive for work on Monday mornings with around 100 orders to fulfil each. The orders have to be fulfilled alongside any other work that has to be done in store. But Mr Begg said: “We are not an Amazon-type operation. We are trying to do clever things, but we believe greatly in the staff and the local touch, the family business touch. We believe in supporting small shops and SMEs.”

Despite the huge growth of online retailing during the pandemic, Mr Begg said there can still be a bright future for traditional shops.

He added: “If you are trying to be a shop without a website, it is going to be challenging for you. I am sure there are situations in some small sectors of retail where that would work, but I would think the majority of retail has to have an online presence.

Highlighting moves by major technology players into the bricks and mortar retail sector – Amazon acquired Whole Foods and was recently linked to Morrisons takeover speculation – Mr Begg added: “I think it is a case that the two worlds just have to move together, really. If you are full-our e-commerce it is ultimately going to be challenging to capture the full market.

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“If you are bricks and mortar, equally it is going to be very difficult to provide the service that customers want nowadays. A lot of it is about having to provide a service to customers, and that is what we are trying to do.”

Store numbers at Begg have grown from three when Mr Begg took over the business from his parents in 2013 to the current nine. Five stores were acquired from DE Shoes – a chain which had around 30 shops in Scotland before running into difficulties – before a second store was added more recently in Inverness. While sales prior to the expansion in store numbers in 2013 was around £1 million, the retailer is on track to hit £4.7m this year.

“We are slowly moving forward,” Mr Begg said. “The way we do things is very analytical. It is done in a way we ensure that the business is sustainable, is profitable, but it is very time-consuming. It does mean it presents real challenges scaling the business.

“The reason we reached out to The Data Lab was we could see that, while idea works, our system didn’t work with the idea, if that makes sense. The game plan has been for the last 18 months to work on the transition…to a technology-based system that allows us to scale up much more quickly than we have been able to so far.”

Q&A

What countries have you most enjoyed travelling to, for business or leisure, and why?

My favourite country to have travelled to for a holiday was New Zealand. I love adrenaline fuelled outdoor activities so a place like New Zealand is ideal, even if it is a long journey. Business wise, we are lucky that we need to attend the Lake Garda shoe fair. We go there twice a year every year and can enjoy the beauty of the lake as well as Italian food and wine (outside of the time at the shoe fair!).

When you were a child, what was your ideal job? Why did it appeal?

Like many young boys, I dreamed of becoming a professional footballer and actually managed to have a very short-lived career at Inverness Caley Thistle. I was always obsessed about football and am highly competitive so it seemed like the ideal career for me at the time.

What was your biggest break in business?

I am hopeful our ERP project will be "the big break". To date, I think the biggest break I've had is being in the fortunate position to be able to join our family run business in such a senior position at such a young age (relatively speaking!). As a business owner it isn't always easy to delegate major responsibilities but I've been lucky to have had that chance.

What was your worst moment in business?

Undoubtedly March 2020 when the lockdown closures were announced. We had 50,000 pairs of shoes due for delivery (and to be paid for), were responsible for employing 45 colleagues while furlough and grant funding were not announced at that stage. We thought that after 150 years of trading Begg Shoes was coming to an abrupt end, through no fault of our own. Thankfully a lot has changed since then but it has been a traumatic time to own and manage a "non-essential business".

Who do you most admire and why?

My Dad, he's achieved a lot in his life both personally and in business. Balancing personal life, being a good parent, whilst maintaining a successful business is not easy but he's shown me it can be done.

What book are you reading and what music are you listening to?

I'm currently reading Ian Rankin's latest novel called In a House of Lies. I listen to both EDM (electronic dance music) and country music, a strange combination! EDM is great for lifting spirits and country is nice for relaxing.