Gerald Ratner has done a few media rounds lately in his native England. If you don’t know him, his business story is incredible. For a start, a gaffe whereby you unwittingly ruin your own business, typically by a public utterance that alienates your entire customer base, is now known as “doing a Ratner“.
As the man himself defines the phrase; “a massive error of judgement“.
In Gerald‘s case, in 1991 he caused the demise of his £1.5bn chain of eponymous jewellery stores.
His success was inspirational. Just seven years prior he saw huge concerns taking over every sector of retailing. He realised no-one was doing so in his arena. So he set out to alter the profile of his shops. He switched people’s thinking so that a jewellers no longer meant a just once in a lifetime purchase visit, and started filling windows with smaller, cheaper items.
In no time at all, he’d outstripped his main rivals, H Samuel and Ernest Jones by exploding from 40 shops to 2,500.
He was invited to speak at an Institute of Directors event at London’s Albert Hall.
Not a man gifted with overly natural or charismatic delivery, he circulated his draft speech to his co-directors. One suggested he needed a few jokes in it.
Gerald knew as a company they had two in-jokes. So he duly deployed them when talking about his wares;
“We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, because it’s total crap.”
(Apparently, he’d inherited the product from H Samuel and didn’t like it anyway!) He added that his stores’ earrings (at just 99 pence) were;
“cheaper than an M&S prawn sandwich but probably wouldn’t last as long”.
It made frontpage news. The two biggest tabloids provided scathing labels; “Rotners” (The Sun), and advising customers, “You 22-carat gold mugs” (The Mirror). Sales instantly disappeared. People in their droves apparently even returned goods demanding refunds, quoting Gerald’s words back to bemused shop assistants all over the country.
The moral is simple.
Never make jokes about your own product’s shortcomings.
Even if you think they’re only ever in private, the negativity can seep out to prospects and take hold like gangrene.
If you know this is going on, then you must act. Preferably by fixing the product first, then attitude alignment across the office.
As for Gerald, his story was initially a horror show. He spent the next seven years locked away from the world. His major advice to others that have fallen now, is;
never wallow in your own grief – get out and do something.
So in 1999 he got up again. He sought £750,000 to buy a freehold and start a health club. No-one would give him the money. He was penniless.
So he put an ad in the local rag (The Henley Standard) and offered memberships (to his non-existent new club) upfront with the joining-on fee waived.
He got an amazing 850 people sign-up. When he took the names back to his bank manager, he discovered they even included his wife, so the clerk was duty bound to lend.
Just four years later, he sold the business for £4m cash.
Then he went back to his first love, and for the past ten years has ran an online jewellery store, currently selling £25m a year.
A wonderful example of recovery.