Driving into B&M Bargain’s huge new distribution centre – The Vault – at Liverpool International Business Park, you are met with masses of green foliage, attractive views of the Mersey, and ducks paddling happily in streams. But it is a scene that belies the fact that in a few days’ time, 600 staff and 200 HGVs will be coming and going 24 hours a day.
Tranquil surroundings was a deal-clincher when B&M Bargains started its search for a new home last year after deciding that it had outgrown its Blackpool base.
The company has expanded rapidly over the past five years – leaping from 21 stores to its present mark of 204. This year, it was listed by the Sunday Times Fast Track as one of the UK’s 100 fastest growing private companies and, more importantly, it has become hugely profitable with turnover of £40m in 2009.
Aggressive expansion plans were put in place under the ownership and guidance of brothers Simon and Bobby Arora, who bought the 34-year-old company from Phildrew Ventures in 2005.
B&M Bargains, whose business format is modelled on the phenomenally successful £10.5bn (turnover) US-based Dollar General, is now expanding through acquisition and new openings at the rate of one store every week.
The discount chain’s eventual target is 400 UK-wide units by 2014, prompting a pressing need for a large distribution warehouse and a new headquarters.
And The Vault certainly fits the bill.
Built in 2007 by Rockpoint, it was sold to B&M Bargains in December 2009 in one of last year’s biggest deals. The Vault’s freehold was purchased for £16m with the help of a £1.7m grant aid from regeneration agency Liverpool Vision.
Standing outside the The Vault’s main entrance on a hot day in late August, Sale-born Simon Arora is wearing a high visibility jacket ready to do a grand tour of his 618,839 sq ft warehouse.
Inspirational quotes
First stop on the tour is the offices section. Workmen are hard at work pasting wallpaper murals of jelly babies in the human resources department – “it just gets across the sheer number of people that we have working for the company”, says Arora – and of flying piggy banks in the accounts department – “count the pennies and the pounds look after themselves”, Arora adds.
The entrepreneur likes mottos and inspirational quotes, believing that they will help to inspire the 200 non-warehouse staff.
On the ground floor, near to the warehouse entrance, the £250,000 staff canteen is being painted. As the centre is open for 24 hours, Arora says staff will need to have access to meals around the clock.
Haulage costs cut
He believes that the HQ and distribution centre should be one and the same, “because there is nothing more practical or real than a buyer sitting on top of their stock”.
Liverpool was one of three areas short-listed for the distribution centre, the others being Doncaster and Stratford. But The Vault outclassed the others in three sectors.
First, its proximity to the docks. “It takes 10 minutes to get our goods from the docks, cutting out haulage costs,” says Arora.
Second, the attractive environment was a major factor for employees.
And third, the cost was right. In addition, the brothers wanted freehold rather than leasehold because of the expense of the fit-out.
“We knew we were going to have to spend £8m on fit-outs and all that investment is then attached to the asset,” Arora explains. “If the building isn’t yours, what you get is a landlord who is sitting back saying ‘thank you, all that work you have done has improved the value of my building’.”
However, all was not perfect with The Vault. While it benefits from very narrow aisle racking, which improves stock density by 30%, and from “expensive but essential” rack sprinkler systems, Arora admits to being unhappy with its 56 single deck bays. “We use double-height trucks, so those,” says Arora pointing to the bays, “are completely useless.”
As a result, Arora has had to install eight scissor machines, at a cost of £50,000 each.
“When designing loading bays, developers should consider compatibility with double bay loading,” says Arora, “or else they’re not keeping abreast of changes.”
He does, however, acknowledge that designs have changed in recent years. “To be fair, The Vault was probably designed in 2005 and the move to double decking occurred only in the past two to three years.”
Still, the benefits of the warehouse are apparent. “The fact is, a modern facility does reduce our distribution times – it cuts one day in three off the time it takes to replenish stocks in the stores,” says Arora. “People perceive a chain of bargain shops to be very basic and disorganised, but with a modern distribution site you can create a better chain of supply.”
Plenty of HGV drivers
Arora believes that companies do not need distribution centres in the traditional distribution heartland of the Midlands: “For occupiers like us, it’s wrong to assume that the best location financially is in the centre of the country. It’s too easy for the market to focus on that idea. We are near a port, which cuts our haulage costs.
“And when I talk to companies in centrally-based distribution centres, they say they have an employment problem. One of the things we benefit from in Liverpool is that there are plenty of HGV drivers.”
B&M Bargains will acquire a further distribution centre in the south of England, below Birmingham, but not for at least four years.
For now, the company’s expanding empire will be served from its Liverpool base.
At times, even Arora is taken aback by the growth he and his brother have achieved. Casting an eye down one of The Vault’s long aisles, he says: “I am not a warehouse person, but when I stand here and see The Vault full of stock I think, ‘bloody hell, what have I created?’”
