He was one of Britain’s most successful businessmen until a speech he gave for the Institute of Directors in 1991 brought him crashing down: NMP Live Meets Gerald Ratner. In our exclusive interview Gerald discusses how he had “the biggest setback in all of corporate history”, the devastating impact it had on his businesses and how he capitalised on the negative media attention. Watch the full interview or read the transcript below.
In conversation with Gerald Ratner
How did you make your business the success it was?
I had about a seven-year run of unprecedented success and there were very few setbacks on the way because we’d basically had a formula that was hugely successful – low priced jewellery, something completely new. I mean, this was not costume jewellery; it was real gold jewellery because we had worked out techniques of making it very light.
Flyaway jewellery some people called it, but it was all gold. I mean if you had a gold pencil you could roll it from here to Edinburgh because gold is very pliable, it doesn’t have to be heavy. So, we had a formula that was hugely successful, until the speech.
So, I didn’t have any set backs, but then I had the biggest setback of all corporate history, so I was saving up for that one.
What happened on 23rd April 1991?
I was asked to do a speech at the Albert Hall in 1991 for the institute directors, and I saw in the previous years that they had asked people like George Davis, Sophie Merman, the sort of successful business people of their day, so it was a great honour to be asked.
I was expecting it, I was wondering why I hadn’t been asked before, but it was a big event for me because I hadn’t made a speech in front of so many people at the Albert Hall and the other speakers were Normal Lamont, who was the Chancellor at the time and President De Klerk of South Africa, this was unusual company for me to be speaking amongst.
I had done a few of these, but nothing like this. I was very nervous. I sent a draft of it, after I had written it, to my co-directors because of the importance of it, and nobody seemed bothered with it, but then again, it didn’t have the jokes in it at that time. But one of the directors came in and said that it was a good speech, but it didn’t have any jokes. I said that the jokes that had always gone down well before when I had used them were the prawn sandwich joke, that we sell a pair of earrings for 99p, the same price as a prawn sandwich at Marks and Spencer’s, but the sandwich probably lasts longer than the earrings. And if I had left it at that, which was quite funny, I might have got away with them.
But then the other joke was the Sherry Decanter. “We also do this nice Sherry Decanter. It’s cut glass and it comes complete with six glasses on a silver plated tray that your butler could bring in and serve your drinks on, and it’s really only cost £4.95. People say to me, how can you sell this for such a low price? I say, because it’s total crap! We even sell a pair of earrings for under a pound – gold earrings as well! And some people say well, that’s cheaper than a prawn sandwich from Marks and Spencer’s, but I have to say that the sandwich will probably last longer than the earrings!”
The Daily Mirror, when they saw this their eyes opened. They came along to the Albert Hall and wrote it up in the only way that the Daily Mirror can, it was just totally disingenuous, but anyway, I have never criticised them, it was my own fault. But they said I said all my jewellery is crap and I’ve got contempt for customers and that sort of stuff but none of it was true.
And then The Sun saw the Mirror headline overnight and changed it, and that was it. I was pretty shocked by that but it had this devastating effect on this hugely successful business that had just announced £125 million profit the day before, and that was during the recession, we were still going up when the other retailers were all going down. So, we could deft the recession but then we couldn’t defy this because customers deserted us, and then when they discovered I owned the other chains they started suffering.
It was a pretty horrendous time for me and I tried to fight it for 18 months, and brought in a Chairman to help me, because I was the Chairman and Chief Executive, but he fired me in the end, so that wasn’t a great move, and that was it.
How did the speech affect immediate sales?
Well, it’s strange, some people now like Volkswagen get in touch with me and ask me about these sort of things when they have difficulties. When I explain to them they can understand this, I don’t know why but it takes time to filter through to your sales.
You think it would have the opposite effect, when the press is fresh, the day of the headlines, you would think that would be the time that the sales would slump, but no, it takes a long time because people make up their mind, about 6 weeks with a diamond ring or something more expensive, to buy it. They don’t buy it as impulsively as I thought because they save up for it. So the people who had already made up their mind continued with that purchase.
So it wasn’t for quite a few weeks that we started seeing really dramatic falls. The next day we dropped a little bit after the speech, we were about 4% down and I thought “oh that’s nothing, this will die down and in a weeks time we’ll be back to being up again.” But a week later we were 5 or 6% down and then a month later we were 10% down and 3 months later we were 20% down. Horrendous figures and in the jewellery business where the margins are high that sends you into loss.
I remember going to see the bank and telling them that we weren’t going to make the profit they had forecast for us of £200 million and that we’d miss it by £300 million. They didn’t find that particularly amusing but that’s an anecdote I use in my speech that after 25 years the audience do find amusing. You’ve got to laugh at it; it’s the only way to keep sane.
How did the fallout from the speech affect you personally?
In the early days, it was horrendous, it was like daggers digging into my stomach because I was very proud of the business I’d built up to be hugely successful. I suddenly went from hero to zero and I felt that it was unfair because it was not accurate.
I have now found that I can cope with this sort of criticism because of the fact that I’ve used the notoriety I’ve achieved in a positive way rather than a negative way. When I opened up a health club in Henley, the fact that it was me meant that everyone knew it was opening. Which is the most important thing in a health club, that’s the one business where it’s all do to with people knowing that it exists. A lot of business is simply a question of whether people know that you’re there.
The Internet is the same and that’s why Gerald online is successful because when I launched it. With sixty billion websites out there, you can launch a website and nobody knows anything about it but they knew about mine because the press said “what bloody cheek he’s got for going back into the jewellery business, just when you thought it was safe to buy jewellery again Gerald Ratner’s back!” That again was very negative but it worked for me. Now when I see all this I think great, bring it on, the more the better.
How did you enter the speaking circuit?
When I launched Gerald online I was looking for a publicity stunt, to be perfectly honest. I thought the only thing that always gets me loads of publicity is to talk about my speech. So how can I get a lot of publicity? I know, go back to the Albert Hall and the Institute of Directors and do another speech there, which would guarantee it.
So I sent them an email in 2003,12 years after the original speech, saying why don’t you have me back to do another speech. I was right, it was on the six o’clock news that I'd come back there. They were really up in arms that I’d got a massive cheer from the audience; they couldn’t accept that all the businessmen stood up and cheered.
The speech went phenomenally well and there was someone in the audience from ABTO Travel who said, “This is exactly what I need for my delegates who are not aggressive enough.” So I did that and then I got asked to do a timeshare. I did tend to get asked for companies that were having difficulties like insolvency conferences but now its spread onto everything and I really enjoy it.
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