We need plenty of headroom
Nils-Arild Angeltveit is the CEO of six successful Instinct stores, and he believes sensible operations are the key to their success.
Instinct Menswear was first established in 1956 under the name “Ungdomsklær” [“Youth Clothing”]. This laid the foundation for its development, where it eventually became a robust player in the menswear clothing sector.
There were major developments when ownership changed hands in 1983, and in the early 2000s, the company underwent an extensive rebranding, which resulted in the current chain, Instinct Menswear.
Board shareholders who professionalise
Angeltveit began his career as an assistant at the store in the late 1990s, as his father was head of the company at the time. In the early 2000s, when his father sold parts of the company, Angeltveit partnered with a group of shareholders to purchase the chain that now includes six stores – four in Bergen, one in Oslo, and one in Stavanger. Here customers can find clothing brands such as Tiger of Sweden, Gant, Riccovero, and J. Lindeberg, just to name a few.
-Our goal is to make purchases for maximum of 50 per cent in advance and hold on to the remaining 50 per cent to supplement the seasonNils-Arild Angeltveit
“When I look at other Texcon stores, they often have one owner, or they are family owned. What is different about us is that the company is distributed across ten shareholders. We no longer run a family business, which I believe makes us more professional. You relate to board shareholders differently than you do to family members,” says Angeltveit.
Angeltveit describes his role as the link between the store managers and the board of Instinct, while also emphasising the importance of being present in the stores and being acquainted with the employees.
Wanted fewer suppliers
It’s impressive – you have six stores and all of them are doing well and making money. What is the key to your success?
“We made some changes in 2018. We sat down and figured out what was needed in order to turn a profit: You have to have sensible operations. This is an absolute must. We are also focused on ensuring a high inventory turnover, where we prioritise suppliers that are able to maintain a sufficient inventory and not simply sell goods in advance. And we have determined that we want fewer suppliers and a better collaboration with those we have, as opposed to broadening our supplier group.”
What about purchasing?
“We are strict about that. Our goal is to make purchases for a maximum of 50 per cent in advance and then hold on to the remaining 50 per cent to supplement the season. Suppliers are probably not as enthusiastic about this strategy as we are, but we view this as a safety measure to ensure greater flexibility during the season.”
Fresh internal transit of goods
How do you prepare for more challenging times?
“Inventories are the first thing we address. We only purchase what is absolutely necessary. And we are always trying to tune our inventory so that it reflects our turnover and we don’t end up with excess inventory that must be realised in the following year.”
There is also extra focus on internal inventory transfer between the stores:
“We meet weekly to review suppliers’ inventory reports and how the various brands have been delivered in batches for each store. During this process, we try to be hands on. If we’re too slow, it will be too late. You have to move while the products are fresh!”
Is it important for the Instinct experience to be the same in each of the six stores?
“As similar as possible, viewed from the outside. At the same time, we know that geographical distance plays a role, so the store managers purchase different items for each store. However, if a customer visits one Instinct store and then visits another one, he will generally view these as being part of the same chain and same store.”
That’s quite clever, because you’re not really a chain, and yet you are – especially since all six stores are named the same. So I’m curious: Why have you given all the stores the same name? “Well, basically it’s because it seems illogical not to do so. We have to ensure some sort of recognition effect among our customers, even if the stores are slightly different.”
Store managers given plenty of freedom
You mentioned that the store managers make the purchases. Do you delegate a large share of the responsibility to them?
“If you’re running two or three stores and plan to be present in all of them, you’ll be constantly running between them. So I rely on store managers who are able to run their own stores. At our company, store managers have a strong power of influence, at least compared to what they would have had in a larger chain.”
-If you are running two or three stores and plan to be present in all of them, you`ll be constantly running between them. So i reply on store managers who are abel to run their own stores.Nils-Arild Angeltveit
This is a challenge for all chains, but you have something in your chain, call it a formula for success, that few other chains have, which is the freedom to determine: What shall we sell in this particular store?
“That’s entirely correct. Naturally, the store managers have certain parameters when working with suppliers, but they still have to discuss things with both me and the purchasing manager of the Instinct chain. This has to fit with our price points, and it has to fit the segments, but as long as all that is in place, they have plenty of freedom. Suppliers today are so big that two stores can make purchases from one supplier and still end up with entirely different items.”
Be true to your own concept
Some of the stores are located in shopping centres. When they hold centre-wide sales like ‘Elleville dager’, are you part of that?
“We’re not fans of the ‘20 per cent off all stock’. We actually avoid that. There will always come a day after these sales, where the best items in the stores are likely sold out. Besides, you create an expectation in the customer that says: ‘Every other month something will be going here where you can get these things on sale.’ If you look at the figures, you can see that those who use this strategy will likely have a higher top line than us, but at the same time, very few will be left with an okay bottom line.”
But isn’t it a bit difficult to remain so true to your concept?
“You must remain true. During more difficult times, when sales stagnate, many stores will need to bring in liquidity and be pressured into having sales and discounts. And that is destructive in the long run.”
Marketing in change
How do you operate a chain of six stores at the administrative level? “We create an annual wheel that we follow to the letter each year. All activities from January to December are pre-planned in the annual wheel. And the annual wheel is strongly related to marketing, which has changed a bit in recent years.”
Are you active on social media?
“Yes, each store has its own Instagram account. We also have an online store, but as we see it, the online store and social media are simply part of the marketing channel and not something we make a living from. They function as a support for sales in the physical channel.”
And what position have you taken in the market?
“We attend trade fairs, and we have tried to take a position on weddings, at least in Bergen. We’re currently planning to visit Grieghallen for a wedding fair, where we’ll have a stand and a catwalk, and models will be showing our bridegroom apparel. We also try to maintain a presence in the local community and support both sports clubs and culture.”
Texcon – a sense of belonging
What about inspiration? Do you attend Texcon events?
“Yes, in March we tried to bring all the store managers together. It’s exciting! There is a lot of enthusiasm at Texcon. You get a sense of belonging and have a forum for sharing experiences. We are a group of people who are all involved in the same things, and we want the best for each other. Although Texcon is huge, we’re still a bunch of small players competing against the big guys.
-Although Texcon is huge, we`re still a bunch of small players competing against the big guys.Nils-Arild Angeltveit
We have internal gatherings for all the store managers each quarter where we meet up in person, and we also hold an annual party for all employees. Here we award the best salesperson of the year, but our main focus is on the social aspect. Yet we always try to include some professional features.”
Let’s take a closer look at values and culture. What is important for Instinct to function optimally?
“As a company, we must always consider our employees, suppliers and customers, and we need plenty of headroom. It is essential to maintain a good reputation, and this should reflect the entire organisation. We believe this is why our employees choose to stay with us.”
When you budget, you budget on items: “How many shirts do I need to sell?” Do you search for lower price points or is that not a factor for you?
“When we say we want to remain true to our concept, that includes price. We have one price point: To make the store seem a bit less daunting by telling customers at the door: ‘We have a shirt and a sweater that cost 700-800 per item.’ Not just: ‘1,500.’
“The challenge is to get the customer through the door,” says Angeltveit. “After that point, it’s all about identifying the customer’s needs:
“What does the customer really want?” If we can determine that, it’s a lot easier to sell more and to make the customer happy. We have a slogan here: “Best in menswear”, which we emphasise in the store. This is somewhat undefinable, but no one can claim otherwise! We sell menswear, so that’s what we’re best at.”
It is said that customers nowadays are more price conscious than before. Is it difficult for store employees to justify the price based on the quality of the clothing?
“This also refers to our price point. I often tell employees: ‘A good idea here is to lift up the shirt that costs 700 and hold it next to a shirt that costs 1400. The customer will often see that there is a difference.’ This justifies the more expensive brands – by having these price points.”
Shirts in size “large” for Christmas
It seems as though you’re building the chain slowly and safely. Do you have any ambitions of opening additional stores?
“Maybe in a few years, but at the moment we have no plans to expand. We’re actually comfortable with that. We have six stores and everyone is making money and turning a profit.”
How are things going these days?
“Based on our accounting figures, we are currently at around 45, excluding VAT. We managed to climb above a ten per cent profit, both for 2021 and 2022. So far, 2023 is uncertain, because a lot is determined in November, and especially in December. But I think we’ll do just fine.”
How are you preparing for the upcoming Christmas season?
“It all starts with the item itself. As we say at Instinct: We have to have the right selection. We have to ensure that we have sweaters and shirts in size “large” in December. And we need to spend the money we have left in the budget to purchase Christmas gift items. The most important thing we can do up until Christmas is to have the right product in the stores, which I believe are Christmas gift items, and not too many suits.”
A little bird from Bergen whispered in my ear that the Christmas party season over there appears to be fully booked… So expectations must be high in the restaurant industry at least.
“And that’s a great thing! But many will choose to wear last year’s suit instead of buying a new one.”
But have you trimmed your product range to ensure you can deliver during the Christmas gift season?