A catalogue of success: How RS Components has grown to become a global distribution power
7 min read
There are very few companies in the fast moving world of electronics that can celebrate 75 years of serving customers with much the same philosophy their founders foresaw.
RS Components has just achieved that goal – albeit the kind of products it is distributing are vastly different and more diverse. And the methods used to take orders and deliver goods could not have been imagined back in the autumn of 1937. Originally named Radiospares, the company was founded by two European émigrés – the Hungarian Paul Sebestyen and the Dutch Johann Weinberger (who, once he became a British citizen, changed his name to Waring). They had been involved in other ventures in London in the 1930s. For instance, together with Weinberger's brother Heinz, they created a venture to import German made radios, which later extended to manufacturing sets. But this failed, mainly because of the imposition of the Fair Trade Agreement, under which only those wholesalers that signed up would be allocated stock. The final knock came when it became illegal to sell imported radio sets. The three then applied their knowledge of the emerging radio sector and their entrepreneurial instincts to the frustrating business of frequently having to repair and replace parts in radio sets, noting dealers and repair shops were constantly finding themselves short of key components. "We reasoned that, with the boom in radios, there must be a big market for components that could be supplied quickly and cheaply," Sebestyen recalled in his unpublished memoirs (The author, a former editor of Electronics Times and EE Times Europe, is Paul Sebestyen's nephew). The partners then created a precursor of Radiospares with £15 worth of components, mostly electrolytic condensers. "We loaded up our cars and found a market for these. Each day, we went back to our suppliers and bought for cash whatever we could sell. Our catalogue was a typed price list of just ten items on a single sheet of paper. "At that time, component manufacturers considered the replacement market as one through which they could unduly enrich themselves. For instance, an 8mF 500V condenser – the mainstay of the replacement business – was listed at 8/6d (42.5p), less 33% to the dealer. We sold these at 1/6d net (7.5p). In this way, we built up a business, as well as a terrible reputation for being awful price cutters. Never mind – it was hard graft, almost always on the road, but from the word go, we made money," Sebestyen noted. Eventually, the trio broke up. Johann Weinberger and Sebestyen decided to continue with an expansionist strategy of opening up new markets and hiring representatives as and when the opportunities arose. Sebestyen suggested he coined the name for the new company, a play on the name of a service and repair client called Radio Menders. Thus began a 34 year partnership that saw numerous setbacks and many triumphs. But, from day one, Radiospares boasted the same day despatch service that remains the mainstay of RS Components today. One reason for the early successes (by the end of the first year of trading, Radiospares made a net profit of £ 1000; "in those days, a great deal of money," noted Sebestyen) probably relates to the characters of the two founders, who complemented each other well. Sebestyen was gregarious and a natural salesman, always looking for new clients and territories so as to meet the objective of 'A replacement for every job. And 24 Hours' Service on top of it!'. That, and a total commitment to quality and service. Weinberger was more sober and considered, well focused on the important business systems side of the fast growing operation. He introduced the single entry book keeping system and the sub stocking sectional warehousing system that remained in place until 1962. The company soon outgrew the original lock up garage in Lanark Villas, Maida Vale, and moved to slightly larger, but more antiquated, premises in Birchington Road in nearby Kilburn. In 1984, this also became the address of its purpose built complex in Corby, which initially had 300,000 sq ft of warehouse space, modern offices and a trade counter. This was by far the biggest and most important move made by the company – out of London, where there were three sites bursting at the seams, plus packaging in Hertford and warehouses in Milton Keynes, making the operation a logistical nightmare for the existing business, never mind the grand plans of the new executives. Both Bob Lawson and Norman King (see below) noted how, by the late 1970s, it became almost impossible to process orders, with some components passing through all these locations before final despatch. It became evident that everything had to be brought 'under one roof'. Both executives took pride in the way the move was achieved, from an advantageous financial and a most successful and well coordinated logistical angle, over Easter, and the fact that almost all senior staff made the move to Corby. King received an OBE in 1987 for overseeing all aspects of the move that offered the company – by then RS Components – enormous growth potential. One crucial game changing breakthrough in the early days was fondly recalled by Sebestyen. This was persuading key component manufacturers to make 'branded' products, featuring Radiospares' 'flying man' logo; an approach that would remain a mainstay of the company until the late 1960s. In house, he was known as 'Mr Speedy'. With this deal, the founders also pioneered a totally new concept that today is commonplace, not least in supermarkets. This entrepreneurial trait is still a mainstay of the company. For instance, it was quick to add tv parts to its list as early as 1947, when televisions proved as unreliable as radio sets. Subsequently, this surefootedness was exemplified by RS becoming the first mainstream distributor to come out with a CD to complement the 'door stopper' catalogues some engineers seemed to prefer. More recently, it was one of the first to pioneer order taking through the internet. The pre war years saw constant growth and, by 1939, the company had signed eight representatives to cover the Home Counties. But, as war beckoned, circumspection set in across all industries and Radiospares found itself with large stocks, considerable financial obligations to suppliers and a static market. This was quickly followed by stockpiling as everyone realised shortages were becoming inevitable. Ever opportunistic, Radiospares staff rushed round selling stock and, by September, had almost sold out. The war years had a profound personal effect on the founders and the company. Both were stateless, so needed to be extremely cautious in their business dealings. They arranged for the company accountant and personal friend John Diamond (later Lord Diamond) to take charge should they be interned. On the business side, the fact that the Government was extremely keen to keep the nation's radios working meant stocks were being replaced. The rebranding of components was hugely accelerated, making the parts – and logo – instantly recognisable. The company also foresaw problems and concluded exclusive deals to distribute radio parts –mainly valves from US company Hasard Austin. However, by April 1940, this source dried up and with it went 40% of Radiospares' turnover and profits. "By extremely hard work and some lucky escapes, we survived the war in relatively good shape. This was helped by the decision to go to a mail order strategy, using the catalogue as the mainstay, as many of our representatives got called up," Sebestyen recalled. The same day despatch promise was kept throughout the war and a rationing system was introduced. While the company continued to prosper, it wasn't all plain sailing. Sebestyen recalls major differences about the timing of another huge change in strategy, not just dealing with repair shops and individuals, but also serving industrial customers. That finally happened in 1954. Some years later, the decision to expand into industrial components, in response to global shifts in manufacturing and equipment becoming significantly more reliable and requiring fewer replacement parts, was easier. The years leading up to the successful flotation and emergence of Electrocomponents in 1967 saw heightened tension amongst senior managers and the founders. Some wanted to diversify into other industry sectors through acquisitions; others saw increasing manufacturing capacity as the way forward. Sebestyen talked of Waring and a group of managers ganging up on him and his favoured successors. Succession was in the air because, much to Sebestyen's chagrin, he had to retire aged 65 in 1971 as stipulated in the Articles of Association agreed ahead of going public. Waring retired two years later and Ron Marler took the reins. He attended the launch of Intel's 64k ram – and, as far as RS's involvement in semiconductor distribution, the rest is history. King and Lawson told how Sebestyen would still turn up, sometimes unannounced, to head office years after retirement and grill them about strategy and operations as thoroughly as if he were still in charge, using the same tough, no nonsense methods the founders had used from the beginning with all their employees. Sebestyen, in his taped memoirs, recognised he was seen as a bit of a bully and blamed himself for the very high staff turnover during the early years. Many representatives 'voted with their feet', with quite a few leaving after the dreaded – and often hot tempered – 12 hour long 'Black Saturdays', when they had to account for their sales figures. Waring, seen as the great leveller in the partnership, was somewhat more pragmatic when discussing the actual accounts. But agonised debates about strategy were not only confined to the early years. One of the toughest, which nearly lost King his job, concerned the introduction into the catalogue of engineering tools. In retrospect, it should instead have led to an enormous bonus in view of the way that segment rapidly took off. Diversification into other areas via ill judged acquisitions was a different story, which management under Lawson took years to resolve. He may have sold off many of these distractions, but much later, in 1999, during his second spell at the company, Lawson also pulled off the acquisition of US distributor Allied Electronics, which he considered the 'last piece in the puzzle' as regards clearly thought through and timely geographical expansion. In his tapes, made in 1977/78, Sebestyen talked with pride of how, despite some differences, the founders managed to groom 'a second generation of managers and introduce novel internal and external operating systems' that took the company beyond his expectations. He would be simply amazed today, not only at where his 'great ideas' have led, but also how they continue to evolve under the current management. Timeline 1937: Radiospares founded 1938: Outside sales force formed 1943: TV parts added to inventory 1947: First export link with Radionics, Dublin 1954: Sales expanded to industrial customers 1965: 50% of sales to industrial customers 1967: Company listed on stock market as Electrocomponents plc 1971: Company name changed to RS Components, Paul Sebestyen retires 1973: Johann Waring retires – Ron Marler is new md 1974: Catalogue carries more than 2500 products 1976: Sales exceed £1m per month 1984: Moves to custom built premises in Corby 1986: International expansion begins 1989: New products magazine launched 1991: Corby warehouse extended. Verospeed acquired 1995: First company to produce CD catalogue 1998: Internet trading commences 1999: Allied Electronics acquired from Avnet 2010: DesignSpark launched 2011: e-commerce accounts for 53% of sales