Case Study: Liberty Games
Once the preserve of a few pioneering brands, the internet-only store is now one of the fastest growing phenomena in the retail sector.
It’s easy to see the attraction. Web portals are much cheaper to operate than traditional bricks – and – mortar shops, and they allow you to offer many more products than you’d fit into the average High Street showroom.
It’s a model that appealed to Stuart Kerr and Jamie Stanford who, in the early 2000s, worked together in a company that rented pool tables, arcade machines, jukeboxes and games room equipment to venues up and down the UK.
Their experience of this market had convinced them there was also a strong demand for these items from home users, but there was no major online retailer catering to the demand.
Stuart and Jamie seized the opportunity and in 2004 www.libertygames.co.uk was launched. It was an instant hit, appealing to home enthusiasts and professionals who wanted to buy games room equipment online, from pinball machines right through to flight simulators.
The website allowed Liberty Games to quickly establish itself as the go-to company in its field. Although it has offices in Epsom, it doesn’t have the constraints of a traditional showroom – meaning the company can offer a good range of equipment and keep its overheads low by not having to keep every item in stock at the same time.
Increasing costs of PPC Advertising cut into profits
There was one hitch, though. In the early days of the venture, Jamie and Stuart were highly dependent on ‘Pay Per Click’ (PPC) online advertising – the ads that appear alongside Google’s search results.
It wasn’t a problem at first, as Stuart explains: “It made sense to attract customers using PPC ads back then. But as the market got more competitive, it drove up the cost of each click and that started to cut into our margins.”
The going had become much tougher by 2009, a time when Liberty Games was on the lookout for a new firm of accountants to work with the business. The team had heard good things about THP, so they got in touch with the team at our Cheam office.
They liked what we could offer, and almost immediately they struck up a great relationship with account manager Feng Pan.
“THP helped us identify where our major expenses lay and to focus on the products that made us the real money”
“Feng gave us lots of great advice from the outset,” Stuart remembers. “We liked having face-to-face contact with a keen and enthusiastic manager, and benefiting from advice that made a real difference to our business.”
So what advice did Feng offer at that stage? “From the outset he helped us identify where our major expenses lay and to focus on the products that made us the real money,” Stuart recalls. “He encouraged us to look closely at our margins, to consider importing products from cheaper overseas suppliers and to tackle the areas of the business where we were overspending.”
One of those areas was PPC advertising. The cost of Liberty Games’ paid Google adverts had escalated, driving up the cost of recruiting new customers to an almost unsustainable level.
Feng encouraged the team to cut that expenditure and invest some of the savings in other forms of marketing. As a result, the team has developed strong in-house search engine optimisation (SEO) skills, allowing them to attract more business through non-paid Google searches and reduce the cost of winning each new customer.
Thanks in part to Feng’s advice and lots of hard work by everyone at Liberty Games, the company is now thriving. THP continues to support the company and not only offers continuing strategic advice but also completes its statutory accounts and tax returns, as well as operating its payroll.
And because the firm now has up-to-date management accounts available it’s easy to keep close tabs on margins, – and as a result the business is achieving better profits and a growing reputation.
That’s great news for the whole team, although that’s not the only reason they enjoy working at Liberty Games. “Not everyone’s lucky enough to work in an office that’s like an amusement arcade,” he smiles.
It’s hard not to envy them.
Visit Liberty Games
This article can be found in our April 2012 newsletter, Clarity