Big Brands are coming – it’s about to get tougher for big and small firms

By Andrew Neill

With the recent sad news of the difficulties at the Co-Op group, perhaps the rise of Co-Op Legal Services will be curtailed. It feels, however, that the industry has finally reached a genuine “Tesco Law” situation where mass-market, highly branded suppliers of legal services are ready to out-compete the small, independent high-street law firms – and there’s no Mary Portas in the wings, promising to rejuvenate those high-street firms.

The truth is that the Co-Operative – like Quality Solicitors and Slater & Gordon and others – have recognised that there is big business in providing a promise to customers that they are the right people to speak to when legal advice is needed. It doesn’t really matter if they don’t have the local knowledge and expertise that your local mom-and-pop lawyers have. These big businesses have something that will win most fights (for customers) before they’ve even started: a brand. A brand is a promise to customers, and theirs are out there fighting for potential clients on TV screens, magazines and online.

The same is happening in the plumbing market (not always the most obvious analogy for lawyers). Family plumbers and small firms traditionally made a living by offering local services, but the rise of the large, branded firms has made this sort of independence virtually impossible. As one (good) local plumber explained: “I tried working 7 days a week, but the work just isn’t there. So many people have insurance contracts now from people like British Gas that the work mostly comes through them [the insurers]. I’ve shut down my firm and signed up to work for British Gas. Now I get a decent salary, and I only work 9 to 5 on weekdays”.

The truth is, for a significant proportion of legal matters, specialist or niche expertise is not needed. Most wills, probate, divorce, conveyancing, boundary disputes, planning applications etcetera are un-complicated, and a branded firm will be uppermost in the public’s mind when the need arises. Those millions spent on advertising do work, and for a large number of law firms, the doorbell will just stop ringing. Or, more accurately, it will stop ringing enough to keep the business afloat, because those cases are the bread-and-butter that keeps firms ticking over. Revenues will drop, and with fixed costs static or rising (rents, salaries, insurance) there will soon be no profit left. There will remain a small amount of specialist work that will allow a few lawyers to run successful practices, but there will be a shakeout in the market.

So high street firms are going to be hurting from the rise of the big brands. Corporate and “City” firms are safe from the likes of Quality Solicitors advising on cross-border investments or regulatory changes, are they not?

Not so fast. Alongside the rise of “Tesco Law” we now have (as history repeats itself) the rise of “Accenture Law”. The big accountants and management consultancies have seen that legal advisory work adds another capability to their arsenal, and many have made big moves in the corporate market – see the rise of PWC Legal both in the UK and Asia, and EY appointing some big-hitting lawyers to senior management positions.

Within these big accountancies, there are entire global businesses of tens-of-thousands of employees who exist to offer services to big business largely so that they can cross-sell more lucrative offerings from the firm. Tax feeds audit; audit feeds consulting; consulting feeds outsourcing. Perhaps legal feeds them all. In that way, the likes of PWC and (perhaps) Accenture will compete with big law firms for the corporate work – and then cross-sell an outsourced legal function. Boom: no more work from that client for anyone else.

The big brands are coming. Both the high street and the big firms need take notice – their world is about to get a lot tougher.