The question is whether last week’s developments represent a changing of the guard, or whether other factors are at play.
Debenhams stores are still set to close
Let’s be clear, the Debenhams deal is only for the retailer’s intellectual property – mainly its brand name and customer data. The 118 Debenhams stores will still be shuttered, sadly resulting in the loss of over 10,000 jobs as only limited opportunities will become available as part of Boohoo.
Boohoo chief executive John Lyttle has expressed confidence in the retailer’s ability to make a success of the Debenhams e-commerce site. The acquisition also provides an opportunity for Boohoo to diversify beyond fashion and move into beauty and homewares.
Boohoo has been on an acquisition spree in recent years
Last year, the fast fashion retailer bought the intellectual property of Oasis and Warehouse, while it acquired Karen Millen and Coast in 2019. These brands allowed Boohoo to make a push into the middle market, as the core Boohoo brand focuses on young fashion. It currently continues to operate separate ecommerce sites for these brands.
While it is easy to see that Boohoo’s potential deals for Arcadia brands Dorothy Perkins, Wallis and Burton will follow the mold of Karen Millen et al, Debenhams could be a different story.
Does the Debenhams brand have a long-term future?
Boohoo intends to relaunch Debenhams as an online marketplace for fashion, beauty, sports and homewares. The offer will include former Debenhams’ own brands. But whether the Debenhams brand has a long-term future remains to be seen.
There is a reason why Debenhams has underperformed for so long. It doesn’t offer anything distinctive and the brand doesn’t really stand for anything. Will UK consumers still think back fondly of Debenhams long after its stores have disappeared from the high street?
There are previous examples of online players buying big retail names and attempting online relaunches. Collapsed British general merchandise chain Woolworths was acquired by Shop Direct in 2009, but its relaunched website quietly disappeared several years later. The website of failed department store chain BHS, bought by Qatar’s Al Mana Group, folded within two years of its bricks-and-mortar collapse.
If Debenhams does follow the Woolworths and BHS examples, it will still be worth it for Boohoo. Quite frankly, £5 million is small price to pay for what Boohoo is getting. The Debenhams site should continue to generate significant revenues in the short-term – the site ranks among the top ten most-visited websites in the UK. The deal will also allow Boohoo to experiment with new product categories, while Debenhams’ sizeable customer database will help Boohoo’s push into the mid-market.
Topshop deal could prove to be a more attractive opportunity
If Asos succeeds in cherry-picking the Topshop, Topman and Miss Selfridge brands from Sir Philip Green’s collapsed Arcadia empire, it could end up being a more attractive long-term proposition than Boohoo’s Debenhams deal.
For starters, Topshop/Topman and Miss Selfridge were Arcadia’s strongest brands. While Topshop may have lost its way in recent years in terms of its styles, its underperformance was also largely due to an inability to move with the times and embrace digital commerce.
In contrast to Debenhams with Boohoo, the Topshop/Topman and Miss Selfridge brands align perfectly with Asos’ existing Gen Z and younger millennial customer base. It should also be noted that ASOS already has an in-depth knowledge of the online performance of these brands, as it has already sold fashion from Topshop/Topman and Miss Selfridge on the Asos site through a wholesale partnership for years.
Move into physical retail for Asos?
While Asos is in discussion with Arcadia for the brand names only, there have been reports that the e-commerce giant is also considering buying the Topshop flagship store at Oxford Circus, in London. Up until now, Asos has remained a pureplay retailer – but the Topshop flagship would be a great location for Asos to dip its toes into physical retail.
The store benefits from significant footfall given its location and used to be a prime fashion destination for locals and tourists alike. Acquiring this property, would allow Asos to enhance its brand and perhaps offer a more experiential shopping experience than your typical fashion store.
While both Asos and Boohoo stand to benefit substantially from their respective acquisitions, it is highly likely that the Asos/Topshop deal (if it goes ahead) will prove to have a greater longer-term impact than Boohoo’s purchase of Debenhams.