Few in the industry would have been surprised when Arcadia reported a drop in its annual profits last month, though 16 per cent is still a spectacular fall. The decline seems to be symptomatic of the problems plaguing the mid-market sector more widely as it grapples with the legacy of inconsistent and unbalanced investment.
Traditional department stores are suffering more than most in this tough climate, which is why Debenhams is now overhauling its strategy to meet the demands of today’s shoppers. Recent events tell us that no retailer, no matter how well established, is too big to fail – and this should act as a wake-up call for retail bosses to re-evaluate their brand.
Within Arcadia, Topshop has always been Green’s ‘favourite child’ within the group, attracting significant investment especially at its flagship store on Oxford Street.
Stores have become a melting pot of disparate ranges, with no clear demarcation and a confused retail offer
In its heydey, it benefitted from strong links to London Fashion Week, virtual reality catwalk shows and the much-lauded collaboration with Kate Moss. When Moss first launched her collection in 2007, people who have grown up with the supermodel clamoured to buy the clothing, however it has failed to engage the next generation in the same way.
Sibling brands like Dorothy Perkins, Miss Selfridge, Burton, Evans and Wallis, as well as Topshop, now have been grouped together under the Outfit fascia. These larger stores, located in out-of-town retail parks, are certainly more efficient in terms of staffing and running costs – however, there is no credible brand voice.
For me, these brands are painfully average. The Outfit stores have become a melting pot of disparate ranges, with no clear demarcation and a confused retail offer. What is currently lacking – and what is desperately needed – is a distinct approach to brand delivery and VM that enables each one to offer something different. Blighted by uninspiring interiors and ranges, places such as Burton and Dorothy Perkins are now floundering in the face of fashion-forward giants like Zara, H&M, Primark, ASOS and Boohoo.
For department stores like Debenhams, the ‘house of brands’ format certainly seems to be hitting its bottom line, although it is reassuring to see that chief executive Sergio Bucher and chairman Ian Cheshire understand the need for change.
Along with plans to review the Designers by Debenhams clothing, the retailer is moving into a younger, more on-trend market with the launch of a new Mango concession. On top of this, it is also expected to make significant investments across its stores, with improvements to ‘experiential’ services like beauty and food.
Brands must make it worth people’s while to go shopping and genuinely give them something to inspire, delight and motivate them to buy
Back at Arcadia, it’s clear that Sir Philip is concerned enough about Arcadia’s fortunes to have recruited management consultants McKinsey to review his strategy, but he will need to recruit a white knight who can perform a miracle of future thinking across all the brands and the company itself. This is a business that increasingly looks to be slowly filling with water and after losing key figures in the senior management team, there may be others now looking for lifeboats.
There are now a number of large retail groups that appear to be treading water and senior management teams are no doubt contemplating the time and vast sums of money needed to effect change. It will be interesting to see what strategy McKinsey comes up with for Arcadia, although it’s likely that Sir Philip is already reviewing his options for some, or all, of these increasingly faded brands.
All this shines a light on how the mid-market, mainstream brands approach the delivery of their instore propositions. The question is whether shoppers still want ‘vanilla’ stores and if so, to what extent. Can the super-sized ‘vanilla tubs’ like Outfit be justified to save costs and fight against dwindling profits? It doesn’t seem likely when you consider that this kind of retail experience is available elsewhere, whether online, in supermarkets or discount stores.
In other words, brands must make it worth people’s while to go shopping and genuinely give them something to inspire, delight and motivate them to buy. The UK has enough discounters, charity shops and average mid-market stores – it really needs more Topshops, but not necessarily delivered by Arcadia.
The collapse of BHS must surely have shown Sir Philip that his business urgently needs massive transformation and investment in its brands and stores to catch up on the years of neglect. If not, we could well see another Arcadia fascia could go the same way of BHS or even the unwinding of the group. With the fate of some many jobs in just one man’s hands, the consequences of this would be catastrophic for retail and the wider economy.
This article was originally published by Retail Focus, July 2017.