Debenhams, an undisputed Goliath of British high streets and shopping centres, has seemingly found its David in the form of online discount retailer Boohoo. But all may not be as it seems –
A decade ago the roles would, most likely, have been reversed. Any whisperings of a £55 million asking price for Debenhams, would have either seen buyers jumping down your throat to snag the bargain, or laughing in your face at the outlandishly cheap price for such a revered brand.
Is This A Win Win Situation?
However, it’s no secret that Debenhams has not exactly been on the up and up in recent years. Within its 242 year lifespan, the store has seen some soaring highs, but at the end of 2020 Debenhams was set to close its doors in the wake of coronavirus declines. But according to the YouGov Brand Index, the problem runs deeper than that. The data clearly shows that while the high street giant is still widely beloved by us Brits, Debenhams failure to provide value for money has caused resoundingly less customers to walk through its doors since 2010.
The subsequent image of Debenhams as a high end retailer, has seemingly done a fair amount of damage to the brand. Over the last decade, Debenhams’ Index score (calculated using an average of Impression, Value, Quality, Reputation, Satisfaction and Recommendable scores of a brand) declined from 30.9 in 2010 down to just 21.8 last year. On the other hand, the Boohoo Group, which already owns other retailers such as Warehouse and Oasis, turned over £816.5m in 2020. There is a good chance then, that Boohoo has been welcomed with open arms, not as a dominating conglomerate, but as a saviour; a chance to continue to replenish the brand and bring customer numbers up.
Using The Online Structure
With an online infrastructure already set up by Debenhams, there’s no reason to let it go to waste, especially as it saw close to 300 million annual visitors between August 2019 and August 2020. Boohoo plans to merge some of its collections with the existing Debenhams departments on their online sites, as well as overseeing a transfer of all customer data. However, in Boohoo’s estimation, the same cannot be said for the 118 Debenhams stores (and each of their 12,000 staff members), dotted up and down the country.
At first glance this may seem like a waste. Closing over 100 existing high street stores at any other point in history, would be considered a death knell in terms of revenue. But it is the clearest example yet of how shopping trends are already changing drastically, in the wake of COVID-19’s effects on consumer trends. With Debenhams presence declining over the last 10 years anyway, it’s no surprise that since the future of physical, non-essential retail is uncertain, brands want to take the experience online exclusively, in order to not only maintain but maximise sales. The biggest example came earlier in January, with the news that ASOS was planning to purchase the recently failed Arcadia Group stores; interestingly one of which, JD Sports, was set to buy Debenhams before they themselves went under.
Uncertain Times For Non Essential Retailers
It’s very clearly an uncertain and tense time for non-essential retailers. However, this ‘solution’ is neither guaranteed nor easy to see through, and £55m could be considered an outlandish amount of money to pay for a website and a brand name. To add to this, efforts to reinvent casualties of the previous recession, such as Woolworths and BHS, have failed miserably and very publicly during recent years.
“The key is to have the right products,” Boohoo CEO John Lyttle displayed his confidence in a press release. “We’ll be revisiting which brands we want to sell and we’ll be putting existing Boohoo brands into the Debenhams marketplace.” It certainly is true that Boohoo does not currently sell the premium beauty and clothing products that Debenhams has become known for, which could open the potential to explore a far wider consumer base.
Will Boohoo be able to make this merger work, and by how much will their reputation be damaged if they cannot fulfil this plan? The future of Debenhams, and multiple other high street retailers, is far from certain yet.