June 2016, by Stephanie Matthews, Director
It’s been called a horror story, a tragedy and a scandal. Beyond the hyperbole, the sad fact is that the recent collapse of BHS is an all-too familiar tale of a once iconic brand that failed to move with the times and got left behind.
In May this year the administrators called time on the 88-year old company – a household name with 163 stores employing 11,000 across the UK that (though this might be hard for younger readers to imagine) was once the go-to destination for affordable clothing and homewares in the UK. While the last ditch attempts to find a buyer rumble on (Sports Direct founder Mike Ashley has expressed an interest in ‘saving the BHS brand as well as a number of jobs’) its leaders are being hauled in front of the press and government committees demanding answers and tempers are running high.
This scenario is one that many other brands in the sector and beyond will be working hard to avoid. In a world where consumers are spoiled for choice, the BHS case highlights the very real need for retailers to apply brand-led thinking in the boardroom, not at the eleventh hour but as a natural part of daily decision-making. Here are just a few observations on what went wrong, and what could have been done better if only they’d acted faster.
Short-term financial decisions
BHS was sold to Retail Acquisitions in March 2015 as its losses widened to £21 million in its 2013-14 financial year from £19m the year before. Not only were they carrying a large estate of largely unprofitable stores, their shortsighted addiction to discounting had gradually eroded quality perceptions and destroyed their pricing power. Despite ‘substantial’ investments by the Green family over the years, analysts agree that while the £571m pension deficit proved an insurmountable hurdle for prospective buyers, years of chronic underinvestment in the proposition, innovation and technology seriously damaged the viability of the business and brand.
Former owner Sir Philip Green – the man behind TopShop – was seemingly unable to bring BHS into the 21st century. Of course, thoughtful, responsible brand stewardship by the right owner is essential to sustain success. To be effective long-term, owners must possess the mix of financial security, experience and ambition. Recent reports revealed that when the company was put up for sale in January 2015, the owners Arcadia Group received credible offers. They discussed selling BHS to a leading turnaround fund Sun Capital (owner of Dreams and Bonmarché) or South Africa’s richest man and retail magnate Christo Wiese before offloading the chain to formerly bankrupt Dominic Chappell with no retail experience for £1 in 2015.
Irrelevance and lack of raison d’etre
While our parents and grandparents may remember shopping in BHS for school uniforms, homewares and lighting, over the last twenty years their stores became tired and dated, leaving them exposed to more aggressive competitors. Following the departure of C&A from Britain in 2000, many stores, including one of their flagships on Oxford Street, soon fell into the hands of Primark – rather than BHS. This symbolic victory was a portent of things to come. BHS failed to articulate its raison d’être leaving consumers confused over who they were and what they stood for. Over time, people voted with their feet and shifted their allegiance to slicker competitors: Matalan, New Look and Bonmarché for fashion and Dunelm, Poundland and John Lewis for homewares.
Turnaround too little, too late
In May 2015, CEO Darren Topp announced his turnaround strategy for BHS with a stated aim to return the department chain to its former glory. Focusing on meeting the needs of working mums in their mid-40s looking for ‘clothing for all the family, homewares, electricals and food’, the plan featured store closures but also growth from in-store concessions from other Arcadia Group brands like Claire’s Accessories, Wallis and Dorothy Perkins, branded food (in partnership with Booker), revamped cafes and restaurants, heritage-appropriate UK sourcing. These were interesting enough moves but in the end, it was a case of too little, too late. Unlike their competitors they were slow too develop an engaging omnichannel experience which would have helped to drive additional revenues by attracting more people to shop online, taking the pressure off their bricks and mortar stores. Getting ahead on click-and-collect was an obvious move they should have made years ago, for instance.
Despite broader challenges in the sector, the decline of BHS was not inevitable. With the right brand thinking in the board room – a single-minded strategy and a desire to get ahead of the consumer, act on insight and invest in iterative improvements across the customer experience – businesses like BHS will be more adaptable and resilient in the face of tough trading conditions.
Photo by tanakawho (Flickr)