British retail chain BHS has collapsed, jeopardising 11,000 jobs across the UK and leading to the likely closure of most of its 238-strong store network.
The department store, which dates back to 1928, was formerly called British Home Stores. It trades in 18 countries and territories, largely in the Middle East and Russian regions, has 164 company-owned stores and 74 franchises. Sir Philip Green, latterly best known as the owner of Arcadia Retail, including Topshop, paid £200 million for the BHS business in May 2000, but sold the business to a group of entrepreneurs trading as Retail Acquisitions last year for just £1. That group had been trying to work with unions and landlords to secure a lifeline for the business, but the business was placed in administration after a much-needed £60 million loan failed to materialise by Monday, and the business has debts of more than $1.3 billion.
Despite handling more than 1 million transactions a week, it couldn’t return to profitability.
CEO of retail analyst Conlumino, Neil Saunders, said the failure of BHS has brought to a close a long period of decline which saw the brand simply fall out of favour with shoppers. He says it failed to respond to changing tastes and the intensification of competition on the high street.
Just 15 years ago, BHS attracted some 13.4 per cent of Britain’s clothing shoppers through its doors.
“Although not all of these visitors would use BHS as their main store, many would buy one or two products – helping BHS attain a respectable 2.3 per cent share of the clothing market,” recalls Saunders.
“Last year BHS pulled in just 8.2 per cent of all clothing shoppers with a 1.4 per cent share of the clothing market.
“Such a decline reflects the fact that even to its core, older audience BHS has become irrelevant. The chain’s ratings on price, quality, value, and range have all fallen thanks to the rise of more compelling alternatives.”
Saunders says Primark and the supermarkets have dominated attention for more basic product, while chains like TK Maxx have allowed more aspirational shoppers a chance to buy fashionable branded product at low price points.
“Even in the middle part of the market, the reinvention of ranges at Debenhams and M&S – while not perfect – have left BHS’s range looking increasingly dated and dreary. All of this has been exacerbated by a store estate that, outside of flagship shops, looks tired and dull. This has meant that despite being in high footfall locations, stores have increasingly failed to draw people in,” says Saunders.
“A firm that lacks relevance but has a sound financial footing has a chance of reinvention. A firm that has relevance but lacks a sound financial footing has a chance of attracting investment. Sadly, BHS has neither.
“It is a firm that is out of step with modern consumer tastes, which lacks the finances to enact the major changes required. As such, it is now a retailer that is out of time.
BHS’ collapse marks the largest single retail business failure since Woolworths went into administration eight years ago.
Verdict Retail analyst Sophie McCarthy said at the time Retail Acquisitions bought the business last year it was clear that its new owners had a massive challenge on their hands to turn around its ailing fortunes.
“Store formats remained firmly in the 1990’s with product design, quality and execution falling far behind its rivals,” she said.
“BHS is an exemplar model of what happens when a retailer fails to take risks and try something new. While its rivals have invested heavily in omnichannel fulfilment, exciting design-lead collections and engaging marketing campaigns BHS has kept its feet firmly rooted on the spot, leaving it to fall by the wayside. Indeed the retail landscape is changing at such a pace that retailers often have to paddle hard just to stay still.”
McCarthy said it would be easy to point to department store darling John Lewis in order to illuminate BHS’ shortcomings but in fact it has failed to keep up with rivals across the board; Debenhams has invested heavily in creating a more engaging and holistic in-store experience and even struggling M&S has been pushing boundaries with some of its more recent homewares collections. Competitive forces have abounded at a wider level, especially from the value end of the market, as retailers such as Primark, B&M and Poundland have grown their physical space and customer base at impressive levels. However to blame BHS’ collapse on external pressures wouldn’t be entirely fair.
“In fact, a key tenet of BHS’ demise has been unclear strategy. Speculation in regards to the motivations of its previous and most recent owners, Sir Phillip Green and Retail Acquisitions respectively, suggest that the customer has, at times, been very far from the heart of BHS,” said McCarthy in the wake of the collapse
“A visit to one its stores reveals two things; firstly it doesn’t know who its customer is and secondly, it relies much too heavily on discounting to drive purchasing. Retailers across many sectors, from Sainsbury’s to Debenhams, have denounced the days of misleading, disingenuous promotions in favour of everyday, low prices – with reported success. It seems that BHS hadn’t noticed this significant shift in consumer behaviour, or just hadn’t responded to it.”
Research by Verdict shows post-austerity consumers are more cautious with their money, even as economic pressures have begun to ease, meaning retailers have had to work much harder to win custom and demonstrate value for money.
“Unfortunately BHS has consistently failed to give consumers a good enough reason to part with their cash over its rivals by trying to be everything to everyone and falling short. Its most recent foray in to foods is illustrative of what contributed to BHS’ overall decline – an inability to decide on what it actually stood for,” McCarthy concluded.