Boohoo thriving in online fashion niche
Pureplay UK-based online fashion retailer boohoo.com has delivered excellent Christmas results capping off another successful year.
Its focus on partywear made it a go-to destination over the Christmas trading period, while the backbone to its success is its clear understanding of the needs of its core shopper base, and strategy of keeping price points competitive and broadening its offer. This has won it the loyalty of its customers and the acquisition of new consumers – impacting the likes of New Look, Primark and River Island.
Planned investment in price and discounting negatively hit gross margins, and this trend will likely continue throughout 2017 as boohoo.com feels the effect of higher cost prices. It can afford to raise its price architecture in line with the rest of the value segment, maintaining competitiveness and margins, but investment in improved quality will be essential in justifying some of these price hikes.
The acquisition of a majority stake in PrettyLittleThing completed on January 3, provides the group with greater scale and share of the online pureplay market. While it must capitalise on sharing logistics, manufacturers and customer data, it is important that the group continues to run the businesses autonomously to prevent overlap and sales cannibalisation, and ensure clear brand identities.
Meanwhile, the potential acquisition of the assets of US online pureplay NastyGal will provide boohoo.com with greater knowledge of US shopper habits, propelling its brand presence even further.
While UK growth shows little sign of slowing into single digits, boohoo.com is right to identify acquisition opportunities to gain a greater share of the global online pureplay market – especially in those countries where there is currently little competition.
- Honor Strachan is an analyst with Verdict Retail.