Welcome to another edition of This Week in Retail, our 129th and packed full of stories with a focus on fashion. We have a set of great stories on how retailers are disrupting the high street stalwarts, through to those retailers who have had a tough Christmas leading to a less than favourable January.
We start this week looking at fast fashion. Missguided has been in the news a lot over the past year with some impressive year on year growth figures, a significant social media presence and a partnership with everyone’s favourite TV show, Love Island (it can’t just be me?). Its growth has been seen as a sign of the times, built on aligning with trends quickly and getting products to market at speed, securing partnerships with up and coming stars whilst appealing to a younger market aimed at the 16-30 age bracket. This has forced a raft of new competitors to flood the market. However, it isn’t all rosy as it announced a pre-tax loss of £46m this week, up from a £1m loss the year previous. This has been blamed on two key areas; an unsuccessful furore into the bricks and mortar space with large store footprints and a premature commitment to establishing a new level of senior management. This is in stark contrast to results at their biggest competitor, Boohoo, which has seen its stock price surge on news of a 44% growth in sales over the last 4 months overtaking Marks and Spencer in terms of market capitalisation. This is even more interesting when you keep in mind their acquisition of struggling brands Coast and Karen Millen earlier this year. With rising pressures on product provenance, the environment and quality, it will be interesting to see how these brands can maintain a healthy margin in the face of intense pressure.
Moving on from fast fashion to the high street. Two stories which really struck me this week revolved around two struggling brands, Joules and Superdry. The former has announced that sales have fallen by 4.5% due to “an internally generated stock availability issue”, with the latter warning that they could make zero profit this year as they have looked to reduce their promotional activity over the holiday period leading to reduced sales. Both brands have one thing in common; a need to transform their business model in order to keep up with changing consumer preferences and habits. This is no mean feat and will likely take years, but is a necessary step to re-engage a disillusioned customer base before it’s too late.
Outside of fashion, Lidl has today announced its intention to go into the online grocery world to deliver ambient goods and alcohol. Similar to some of the fast fashion stories we reported on earlier, with a low cost, lean model adopted by the low cost grocers, it will be interesting to see how its margins stack up to an online operation that is frequently reported as loss leading by some of the largest food retailers.
Finishing off this week, one of my favourite stories focused on the new “See My Fit” service launched by ASOS this year in partnership with augmented reality start up Zeekit. The service had been trialled early last year but has now gone live. In short, it allows ASOS customers to see how their products would look on a range of different body sizes. Whilst on the face of things this looks like a great initiative for the customer in getting the right product, it should allow ASOS to ease bottom line pressure by reducing the amount of returns.
Have a great weekend!
Senior Consultant, Retail Supply Chain
Digital Fulfilment Operations and Logistics