All eyes are on BHS to see if new owner Al Mana Group can succeed in breathing fresh life into the brand with its ecommerce site.
With the help of an 84-strong team, headed up by the department store’s former international director David Anderson, BHS re-emerged in the UK two weeks ago with a website selling its bestselling homewares products.
The BHS team have a long way to go yet. Reigniting a burnt-out retailer isn’t easy. The first thing to decipher is whether or not there is enough brand equity left to justify a revival.
Does mud stick?
“Attempting to reverse-engineer existing negative brand equity to fit a new commercial opportunity, rather than creating something purpose-built, is difficult,” says Allison Vettasseri, strategy director at marketing consultancy Clear.
“The fit isn’t natural and requires consumers to rewire their expectations and how they think about a brand,” she explains.
“It doesn’t stay in the consumer’s mind very long that someone has gone bust. If someone likes shopping in a store, they will keep shopping in that store. I still go into HMV and don’t think of it any differently”
David Mordecai, Hawkin’s Bazaar
But Hawkin’s Bazaar chief executive David Mordecai, who was parachuted in to reinvigorate the toy retailer five months after it fell into administration in 2011, believes “customers are very forgiving”.
“It doesn’t stay in the consumer’s mind very long that someone has gone bust,” he says. “If someone likes shopping in a store, they will keep shopping in that store. I still go into HMV and don’t think of it any differently.”
OCTC founder Michael Jary agrees and, contrary to Vettasseri, believes that reviving a brand can be easier than starting from scratch. “You have instant and invaluable levels of awareness, plus customers will be curious,” he says.
Strike while the iron’s hot
However, Jary says it’s best to strike while the iron’s hot when trying to revive a brand that has gone bust.
“The key is to buy these brands when they still hold some value at that price,” he says. ”They are not perfect, but the instant familiarity and customer momentum is worth something.”
But Jary warns that there is a tipping point, beyond which, it’s too late. “There comes a point when the consumer does not care any longer and they feel their prior loyalty in the brand was misplaced,” he says.
KPMG head of retail David McCorquodale says brand equity can be lost if a business has slowly deteriorated over a number of years.
“Woolworths’ death was slow and painful, so by the time it was resurrected, its customers had all moved on and forgotten,” he says.
This impacted the success of its relaunch as an online-only brand by Littlewoods-owner Shop Direct, which bought the brand name out of administration in 2009, says McCorquodale.
“Between Woolworths closing and Shop Direct relaunching it online, retailers like B&M snapped up its share of the home and general merchandise market, while online retailers like Amazon ate its share of electricals, music and books,” he says.
Shop Direct closed down the Woolworths site last year.
Going back to basics
According to Vettasseri, while there are new digital brands introduced every month, “there’s a counter-trend of nostalgia” and shoppers find comfort in what is known.
Jary says damaged brands are wise to capitalise on this, explaining that “all successful reinvention programmes have an element of going back to their roots”.
“It is important to capitalise on an existing degree of familiarity, but then you have to meet the demands of the modern consumer with an attractive and enticing proposition, competitive service and an up-to-scratch website”
Michael Jary, OC&C
Many brands hark back to their heritage when times are tough. Jary points to Asda, which is leaning on its value-for-money proposition, and Burberry, which has reverted to its classic macs, to win back once-faithful shoppers.
However, after a company has disappeared from the high street, it is not enough to rely on history alone.
“It is important to capitalise on an existing degree of familiarity, but then you have to meet the demands of the modern consumer with an attractive and enticing proposition, competitive service and an up-to-scratch website,” says Jary.
New owners must carve out a unique place in the market when reviving a retailer. HMV has strived to reposition itself as a music specialist following its collapse in 2013. New owner, private equity firm Hilco, scrapped the retailer’s tech offer and introduced vinyl and live music events to its stores.
“It was even more difficult to breathe life back into the chain because it never had an online offer. It would have taken an awful lot of marketing from Shop Direct to convince Woolworths’ customers to navigate online”
David McCorquodale, KPMG
Despite reporting falling sales in its full-year last month, HMV chairman Paul McGowan hailed “encouraging” market share gains.
Likewise Jessops, which was bought out of administration by Dragons’ Den star Peter Jones in 2013, has also repositioned itself as a specialist, and offers in-store photography tuition and courses and trumpets the expert advice of its store staff. The move clearly worked as Jessops returned to profitability in its first year of trading post-administration and has been in the black ever since.
“The key is to get the balance right between building on heritage and getting the proposition right for today’s consumer,” Jary concludes.
That includes getting the format right. McCorquodale argues that Woolworths failed to gain mainstream appeal as a digital business because its customers were not online shoppers.
“It was even more difficult to breathe life back into the chain because it never had an online offer,” he says. “It would have taken an awful lot of marketing from Shop Direct to convince Woolworths’ customers to navigate online.”
Take it one store at a time
The retailers that are succeeding in bringing back businesses from the dead have done so by taking it slowly.
Jones has been cautiously rebuilding Jessops’ estate, reopening in locations where it was previously very popular, since he acquired the business.
Mordecai has also exercised prudence at Hawkin’s Bazaar. It now has 30 permanent stores and is opening 12 temporary shops for Christmas this year. Mordecai says if these stores are particularly successful he will consider keeping them open.
“If you’re opening stores, they need to be less risky ones. Units in the highest-footfall locations cost a lot of money,” he says.
“We’ve been careful not to grow too quickly. We listened to what our customers wanted and observed their shopping habits, and responded accordingly.”
Under new management, Hawkin’s Bazaar has worked to reposition itself as a gifting destination as well as a toy retailer, and revenue has grown from £8m in 2012 to £14.1m in 2015.
Where does that leave BHS?
Jary believes Al Mana’s online BHS venture could have legs. “Setting up online is a good way of testing for continuing loyalty and to see if they can rebuild from there,” he says.
Vettasseri is more cautionary, however: “There are plenty of existing specialist omnichannel retailers generating huge volumes of online sales. They won’t be ready to cede their market share to BHS online,” she says.
BHS has been reinvented over an eight-week period, while the scandals surrounding its demise rumble on. Whether or not its former customers bear a grudge is yet to be seen.
But one thing is certain: The hard work has only just begun for those behind the brand’s reincarnation.
Rebuilding a culture of trust
Hawkin’s Bazaar chief executive David Mordecai says it is imperative for new management teams to swiftly regain the trust of former suppliers, partners and landlords.
“The first thing to do is meet with your key suppliers, show them what has changed and why you think the business is in a better place now. Give them access to monthly accounts if necessary.”
Mordecai adds that it’s wise to recruit some of the retailer’s former staff.
“Invariably the people within the organisation are fantastic,” he says. “It’s usually daft decisions at the top that caused the problem.”
On the topic of former colleagues, Jary points out that if staff have been through a succession of troublesome times, it’s essential to reinstate their sense of confidence in the business.
“They need to feel secure in the knowledge that this not just another juncture and that there’s a real future there. This positivity then gets communicated to the customers,” he observes.