BHS’s demise throws into sharp relief how unforgiving the British high street can be, and proves that retailers must thrive to survive.
The news today that the department store chain is to enter into liquidation is sad, but not unexpected.
Of the 11,000 people who worked at BHS, the 8,000 directly employed by the retailer are likely to lose their jobs. The fate of another 3,000 people, 1,000 of which are employed in Arcadia concessions in BHS stores, is as yet unknown, but doesn’t look promising.
It is the biggest collapse on the British high street since Woolworths shuttered stores in 2008, and highlights how competitive an environment the UK high street still is.
When rubbing shoulders with staggeringly successful etail giants and the meteoric rise of fast-fashion brands such as Primark and Zara, it is no longer enough to complacently assume that 88 years on the high street might guarantee another 88.
There are retailers that stand to benefit from BHS’s demise, including Primark and M&S. And, ironically, experts believe that BHS’s collapse could in fact help revive some high streets as it will free up space for more attractive retailers to open in towns that really need them.
Sleep walking its way to administration
Although much has been made of Retail Acquisitions leader Dominic Chappell’s mismanagement of BHS, it seems that the chain sleep walked its way towards the precipice long before he was on the scene.
Years of under investment, evidenced in the tired fascias and lacklustre product, were instrumental in BHS’s demise. It had, after all, been loss-making for seven consecutive years.
“Nobody in British retail was prepared to put up – or had access to – the amount of cash it would have taken to mop up the mess and right the chain’s course”
On the day that it entered administration, Conlumino chief executive Neil Saunders said the retailer had failed “to respond to changing tastes and the intensification of competition” and that even its older core audience mostly regarded the chain as “something of an irrelevance”. So it is questionable whether BHS will be missed by many.
Its flagship Oxford Street store was dismal compared with the competing department stores, which flanked it, and gives some indication of what the other 163 stores would have looked like.
Coupled with mismanagement, an eye-watering pensions deficit and unsustainable rents, BHS’s fate seems to have been sealed long before today. And no doubt the introduction of April’s living wage and crippling business rates only exacerbated an already painful situation.
No appetite for a rescue
Despite its problems, BHS attracted all manner of high-profile bidders including Sports Direct boss Mike Ashley, Edinburgh Woollen Mill chief executive Philip Day and, the last to throw their hat into the ring, a consortium led by former Mothercare and Burton boss Greg Tufnell.
“It is no longer enough to complacently assume that 88 years on the high street might guarantee another 88”
But a drawn out administration came to nothing, with administrator Duff & Phelps saying that, in spite of “considerable efforts” and multiple bids, “none were able to complete a deal due to the working capital required to secure the future of the company”.
Nobody in British retail, or in the wider industry, was prepared to put up – or had access to – the amount of cash it would have taken to mop up the mess and right the chain’s course. Put simply, no one had the stomach for it.
For now, one of the most contentious fall-outs in British corporate history continues. Retail Acquisitions, Darren Topp and Sir Philip Green are yet to be hauled in front of MPs, but BHS stores will soon stand empty on 164 British high streets.
All that this sorry saga proves is that unless retailers have a sharp focus on their core customer and continue to innovate in order to please them, the wolf is never far from the door.