Clothing and accessories retailer Monsoon has been caught in a domestic storm as UK profits have suffered while management is focused on creating a global brand.
Peter Simon, who founded Monsoon in 1972, re-acquired control of the business in 2007 determined to concentrate on developing the international side, leaving the domestic operation largely to fend for itself.
However, as Retail Week Knowledge Bank’s profile of Monsoon demonstrates, rising domestic competition threatens to undermine those ambitions. Monsoon - about the 50th largest retailer in the UK with sales of £550m - has seen domestic operating profits slump from double-digit margins in the earlier 2000s to marginal profitability in 2009, with like-for-like sales falling four years running: Monsoon’s UK sales accounted for 90% of the group total, but international operations contributed more than 90% of operating profit.
This is not a sustainable situation, not least because the company has only indirect control over much of its burgeoning international network, with franchisees running many of the 700-odd stores. UK sales densities are down, despite recovering some lost ground in 2009. Staff numbers have been cut, while administrative staff have grown to 500 to service the international network, but represent an elevated 12% of the total.
Historically, a well differentiated Monsoon plus Accessorize have not had to contend with heavy competitive, let alone operational, difficulties in the UK, though a new central distribution facility has lately caused extended problems. Domestic plans simply call for more trading space and higher densities in stores. In 2010, Simon is orchestrating a new onslaught on the notoriously difficult US market, at the same time reportedly planning up to 1,000 stores by 2015 in China.