Philip Day has secured the survival of previously written-off brands such as Jane Norman, Peacocks and Jaeger despite stronger competition and downbeat consumer sentiment.
His track record in restructuring failing businesses will provide Bonmarché with much needed encouragement as Day takes it under his wing in a proposed takeover bid.
Persuading investors to part with 52% of the business at a price below market rate signals a lack of interest from other potential buyers or admission that a continued struggle would have likely resulted in administration. Day’s lifeline provides an opportunity to shake up the current structure and leverage the scale of his group.
“Taking Bonmarché private will provide it with breathing space to make short-term, potentially high-cost, decisions”
Bonmarché operates in an underserved segment of the market and should benefit from a growing population of over-55s but it, among others, continues to fail in successfully targeting this seemingly very challenging consumer group.
Country Casuals, BHS, Marks & Spencer, Debenhams, Kew, GIVe, Austin Reed, Jacques Vert, Fenn Wright Manson and most recently JD Williams are just some of the players that have chased these consumers who demand style, fit, quality, value and service. Only a handful, such as M&Co and Mint Velvet, are getting it right.
Taking Bonmarché private will provide it with breathing space to reconsider chief executive Helen Connolly’s turnaround strategy and make short-term, potentially high-cost, decisions such as exiting leases, which would likely hit profitability.
Day has rightly recognised there is clear gap in the market for Bonmarché, especially since the opportunity is ripe to poach deserting Debenhams shoppers (a quarter of Debenhams’ clothes shoppers are 65+). But there are fundamental issues that need addressing.
The size of Bonmarché’s store portfolio is cumbersome and a burden on costs, especially since many require modernisation. Brand appeal does little to draw in 45- to 64-year-olds, limiting customer acquisition opportunities and leading to overreliance on a diminishing customer group.
Moreover, despite achieving double-digit sales growth in 2018, Bonmarché’s online penetration (13%) remains far below the clothing sector average (29.9%), causing it to lose out in an outperforming channel.
Day’s understanding of the mature shopper in the UK will aid his Bonmarché recovery plan, particularly since the Edinburgh Woollen Mill (EWM) shopper profile almost perfectly mirrors Bonmarché’s in terms of age breakdown.
Customer affluence varies (39.4% of Bonmarché shoppers are in the DE socioeconomic group, versus 23.3% at EWM) but neither are too heavily exposed to one segment.
For Day, the challenge will be differentiating the brands in terms of product, styling and branding – currently there is little to separate them, looking at their online platforms. A shopper should be able to trade up and down between the brands, as they can at H&M and & Other Stories, but quality, price and the shopping experience must be reflective of its position in the market.
Bonmarché should continue to tackle the value segment. Again, Day has experience of this with his Peacocks fascia, but where M&S and Next have reduced prices the price differential is blurred and the perception of quality at Bonmarché’s rivals is higher, leaving it with reduced appeal.
Using the group’s scale and the Jaeger and EWM supplier base should allow Bonmarché to raise its quality credentials, particularly in knitwear and outerwear, while keeping prices competitive. Jaeger’s authority in tailoring and formalwear must be tapped into, with Bonmarché under-indexing in categories such as dresses and occasion separates across trousers, blouses and skirts.
“Presence on a third-party platform could remove the issue of limited brand appeal for Bonmarché”
Keeping Bonmarché at the value end of the market provides Day with a good (Bonmarché), better (EWM) and best (Jaeger) proposition targeting those aged 55-plus, allowing his group to have a much better understanding of this demographic versus rivals.
A presence on a third-party platform could remove the issue of limited brand appeal for Bonmarché.
For some brands with a strong identity and loyal shopper base, appearing on third-party sites such as Next, Amazon or JD Williams can be damaging to the brand because shoppers tend to browse by product, rather than brand, and they are at the mercy of the platform in terms of product imagery, ranging and discounting.
But for Bonmarché this could have the opposite impact. Selling on one of the aforementioned retailers would open the brand up to a new shopper base – and that’s essential if its high street presence is diminished.
Honor Strachan is lead analyst at GlobalData Retail.