As pureplays Boohoo and Asos scoop up the brand rights to former high street darlings Debenhams and Topshop, switching them to online only, Retail Week gleans lessons from brands that have already ditched their stores.
- Online shift and enforced closures during the pandemic have brought into question the necessity of physical stores
- Retail bosses outline the biggest pros and cons of switching to online-only including buying and merchandising, marketing and overhauling head office culture
- Cath Kidston chief executive Melinda Paraie still believes in the value of a physical store after reopening London flagship
Acquired by fashion pureplays Boohoo and Asos respectively, the struggling brands will be revamped and relaunched online only. The same is true of Wallis, Burton and Dorothy Perkins, also snapped up by Boohoo this week.
With the online shift rapidly accelerating during the pandemic and the financials for running stores becoming harder to stack up, they may not be the last retailers to shut up shop and embrace the pureplay world.
Retail Week explores the pros and cons of making the switch, pulling out the biggest lessons for retailers considering a similar move.
A new way of working
When Cath Kidston was bought in a pre-pack deal last year, new owner CK Acquisitions, itself owned by Baring Private Equity Asia, opted to close all its UK stores.
Cath Kidston chief executive Melinda Paraie says the store closures were necessary and driven by “customers shifting their behaviour online and footfall falling, which really required a change in the thinking behind our model, which the pandemic then accelerated”.
She says the move allowed it to reinvent the business and improve profitability. By switching online, Cath Kidston slashed overheads associated with stores and staff – the global brand operates with just over 70 employees.
“The biggest change in approach is buying. With no physical retail estate to fill, we are able to buy much smaller volumes and a broader range of options”
Jane Eskriett, Karen Millen and Coast
The business was also able to increase efficiency by having a single view of inventory and made online investments, such as new payment options like international payment, which increased conversion rates by 20%.
Similarly, when Boohoo bought Karen Millen and Coast out of administration in 2019 it also opted to scrap the stores.
Karen Millen and Coast product director Jane Eskriett says the move changed fundamental parts of how it operates.
“The biggest change in approach is buying. With no physical retail estate to fill, we are able to buy much smaller volumes and a broader range of options,” she says.
That allows the retailer to test what works with customers before buying more of it.
“Our test and repeat offer means that the focus is on delivering choice and width, rather than editing down to a range that works in a fixed space.”
She says this helps the brands to be brave and try out new styles with less risk.
Eskriett, who was also instrumental in integrating the Oasis and Warehouse brands after Boohoo acquired them last year, says decision making is faster and there is a greater level of autonomy in the pureplay world.
She cites one of her long-time colleagues who observed: “At Karen Millen we would be in a meeting for eight hours and make one decision. Today we are trusted to make decisions so can make eight decisions in an hour.”
Paraie says her biggest challenge was bringing in new digital working practices to Cath Kidston staff used to operating in an analogue way.
“The biggest changes operationally were around changing the internal mindset and culture to a digital-first business,” she says.
“We’ve streamlined our business, but we’ve also been able to eliminate silos as most of the functional areas now are all supporting the digital business. Logistics, buying and merchandising, design and brand marketing all look at digital as the lens for decision making and that has been a big change in the company.”
With the whole team focused on digital and by ensuring visibility across the company, the transition to online was made smoother for the new Cath Kidston.
“I think the other lessons are really around balancing the investment with the internal transformation of culture and focus on the customer’s digital experience,” explains Paraie.
“As we’ve continued to do that and orient our teams around the digital experience, we’ve seen huge benefits.
“Firstly, we had to give visibility to the teams of what’s going on in digital all the way from sales through to marketing, but really focusing on the customer navigation and experience.”
A long-term success story
The Very Group is an example of the long-term success of switching online.
The business, which was known as Shop Direct until last year, was formed out of the 2003 merger of catalogue and high street store retailer Littlewoods and the mail-order division of GUS, which owned brands such as Kays and Great Universal.
Following the deal, Littlewoods’ stores closed and were sold to Primark.
It was a long arduous journey for the group to make money online and it first broke into profit in 2013 after a decade of losses.
The Very Group only made the switch to fully online-only in 2015 when it ceased its catalogue.
In recent years, it has grown rapidly and become an online force to be reckoned with.
“Effective online retailers are agile. To get it right takes significant outlay and real focus”
Sam Perkins, The Very Group
Core brand Very’s sales surged 25.5% in the seven weeks to December 25, acquiring half a million new shoppers in the same time period.
As a pureplay, agility has been a key part of Very’s business as it serves an always-on consumer.
“Online retail is 24/7; the shop’s always open and the market never stands still,” says Very managing director of retail Sam Perkins.
“You need to plan and respond to changes faster than ever before, whether that’s on price, site improvements, assortment and newness or fulfilment peaks. Effective online retailers are agile. To get it right takes significant outlay and real focus.
“To make the switch, massive investment in tech, data and operations is needed, but also people. Online-only retailers need the right high-value skills in areas like development and user experience, as well as talent with the right mindset.
“We look for people who take ownership, have energy and understand customer-centricity.”
Marketing in the digital world
Cath Kidston has shifted its marketing strategy so it fits with the digital space, with a particular focus on social media and influencer marketing.
“We’ve been working on our storytelling through our influencer strategy and bringing to life the craftsmanship in our prints and the handmade design work to really focus on bringing our customer inside the brand,” Paraie says.
This marketing has brought Cath Kidston to a new audience, with more than 50% of site visits now coming from new customers.
Paraie says: “We’ve been able to more than triple our revenue from social this year as part of our effort to build new customers.”
Karen Millen and Coast have also switched up marketing to focus on social media.
“The real difference [in marketing] is that we are able to focus spend on customer-facing digital marketing, rather than cardboard for stores,” says Eskriett.
“With millions of followers across our social channels, we get instant feedback on our posts and updates. Our marketing teams are incredibly agile and so can change and react in real time.
“Without doubt, not having to spend thousands to create in-store marketing campaigns for hundreds of individual physical stores is a breath of fresh air and allows us to use our marketing budgets in a much more customer-focused way.”
Very looks at marketing in a holistic way.
“We focus on the right data to capture opportunities while still staying nimble. It’s that balance that’s super-important”
Melinda Paraie, Cath Kidston
“We stopped looking at marketing channels in isolation, such as TV, print and digital, and started considering the overall customer journey and experience. In doing so, we focused more on data and technology to deliver that seamless experience,” says Perkins.
“There was also a big move towards new in-house talent in areas like performance marketing and social.
“Overall, the shift towards integrated digital marketing across the customer journey increased our costs, but over time we’ve become highly efficient and effective.”
The sheer amount of data available in the online world can create challenges – as well as opportunities – for brands.
“One of our biggest lessons was really around data,” Paraie says. “There’s an infinite amount of it, so we needed to focus on the right data to capture opportunities while still staying nimble. It’s really that balance that’s super-important.”
However, focusing on crucial data can lead to better decision making and a better customer experience.
Perkins says: “Being online means you collect more data than you can shake a stick at. More so than bricks-and-mortar retailers. We can test, learn and test again to give the best experience for our customers. That can lead to stronger, stickier relationships.”
Do retailers really need shops?
All of this begs the question: do retailers really need bricks-and-mortar stores in 2021?
Paraie admits that going online-only has brought challenges, particularly for selling clothing.
She says it has been difficult to translate Cath Kidston’s signature soft hues and patterns via a website. “It’s always a challenge to get the soft expression side of the brand online.”
Paraie says online also has its limitations when it comes to building a brand to immerse customers in.
After closing all stores initially, Cath Kidston made the decision to reopen a single flagship store in London’s Piccadilly late last year, which Paraie says acts as a “beacon for the brand”.
“I see it as an important piece of the brand experience,” she says. “Stores are an opportunity for customers to experience a brand in a much different way and I think it brings a different perspective and interaction that you just can’t get online.”
The Piccadilly store will host a wealth of gifting and crafting events that Paraie says Cath Kidston customers love.
“It helps us tell the brand story, not only in the UK, but also as a key tourist location to drive the brand and expand our franchise and wholesale business.”
“There is definitely a place for experiential retail, but it is not the only way. Ever since the late ’90s, increasing numbers of people have chosen to shop over the internet”
Jane Eskriett, Karen Millen and Coast
As well as its online business and flagship store, Cath Kidston has 100 franchise stores internationally to help grow its global business, as well as wholesale relationships with the likes of Zalando and John Lewis.
While Paraie has no plans to expand the retailer’s store estate, she says “opportunities may present themselves” for the brand in the future.
Eskriett on the other hand is fully converted to the online-only world.
“There is definitely a place for experiential retail, but it is not the only way. Ever since the first online retailers launched in the late ’90s, increasing numbers of people have chosen to do their shopping over the internet.
“The long-term decline in footfall to the high street has been accelerated by the pandemic and created a very difficult environment for many traditional retailers.
“It’s been great to see how many retailers and restaurant owners have shown real ingenuity using the lockdown as a catalyst to reinvent their businesses for an online audience,” she adds.
The shift to online shopping is showing no signs of slowing down, so it may not be long before other retailers take the leap.
It’s not an easy road from multichannel to pureplay. However, the lower costs, greater agility and potential for increased profitability have given a new lease of life to some of the high street’s struggling brands.