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Where did BHS and Austin Reed go wrong?

By Vivian Hendriksz

27 Apr 2016

Business |ANALYSIS

It has been a dark start to the week for Britain's high streets as both department store group BHS and clothing retailer Austin Reed fell into administration. Both their failures to remain relevant to consumers reflect the ever-changing retail landscape which sees more and more shoppers frequent out-of-town shopping centers and online retailers over the high streets.

BHS and Austin Reed fail to evolve with changing consumer shopping habits

Visitor footfall to the UK's high streets has continued to decline over the past few months, as customers combine the available shopping channels seamlessly, choosing which ever channel is the most convenient for their needs. Retail sales dropped 1.3 percent in March, according to the Office for National Statistics, and footfall on the British high streets fell 3.9 percent, according to data from the British Retail Consortium (BRC) - Springboard monitor.

The decline in traffic is a "continuation of a longer term trend caused by on-going structural change within the retail industry," pointed out Helen Dickinson OBE, Chief Executive of the British Retail Consortium. "Customers don’t differentiate between buying online, on a mobile device or in-store and often combine two or more different channels when they shop." Physical stores continue to feel pressure from the UK's leading position in e-commerce. Last month saw over one pound in every five pounds spent on non-food items spent online, the third highest proportion recorded by the BRC. "In today’s increasingly digital environment, retailers continue to invest in online and omni-channel strategies to evolve with changing consumer shopping habits. There is a need to think differently about the retail offer, whether digital or in store, as people crave more theatre and experience."

So is this where both BHS and Austin Reed went wrong? Both retailers have a long history on the UK's high streets, yet is seems as if both of them failed to adapt to the current retail climate in time. In order to learn more about what went wrong for BHS and Austin Reed, FashionUnited spoke to fashion analyst Anusha Couttigane at Oresa.

BHS two biggest pitfalls: "failure to refresh stores and delayed response to online demand"

"It’s clear that there have been historical failures within the business, both with regard to invigorating ranges and in relation to the customer experience," said Couttigane on BHS to FashionUnited. "Two of its biggest pitfalls have been a delayed response to online demand and neglecting to refresh stores. What this has meant is that even rivals who are also struggling, like M&S, still come out on top when compared to BHS, because at least others have been investing in widespread store refurbishments and online standards. There’s also a bubbling opinion that introducing Arcadia brands to BHS hasn’t helped."

"BHS predominantly targets an older audience and, aside from maybe Wallis, few of the Arcadia brands really speak to this demographic. Meanwhile, dedicated Arcadia shoppers are more likely to visit standalone branches of Topshop, Burton and Miss Selfridge, or take advantage of the propositions at more diverse department stores like Debenhams. The Millennials to which Arcadia brands cater are also far more demanding of online services, so BHS has really missed a trick here," she added. "It would have been better for BHS to prioritise revamping its own brands ranges and online services rather than embark on a food service mission...The fact that the company’s pension deficit more or less outweighs its assets makes it a very unattractive proposition for investment. Add to that the mystery and speculation shrouding Dominic Chappelle’s personal finances and it’s no wonder that the business has struggled to secure further funding."

"Austin Reed failed to differentiate in terms of design and service"

"Although BHS is probably a more familiar face on the high street as it caters to a wider target market, Austin Reed has a longer and more significant story. The fact that it has been around for well over one hundred years and its status as a royal warrant holder, means its fall from grace has a harder impact on history. Yet Austin Reed’s challenges have been somewhat different from those faced by BHS," stressed Couttigane. "In the context of a booming British tailoring sector, Austin Reed’s fortunes are quite contrary to many other players in the market. Part of this comes down to brand identity and poor market positioning. Over the last few years, we’ve seen something of a polarisation in the tailoring market, juxtaposed between highly affordable, fast fashion high street ranges from the likes of Topman, Moss Bros. and Zara and a revival of Savile Row artisans."

"Sitting somewhere in the middle between high street players and luxury suit makers is Austin Reed, yet against this competitive backdrop, Austin Reed has really failed to differentiate in terms of design and service. Its sale price points are what you would expect to pay at full price at Debenhams or M&S," she concluded. "At full price, hovering between 399 pounds and 550 pounds are just beyond reach for most consumers, while its designs, although high quality, are nevertheless widely produced. It is difficult to justify price points over 500 pounds when your product lacks elements of exclusivity. Austin Reed simply hasn’t done enough to promote these qualities. Trading on its royal warrant credentials hasn’t been enough."

"All in all, the threat of two well-known brand disappearing from the British high street is likely to result in a dip in confidence, both within the retail sector, which has struggled with deflationary trends over the last year, and across the wider population. With two notable business failures, a property bubble, the NHS on strike, the prospect of an end to the British steel industry and a fervid debate surrounding Brexit, it’s a highly unsettling time for the British economy. All of these factors are likely to affect consumer spending in the short term."

Photos: Wikimedia, BHS and Austin Reed Facebook

Austin Reed