Tharp's Thoughts: 31 May 2019

    By Hannah Tharp, Head of Consulting at BJSS

    Hannah Tharp

    When identifying reasons for Mothercare's struggles of late I would suggest that their tired stores, outdated website and lack of innovation are high on the list of contributing factors.
    It’s been a fortnight of worrying news headlines to say the least. Whilst the state of the UK’s retail industry hasn’t dominated the press, as is so often the case, there have been some concerning stories hiding in the background.

    We all know the story of Mothercare hasn’t been a happy one over the last few years. Their recent results showed they made a pre-tax loss of £87.3m in their last financial year, a £14.5m increase on the previous year. Although it may well be true that Mothercare is facing many of the same challenges as other retailers (including reduced footfall on the high street, higher rents and the rise of online shopping) I would argue that there aren’t many purchases that would encourage shoppers to visit a physical store and speak to an expert more than that of an imminent new addition to the family.

    When identifying reasons for their struggles of late I would suggest that their tired stores, outdated website and lack of innovation are higher on the list of contributing factors. When we look at their competitors, Amazon (who sells Mothercare products) has far more advanced customer service functionality, a high number of reviews and offers products through Prime ensuring speedy delivery. When it comes to maternity clothing, mums-to-be can buy fashionable clothing with brands they already like and trust through the likes of ASOS or Boohoo. Meanwhile, parents that are more concerned about the products they are using might turn to other brands for innovative sustainable solutions that are good for their little ones and the planet.

    Although Mothercare point out they are significantly reducing their debt through closing stores and selling the Early Learning Centre to provide a strong financial foundation, it could be argued that these are short term wins that could contribute to their overall demise. To help guide them out of such challenging times they require a consistent senior leadership team that has the support of shareholders and a clear vision for the brand. No small ask.

    At the other end of the high street, it isn’t too much of a surprise that Arcadia is announcing a CVA, well actually 7 individual CVAs, closing 23 of its 566 UK and Ireland stores. Philip Green was once the King of the High Street and Topshop was the jewel in his crown. But whilst the high street changed, Arcadia and Topshop failed to do so.

    Ten years ago, Topshop was the place to shop. Its stores had a buzz, its clothes were like nothing else on the high street and it had an impressive list of celebrity fans. Fast forward to 2019 and its stores are dated, its clothes uninspiring and its reputation in tatters. Many claim this is due to a real lack of investment in the brand, Philip Green failing to consider new online pure plays like ASOS and Pretty Little Thing as real competition and failing to compete with the new Kings or Queens of fast fashion, Zara and Primark.

    If the future isn’t looking good for Topshop, spare a thought for its poor cousins Wallis, Miss Selfridge or Burton, who are in an even worse shape. Rescuing a brand is no easy feat; at Arcadia this will be even more challenging as the retailers are so interlinked yet cater for very different customers that want different products and different shopping experiences.

    Now let’s turn our attention to a company that is innovating. This week Urban Outfitters announced the launch of Nuuly a subscription service in the US that allows customers to pay a fixed fee to borrow six items of clothing from a range of brands each month. This could potentially prove a very shrewd move for Urban Outfitters, since they are able to tap into the key trends that matter to their customers, including sustainability, the sharing economy and the need to wear a new outfit in every social media post.

    The new business venture is predicted to gain an impressive 50,000 subscribers and generate £50m in sales in its first year. Most impressively, it may provide Urban Outfitters with first mover advantage and their powerful mix of online and physical stores may position them very well to compete against start-ups like Rent the Runway. It also takes ideas like Klarna, who offer buy now pay later services, a step further and appeals to a new, young audience.

    As always please let us know your thoughts - and thanks for reading.