YAHOO BOOHOO

Retailing is in many cases an ephemeral business. Retailers come and go. Success stories of today are likely to be the failures of tomorrow. As shopper preferences changes, perceptions alter and new entrants come on the scene, profitable retail operations can struggle and in many cases disappear off the horizon.

This is especially so in the case of fashion retailing – where young shoppers in particular are consistently promiscuous in terms of where, when and how they shop.

I become intrigued when a particular fashion retailer begins to acquire positive publicity in the business and retail press. One such retailer is Boohoo.

This is an online fashion retailer and targets the 16 to 24 year old market. Recently it launched a sister-site: boohooman.com to specifically focus on “trend-led, price-conscious sixteen to twenty-four year old men.

It was listed on the stock exchange in 2013 amid great fanfare. Unfortunately it issued a profit warning at the end 2014. Retail analysts reckoned that it needed more aggressive marketing and more focused differentiation from its main competitors: ASOS, Misguided and Pretty Little Things. Boohoo promised to address these issues and at the start of 2016 it returned much improved figures: pre-tax profit was up by forty-two per cent and a forty per cent increase in sales (£195 million) was recorded.

Boohoo operates in the online clothing sector which over the next three years is estimated to generate overall revenue of £9.4 billion.

Why then should we study the retail strategy of Boohoo more carefully?

Since the profit warning, senior management at Boohoo have embarked on an aggressive and focused overall marketing strategy. It has invested a significant percentage of overall revenue (15% approximately) on general and digital marketing activities. These include: TV, underground, digital display, banners, video, blogger outreach and direct mail, to boost performance.

It has also invested significantly in its overall infrastructure such as warehousing. This has sharpened up its ability to respond quickly to the customer demands and the changing nature of the fashion retail sector.

The key differentiating factor and indeed its main lies in its overall business agility. This is a term that is used frequently when discussing the overall supply chain of a business. We discuss this in chapter three of the text-book. Many commentators argue that successful supply chains are ones that are built on the principle of speed and flexibility in terms of managing the process in the supply chain and in responding to the needs of its target market.

Clearly not all supply chains need to be so responsive. For instance in well established, mature and commodity type sectors, the pressure to deliver and respond flexibly, may be less significant than issues surrounding efficiency and price.

However in the case of the fashion sector this is not the case. The nature of the fashion business is based on unpredictability, fluctuations, sharp changes in customer preferences and turbulence. Retailers that have developed rigid and inflexible supply chains are likely to struggle against the “quick fashion” operators like Zara, ASOS and more recently Boohoo. Witness the demise of Marks and Spencer in this respect. While there are many reasons for their continued struggles in the clothing sector, many of the problems can be found in its approach to supply chain management.

Boohoo’s retail model is anchored around the following features. It launches on average, one hundred new styles daily. It has created a range fulfilment options such as a midnight cut-off point for next day delivery. It has also introduced petit and plus size ranges to cater for a broader range of sixteen to twenty-four year old males and females.

Seventy-five per cent of its suppliers are based in the United Kingdom. This is a good example of what is often referred to in the literature as “proximity-based” sourcing and allowed for greater flexibility in terms of supply chain management. For instance lines that move more quickly off the shelves can be re-ordered expeditiously and orders can be fulfilled more quickly. Likewise they do not place large orders with suppliers (shares of Zara in this respect). This means that they are not exposed to the vagaries of volatile demand. If particular lines are not popular, they have not build up a large amount of inventory in the warehouse. Unproductive inventory as a consequence is kept to a minimum.

Boohoo has around four million active customers and has an impressive set of social media statistics. These include: 500,000 twitter followers – generating a reach of 9.6 million, 1.4 million users of Instagram and over 1 million views on YouTube.

On a slightly critical note, Boohoo perhaps is over-reliant on the United Kingdom for its customer base. Currently two-thirds of its customers are generated from its home base. It has plans to expand in Europe with an initial focus on France and the Republic of Ireland.

In the past eighteen months Boohoo has also invested aggressively in its mobile experience. It has developed UK, US and Australian apps. Again this allows for more flexible ordering, delivery and return options for its customers.

Other initiatives include the setting up of a student ambassador programme with UK universities, collaboration with the singer Charlie XCX and a pop-up store in France.

Will we be talking about Boohoo in five years’ time? Who knows? We have already mentioned the vagaries of fashion retailing.

We should note that Boohoo is a pure-play online retailer and as such has no visible physical presence on the high street. This conflicts with the ever-increasing presence of multi-channel and omni-channel retailers who are arguably in a stronger position to provide a broader array of options and alternatives for shoppers.

It will have to widen the number of collection and return points for its customers over the next couple of years to provide a flexible range of alternatives for its target market. The introduction of a pop-up store in France suggests that Boohoo is not ignoring the possibility of widening the number of retail channels and following the trend of other retailers.

A recent collaboration with Summit – an online retail consultant, suggests that Boohoo is still keen on aggressively pursuing opportunities in the digital arena surrounding areas such as increasing traffic growth and new customer acquisition.

For now, it is fair to say that this is one of the success stories over the past year or so. It will be interesting to see how it develops in the future.

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