YABA DABA DO BOOHOO

My recent blogs have been somewhat depressing in that I have focused on retailers that to a greater or lesser (mostly greater) extent have failed as business proposition. I thought it might be opportune to revisit a retailer that we examined almost exactly this time last year in a blog (Yahoo Boohoo).

This retailer was one of the success stories of the past couple of years. I suggested it might be one to follow.

Let us briefly recap its background.

It is a Manchester-based company founded by two entrepreneurs: Mahmud Kamani and Carol Kane

It is a pure-play fashion retailer (online only) and targets the 16-24 teenage market (mostly female but more recently it has opened an online channel for males).

Its value proposition is based 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.

The vast majority of its suppliers are based in the United Kingdom. This endorses the concept of “proximity-based” sourcing in theory allows for greater flexibility in the management of its supply chain operations – something which is essential in the context of a retailer launching thousands of new merchandise over the course of any given year.

Following a profit warning in 2014 it subsequently invested heavily in digital marketing activities to re-boost its potential. This was of the order of around fifteen per cent of its turnover.

It appears to have worked.

At the end of April 2017 it boasted of a fifty-one per cent increase in sales and an almost doubling of pre-tax profits on its year-on-year performance. During this year it made major investments in warehousing space and in general infrastructure. It plans to generate further improvements in its website design and in terms of increased customer service in terms of response times and overall flexibility. It also experienced major growth in its international sales: such as an increase of £40 million in the USA and fifty per cent growth across the European market.

This evidence indicates that Boohoo does not appear to be a flash in the pan. It has laid down long-term investment to ensure future growth.

Any evaluation of a pure-play retailer such as Boohoo reopens the debate about the need for physical retail space. This argument has been going on for a few years now. Many commentators argue that retailers still need a presence on the high street in order to allow shoppers to engage physically with the items of merchandise. In the case of fashion retailers this revolves around the perception that such items need to appeal to the senses. How for instance can a shopper touch and feel and item of clothing? If they can’t then surely it is difficult to assess the material, its quality and so on.

It is counter-argued that a retail store portfolio adds significantly to the overall cost structure of a retailer. In the case of the United Kingdom business rates are increasing and are projected to have a major effect on many retailers (albeit some may actually benefit). The cost of renting or leasing properties decreased somewhat in secondary locations, but prime locations still show no signs of such a decline.

The evidence shows that shoppers, particularly the younger segments are increasingly relying on the online shopping experience. Without claiming to be a guru or prophet, it does not take a genius to predict that this trend is only going to increase further. If you look at very young children you can see how comfortable they are with the various forms of what “oldies” like me call “new technology”. Project forwards to when they are active and vibrant teenagers, particularly with respect to shopping activities. In such a scenario and assuming even more developments in technology and so on, it could be argued that the concept of space: physical and virtual will be even further refined to reflect a different type of shopping activity and experience.

Supporters of the concept of pure-play online retailing also argue that it leaves such operators in a more flexible agile position that “bricks and mortar” operators: less reliance on fixed assets such as premises, and easier to change direction with regard to merchandise and designs.

One of Boohoo’s competitors; Asos has also experiences growth and success, again mainly through international expansion.

Another competitor; Missguided, has been the exception, while still returning relatively successful sales, its profits have decreased. This has been attributed to its expansion into “bricks and mortar” retailing.

Boohoo has generated its success in my view by investing strategically in digital marketing activities. It has worked conscientiously on developing its customer base through the “old reliables” of the social media. It generates average postings on Facebook alone of between 15 million to 20 million on a weekly basis.

It cultivates its shoppers with an array of support initiatives such as fashion tips, style videos and blogger articles. While this is not particularly unique to Boohoo, it reinforces the need to provide enough material to warrant shoppers visiting and more importantly revisiting the social media channels.

It has worked hard on its supply operations. This is reflected in the introduction of Boohoo Premier – an unlimited next-day-delivery service for an annual fee. It also offers collect+ returns in the UK.

Interestingly, and arguably very cleverly in a sector such as fashion and with a very young target market, it has fully embraced the concept of celebrity. This is reflected in paying celebrities to promote its merchandise on Instagram.

We should take cognisance of the role of celebrities in digital marketing.

Perhaps the most successful of Boohoo’s celebrities is the model Jordyn Woods. She resonates strongly with the target market and generates a lot of “wow” across the social media channels. Others include Bella Thorne and Kendall Jenner. Some get paid for such endorsements, others benefit from free clothing.

More recently Boohoo has bought into PrtetyLittleThing, an operation set up by two sons of Mahmud Kamani. This move fits in well with the retailer’s overall youthful image. This spreads right through to its management team.

Further investment in its mobile apps by creating country-specific ones for the USA and Australia also reinforces its focus on digital marketing.

While none of these initiatives are particularly unique or highly innovative, I would argue that when combined, they represent a strategic and focused approach and its success is reflected in the increases in sales and profitability.

One year one from my last blog on Boohoo it continues to enjoy success and remains as one of the stars of the volatile fashion sector. Let us salute them for now and keep an eye on them over the next year or so.

 

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