Published Tuesday 13th August 2019
On Wednesday 12th June, following eleventh-hour talks, fashion retail giant Arcadia agreed to a rescue plan for the business that saw it avoid administration by the finest of margins. As a result, 50 of the empire’s stores will be closed. However, many experts are still concerned about whether this will be enough to save some of the most notable brands on the high street.
It is a familiar story for UK bricks and mortar retail. The concerns facing Arcadia and its owner Sir Philip Green cast a striking light over mounting worries for the sector. However, there are some telltale signs in this instance that point to where Arcadia went wrong and the best practices for other retailers going forward.
The Changing Trends of Retail
As mentioned before, this is but one of a string of high street closures that have taken place over the last decade. Businesses across all sectors, from home brands like BHS (once part of Arcadia Group) to electronics companies like Maplins, the story of the high street is a seemingly endless current of closures. The reasons for such a dramatic shift can sometimes be as long as the list of store closures. However, there are a few key reasons that are visible in almost every case.
The predominant reason often noted is the rise of e-commerce against bricks and mortar retail. With online now accounting for almost one-in-five total retail sales and consistently outgrowing its physical counterpart, companies that have been slow to adapt have fallen behind. Whilst many of Arcadia Group’s brands have an online presence, it is often hugely overshadowed by the dominant players in the e-fashion sector. Fast fashion giants such as ASOS and Boohoo mean that other brands are becoming marginalised in favour of these broader sellers.
However, not having a successful online presence is not always fatal to a fashion retailer. Primark is a notable example of a high street favourite that has thrived despite having no e-commerce revenues. Therefore, what has happened at Arcadia that has stopped it achieving what Primark has?
Growing Problems in Modern Retail
With Arcadia, many industry experts believe the issue lies in the number of stores that now belong under its wing. Operating eight brands across a range of demographics, Arcadia owned 570 standalone stores at the time of the rescue deal. This oversaturation has made Arcadia brands lose their appeal to an audience whose attention is becoming increasingly sought after.
This oversizing problem had even been noted at Arcadia Group decades ago. In 1993, then Burton Group conducted a review of its trading spaces and implemented changes to reduce its store count. However, the same problem has come back to haunt the business. Many retail experts believe that the 50 store closures agreed to will not be enough and that more will have to follow if Arcadia is to be successful long-term.
Another concern for the Arcadia group is the state of some of its brands. Whilst names such as Topshop/Topman still have an audience and targetable demographics, experts see some of the others as lost causes in the modern retail world. Brands such as Wallis, Miss Selfridges and Evans, with falling revenues and unclear audiences, could be squeezed out of the increasingly competitive market.
Retail for the Modern Age
The reality is that Arcadia Group should have everything it needs to be a successful retailer going forward. If anything, it currently has too much.
Many industry experts believe that the future of bricks and mortar retail will be in experience outlets. By creating a tangible event or activity in-store that cannot be experienced online, or merging the in-store and online experiences, retailers can continue generating footfall. For Arcadia and many other retailers to achieve this, a streamlining process will have to take place, with focus on quality over quantity on the high street. Here is where companies such as Expense Reduction Analysts can help.
Here at ERA, we’ve been helping major retailers in the UK refine their procurement strategies since 1992. Our industry experts work in a range of cost areas and can help reduce retail operating costs through effective supply chain strategies that work long-term. With retail continuing along its path of dramatic change, it’s of paramount importance that businesses are doing everything that can to ensure their success long into the future. We’ve saved businesses millions so far – why not get in contact and see what we could do for you?