What happened to House of Fraser?
It was announced today that Mike Ashley’s Sports Direct has purchased the struggling retailer House of Fraser. This happened shortly after House of Fraser announced it had appointed administrators.
Just how did House of Fraser end up in this predicament?
Failure to act
Many news outlets will cite “new technologies” such as the internet as a main contributor. Whilst spending online continues to rise I wouldn’t call this “new technology”. Online growth should no longer come as a surprise to retailers. This is a not a new trend and there have been many other businesses that have struggled as a result. Look at HMV for example. Here is a retailer who suffered from change that the internet brought – over 15 years ago. So in my opinion this is less about the internet and more about House of Fraser’s lack of action.
House of Fraser has had something of revolving door at the top. The business has changed hands twice in the last 15 years (2006 and again in 2014). The person at the top has also changed. Nigel Oddy resigned in 2016 after less than 2 years, but his replacement Alex Williamson didn’t start until July 2017. This left them without a CEO for over half a year and through the crucial 2017 Christmas trading period.
Bricks and mortar bombs
House of Fraser has 59 stores in the in the UK, which is about the same as Debenhams and John Lewis. So whilst this is not an unusually high number it is too high for a brand that has struggled to re-invent itself over the years. They should have looked to reduce the number of stores and reallocate lease and rental costs into online and digital offerings. This is the strategy we are currently seeing Marks & Spencer adopt.
Lack of experience
Consumer spending is shifting away from material goods and toward experiences. We can tell this by the number of coffee shops popping up in our High Streets, where retail stores once stood. Retailers such as Ikea have addressed this by adapting store design – and of course offering its tasty meatballs! People enjoy a trip to Ikea. It is not ‘just a store’ – it is an experience.
Sports direct has a massive amount of experience selling goods online and I expect this to be a core focus over the coming months. I would expect to see store closures which would be sad news for employees, but necessary if the brand is to survive.
Is this another warning to retailers?
The internet is not new and retailers that have failed to respond are in trouble. But what next? If the internet is the big High Street disruptor of today, what is the disruptor of tomorrow? AI and big data platforms are already making a big impact across multiple industries and High Street retailers will not be immune. How are retailers responding to this and staying ahead of the game? Are they thinking more like tech firms and innovating? My gut feel is that they are not…. But they should be!