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  • Writer's pictureZachary Jammal

A tale of fashion conquests: How are online retailers Boohoo and Asos taking over the industry?

Online Fashion retailers have created a very lucrative business model relying on low prices, trendy clothing and a very efficient delivery system that has revolutionized the fashion industry. Struggling to compete with these new brands and experiencing major losses during the COVID 19 pandemic, established in-store retailers are losing more and more ground every day.

With decreasing sales, store closures, and market share loss, established high street fashion retailers have been struggling over the past few years. Consumer behaviour has changed, and there is a growing need for convenience and immediacy in the market. The emergence of e-commerce has provided customers with the convenience of doing online shopping from the comforts of their home. This has profited online retailers at the expense of high street retailers who are unable to adapt.

The downfall of department stores and the rise of e-tailers:

The rise of e-commerce, coupled with the global pandemic's disastrous effects, has aggravated the situation of high street fashion retailers.

Online fashion retail sales have soared, and brands have become increasingly popular. This is the case for the internationally renowned brand Asos, which has become one of the largest fashion companies in the UK with a market cap of over £5 billion. The company has an international active customer base of nearly 25 million and managed to generate a revenue of £3.26 billion in 2020, a 20% increase from 2019. Other fashion e-tailers such as Boohoo have also grown tremendously in recent years and have become industry giants.

With lockdown measures and fears over the virus, in-store sales have slumped, companies have run out of cash, and rent has become unaffordable. For example, high street fashion giants such as Debenhams and Marks & Spencer’s have permanently shut down many of their stores in the UK. Furthermore, large retailers such as Bonmarché and Peacock Jaeger have collapsed into administration, highlighting the in-store fashion industry's downfall, which was once thriving.

On the other hand, fashion e-tailers are the big “COVID 19 winners” as their online sales have surged during this period. Asos reported a 23% increase in total revenue for the four months to December, and Boohoo’s sales jumped by 40%.

Boohoo-Debenhams and Asos-Arcadia Group deals:

The 242-year old department store Debenhams has collapsed. This is not a surprise as the British multinational retailer was strongly hit by the effects of the pandemic and was struggling with high levels of debt. With over £720m in debt, insufficient cash and declining profits, Debenhams was put into administration in 2019 and then in April 2020.

Last month, the fast-fashion retailer Boohoo acquired Debenham’s intellectual property, including customer data, brand assets and website operation, for £55 million, highlighting Debenham’s failure to adapt to the new trends of the industry.

This is not an isolated case as Boohoo’s rival Asos acquired Topman, Topshop, Miss Selfridge and HIIT brands from Sir Philip Green’s Arcadia Group for £295 million. After reporting a pre-tax loss of £93.4 million in 2018 and being unable to secure funding to cope with its creditors (landlords and clothing suppliers), Arcadia was placed into administration in late 2020. Another prime example of how online retailers have taken over established high street stores.

Impact on the UK economy:

The consequences of online retailers taking over the fashion industry are likely to be severe in the UK economy.

It is important to understand that neither Boohoo nor Asos want to operate physical shops. Indeed, the Boohoo-Debenhams deals do not include the 118 Debenhams stores, which are likely to be closed for good, affecting between 10,000 and 12,000 jobs in the UK. The same goes for Arcadia Group, which already closed 50 stores over the past few weeks, putting 13,000 jobs at risk.

Fashion retailers must adapt to this change in demand. As we have seen with the examples of the Debenhams and Arcadia group, this need for change is becoming a matter of life or death. Online shopping, fast delivery, variety and affordable clothing has become an undeniable trend that is here to stay.



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