Arcadia Group has called in the administrators overnight, putting about 13,000 jobs at risk.
The business, owned by Sir Philip Green and his family, continues to trade both online and in-store and says all commerce orders placed over the Black Friday weekend will be honoured. Its retail brands are now up for sale and administrators hope that buyers will be found quickly.
Ian Grabiner, chief executive of Arcadia Group, says: “This is an incredibly sad day for all of our colleagues as well as our suppliers and our many other stakeholders.
“The impact of the Covid-19 pandemic including the forced closure of our stores for prolonged periods has severely impacted on trading across all of our brands. Throughout this immensely challenging time our priority has been to protect jobs and preserve the financial stability of the group in the hope that we could ride out the pandemic and come out fighting on the other side. Ultimately, however, in the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.
“Our priority now is to work closely with the administrators to deliver the best possible outcome for all our stakeholders, in particular our hard-working employees across the group. Throughout this process, trading will continue across all of our brands. Our stores will remain open or reopen when permitted under the government Covid-19 restrictions, our online platforms will be fully operational and supplies to all of our partners will continue.”
The move will have a profound effect on the UK’s high streets, where Arcadia brands Topshop, Top Man, Burton, Dorothy Perkins, Miss Selfridges, Outfit and Wallis have had a presence over many decades. The group says the move comes as a result of Covid-19 but already before the forced lockdowns caused by the coronavirus pandemic the business was struggling to adapt to the growth of online retailing.
The group’s failure is thought to have knocked on to Debenhams, which today announced it would wind down its business after a planned sale failed, reportedly following the failure of Arcadia, which has concessions within many branches of Debenhams.
Last year Arcadia started to close stores through a number of CVAs (company voluntary agreement) as it tried to rebalance its store estate with customers’ move to do more of their shopping online. Arcadia’s move into administration last night meant that those CVAs come to an end.
The group now trades from about 444 leased UK sites and 22 overseas. It employs about 13,000 people of whom 9,294 were on furlough when the administrators were appointed. Its stores are expected to reopen tomorrow after the UK’s second Covid-19 lockdown, pending a potential sale.
Matt Smith, joint administrator at Deloitte, says: “Arcadia sits at the heart of the High Street, and has been striving to combat the impact of Covid-19 throughout this year. Now the effect of the lockdowns, combined with broader challenges facing bricks and mortar retailers, have resulted in a critical funding requirement for the group and today’s administration.
“We will now work with the existing management team and broader stakeholders to assess all options available for the future of the Group’s businesses. It is our intention to continue to trade all of the brands, and we look forward to welcoming customers back into stores when many of them are allowed to reopen. We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses.”
Yesterday Frasers Group offered to lend up to £50m to Arcadia Group but the offer was declined. The group, owner of brands including Sports Direct, Game, Flannels, and House of Fraser, said at the time of the offer that it “would be interested in participating in any sale process” should Arcadia Group go into administration. Other groups that could be interested in buying some of the brands include Boohoo, which set aside a warchest of cash earlier in the year in order to take advantage of opportunities such as this, hastened by the Covid-19 pandemic and the related change in the way that customers now expect to buy.
The group’s failure comes partly because it has not been able to keep up with the pace of change as customers have opted to do more of their shopping online in recent years. The trend has significantly accelerated in recent months as lockdowns meant more people worked from home while non-essential shops were closed for months at a time. Those that were able to offer fast delivery and convenient collection were best placed to serve them. Arcadia has been unable to balance that online demand with the high costs of running stores.
Liam Patterson, chief executive and founder of retail marketing technology platform Bidnamic, said: “Despite its legacy position as a market leader, Arcadia Group is a victim of its earlier successes. Rather than adapting to modern customer needs with a strong ecommerce offering, the brand resisted innovation and was late to the digital party. The lack of a competitive online offering, combined with other issues such as the racial, physical and sexual abuse allegations around Philip Green meant that the brand struggled to remain relevant to younger, socially aware, digital consumers. Covid-19 lockdowns only exacerbated these issues as the business lost customers to digital natives like Asos and Boohoo that had more engaging online presence and more reputable brands.”
Melissa Minkow, retail industry lead at digital consultancy CI&T, says: “Arcadia’s collapse into administration under the pressures of the pandemic is a major blow for the UK High Street – especially when years ago Topshop was a best in class example of retail innovation. There are a few different variables at play that could serve as great lessons for other retailers currently succeeding.
“Firstly, most of the brands under Arcadia Group, especially Topshop, sit in the mid-range for price points. We’ve seen mid-priced retailers struggle across the board because of the massive rift between low and high-income groups. As the middle-income demographic shrinks, so does the success of mid-range retail.
“On a similar note, Arcadia Group’s brands’ failure to identify with either fast fashion or more quality, high-end messaging means a failure to connect with consumers at a values-based level. The brands have been experiencing a sort of identity crisis for a few years, making it difficult for shoppers to place these retailers within their lifestyles.
“Beyond the increasing irrelevance of mid-tier retail, the lack of digital innovation is certainly a key culprit. Arcadia Group’s decision to leverage more of a brick-and-mortar backbone, investing less than it needed in keeping up with social and ecommerce, allowed it to fall behind in establishing the omnipresence possessed by its rivals. Digital commerce is constantly evolving, and retailers that maintain more of a transactional, versus experiential, online platform are falling behind fast.”
Hugh Fletcher, global head of consultancy and innovation at digital consultancy Wunderman Thompson Commerce, said: “While Arcadia was a high street powerhouse in the nineties and noughties, its biggest shortcoming has been a lack of investment in digital commerce, as well as failing to provide shoppers with the experiences that they wanted – over a third of digital commerce projects fail due to a lack of alignment with consumers’ needs. The combination of an unwillingness to visit physical stores and a lack of digital readiness during the pandemic has driven the business into administration. Arcadia’s story is indicative of a wider trend, however, and is one that all retailers can learn from.
“The retail sector must heed lessons from the current economic scenario and implement changes in 2021 and beyond. Online fast fashion businesses like Asos, Boohoo and even Amazon to an extent have thrived by providing customers range, ease, speed and convenience. But this doesn’t mean that only pureplay fashion outlets will remain; we’ve found that even the younger generations, while digitally native, are not digitally exclusive. They enjoy the physical shopping experience and will embrace retailers that can align products online and offline.
“When the high street eventually reopens, consumers will demand more from their retailers. They’ll crave innovative and engaging experiences in store, and it’s up to retailers to create a strong omnichannel offering. While 2021 may not offer ideal conditions for investment in digital services, without an online infrastructure underpinned by a high-street experience that adds value in the customer journey, more high-street brands that rely solely on their physical stores will struggle.”
The wider context: the shift online
The administration comes at the end of a year which started with the Centre for Retail Research saying it expected to see more than 17,000 shops close in 2020, and that 19.8% of retail would take place online by 2024. That was before the Covid-19 pandemic moved shopping online much more quickly – peaking at 33% of sales during store lockdowns in May, according to the ONS, but since then settling at a higher average than previously. In October, ONS figures estimate that 28.5% of UK retail sales took place online, at time when shops were open but trading under social distancing rules.
Since then shops in England and Northern Ireland have closed for further lockdowns, and in the parts of Scotland that are in tier four. Stores in Wales reopened earlier this month from their own two-week lockdown.
During last week’s lockdown Black Friday peak trading day, retailers including John Lewis and eBay said that their digital sales were about 35% up on the same time last year – and that’s likely to mean November was one of the all-time biggest months for online trading, and the one of the worst for in-store sales ahead of Christmas. Now the pressure is on for shops to trade strongly once they are able to reopen tomorrow following November’s lockdown.
Dorothy Perkins is a Top100 retailer in RXUK Top500 research, while Topshop and Burton are Top100 and Topman is Top150. Debenhams is ranked Top50.