A failure to focus on the customer, or a lack of multichannel ambition – and investment? There have been suggestions of all these on the day that BHS has gone into administration, putting 11,000 jobs at risk.
The move comes weeks after the high street stalwart asked
landlords for space so that it could turn itself around for a multichannel future. At the time, KPMG restructuring partner Will Wright said BHS had become less profitable in recent years "as it has sought to respond to changing customer behaviours, increased competition and the rise in omnichannel retailing."
Following the support that it went on to win from its landlords, the retailer had planned to, in Wright's words: "reshape its debt and operational structure to a model more suited to today's multichannel retail environment." But today Duff & Phelps were called in as administrators, with the mission of selling the business as a going concern.
Too slow to multichannel?
It's a struggle to modernise that has been repeated over recent years as household names from Game – now back in business
as Game Digital – to Jessops
, also now reinvented under new ownership, have fail as they sought to catch up in an age where the customer expects to buy wherever and whenever they like.
Jason Shorrock, vice president, retail industry strategy EMEA at JDA Software
, says more retailers will fail unless they adapt their businesses to the needs of the customer at a time both of fragile economic conditions and the "disruptive force" of online retailing.
“The questions facing retailers are tough," added Shorrock. "As online continues to cannibalize store sales, how do they deal with a decline in store profitability due to fixed occupancy costs? How do retailers address the additional costs associated with an online business without killing their profit margins?"
He added "As BHS falling into administration shows, retailers cannot afford to stand still; being able to fulfill customer demand in an intelligent and profitable way is now an imperative. Indeed perhaps the toughest question retailers need to ask themselves is: are we changing fast enough to survive?”
Ian Jindal, editor-in-chief of InternetRetailing, said news of the administration was "sad" but inevitable in a time of changing customer behaviour.
"I think that this shows that there’s no ‘middle’ left in multichannel," he said. "You’re either desirable – a brand, or Selfridges, for example – or you're cheap and desirable, like Zara and Primark. There’s no way an undesirable and mid-price offer can survive. As brands increasingly sell direct to consumer online, and major marketplaces offer a comprehensive product offering, a modern retailer needs to have a clear connection with customers to survive. Where a retailer - however venerable - is burdened with the legacy of property choices, financial deal structures and debt or pension obligations, then a challenging job is made nearly impossible.”
A Leading IRUK Top500 retailer
BHS was a Leading retailer in the IRUK Top500
Commenting, Jindal said: "The IRUK is a performance and capability measure. On a flat sea with a fair wind it reflects how well they retail. BHS had a half-billion pension hole, painful leases, it lacked working capital and that’s all before you consider their strategy in terms of product and customer offering.
"There was nothing 'wrong' with BHS as a retail operator in the short term, but with this legacy to contend with it was too weak to have time to adapt.
"One could argue that it was management choices from 10 years ago (not adopting multichannel early enough) that led to its weakened position.
"Indeed, it’s often the lack of decisions that kill you, rather than a (supposedly) wrong decision."
InternetRetailing head of research Martin Shaw added: "There’s a lot more to a retail company – or any company – than their customer-facing performance. Financial health can influence the cost-benefit analysis around leading retail practice, just as it can also be negatively impacted by poorly-timed or inopportune decisions. Some companies will do better by not introducing the best-practice, at least in the short term.
"But our view and expectation is that the Top500’s focus on performance correctly rewards retailers who are taking the necessary decisions that contribute to future performance."