Topshop, Topman, Miss Selfridge and HIIT are becoming online-only brands as Asos spends £295m to buy them out of administration. Mobile-first Asos says the deal is a “strategically compelling opportunity” in its mission “to become the number one destination for fashion loving 20-somethings worldwide”. It says the “four strong, iconic” Arcadia brands will resonate with its own customer base – who already, indeed, bought them via its own website.
This is the second example is as many weeks of brands that previously had a presence on high streets around the country moving to sell through online marketplaces and via mobile. Last week, Boohoo Group bought department store Debenhams, with the knock-on loss of 118 large high street stores – and today its talks with Arcadia Group administrators about the Burton, Dorothy Perkins and Wallis brands continue. Today’s news puts 2,500 jobs at the three Arcadia brands at risk.
High street fashion, it seems, is moving online – and will now be primarily available through the smartphones that Asos’ existing and target customers now use to buy. Some 85.5% of visits to Asos’ website were from a mobile device in its latest financial year. A study from Adjust last year suggested that young fashion shoppers had moved to mobile during lockdown.
Today’s news will have a significant effect on the high street – and on retail employment. Between them, Topshop, Topman and Miss Selfridge traded from 70 shops. All the shops are set to close, while Asos will take on just 300 of their staff – buyers, designers and those who manage brand partnerships with third-party retailers.
Asos will use its existing technology and infrastructure to operate their websites, and run their logistics, while continuing to sell the brands via its own Asos website. There could potentially be in-store sales via US department store Nordstrom – an Asos retail partner.
Nick Beighton, chief executive of Asos, says: “This acquisition of these iconic British brands is a hugely exciting moment for Asos and our customers and will help to accelerate our multi-brand platform strategy. We have been central to driving their recent growth online and, under our ownership, we will develop them further, using our design, marketing, technology and logistics expertise and working closely with key strategic retail partners in the UK and around the world.”
The brands will join Asos’ Venture Brands group, which includes Collusion, AsYou and Reclaimed Vintage. Asos says the brands will remain differentiated from its own brands, and means it can give customers more choice of styles, product and price points. It says that in Asos’ hands, the newcomer brands will benefit from investment in customer engagement and brand positioning. It also promises a “thorough review of the supply chain to ensure it complies with all our Fashion with Integrity principles”.
Topshop, Topman and Miss Selfridge have existing brand awareness in Germany and the US – where almost a third of their revenues were generated – as well the UK, and will fit well within Asos’ ’truly global retail’ strategy. "In the US, for example, customers who buy Topshop from us have over double the order frequency and three times the value to Asos," says Beighton, speaking in an analyst presentation today.
The four Arcadia brands turned over about £265m online and through retail partners in Arcadia Group’s latest full year. However in the year to August 29 2020, Topshop, Topman and Miss Selfridge made an EBITDA (earnings before interest, tax and asset writedowns) loss of £1.8m across all their sales channels, while HIIT, a sub-brand of Burton, is estimated to have lost around £0.4m. Topman, Topshop and Miss Selfridge, according to today’s presentation, have 3.3m active customers, 11.8m Instagram followers and more than 200m site visits in its latest financial year.
Before Covid-19 hit, in 2019, the brands turned over about £1bn across all channels, and continued to grow online even after Covid, with sales of about £265m via both retail partners (+16%) including Asos and on the brands’ own websites (+0.5%). Asos’ own sales have been running at 41% so far in the 2021 financial year. Asos expects that earnings as a result of the transaction this year will be offset by the costs of integration and rebuilding stock, as well as one-off restructuring and transaction costs of £20m But it expects the deal to deliver a double digit return on capital in the first full year.
Asos is buying the Topshop, Topman and Miss Selfridges brands and their stock on hand while also taking on some of their forward orders in a deal that Arcadia administrators say will raise about £330m for its creditors. But it will not buy any of the 70 shops that they currently operate, despite previous suggestions that Asos might buy Topshop’s Oxford Circus flagship. The deal is expected to complete on Thursday and comes just over a month after Arcadia administrators sold Evans to City Chic for £23m.
The acquisition makes sense for Asos, but will hit the high street, says Guy Elliott, senior vice president, retail and retail analyst at digital consultancy Publicis Sapient, says: “Asos’ acquisition of Arcadia brands Topshop, Topman and Miss Selfridge is a quick move to acquire some valuable consumers and brand assets ‘on the cheap’. It’s positive because it keeps these much-loved British high street brands alive. Asos seem to be building up their “own brand” portfolio so their products will be more balanced between their own ASOS brand and that of third parties, which makes sense. However, I think it is disappointing, and somewhat short-sighted that they are not keeping any of the brand stores. That to me, feels like a bad longer-term decision. I believe they should have maintained some sort of store presence at least from a connection/brand awareness, omnichannel perspective, and for the sake of our high street – maybe just the best performing stores or the flagships like Oxford Circus. Though I guess this way, they don’t take on any of that debt/cost initially and could always rebuild store infrastructure at a later date. Let’s hope so.”
Melissa Minkow, retail industry lead at digital transformation specailist CI&T, says that the acquisition seems like a natural fit since Asos already sells these brands and is targeting the same customers. It gives Asos the digital reinvention the brands could experience the digital reinvention they have needed via Asos. The online retailer could leverage its already-strong website and social media following to build more of a draw to its ranges with these brands.
"Asos will be able to leverage the brand heritage that comes with Topshop, Topman and Miss Selfridge and establish a strong influencer strategy around the brand, much like what Revolve has done,” she says. “That said, given that these brands already blend in so well with the Asos label and Asos has already been winning on its own, I don’t think it’s necessary to completely change its current strategy just because of this acquisition.
“Asos has always had a current pulse on its shoppers, and its site has been, and continues to be, a best practice platform. Digital-only and digital-first retailers often demonstrate a more flexible, comprehensive understanding of consumers’ shopping behaviours because they can adapt more quickly than physical-first retailers. Thus, Asos and other successful ecommerce players are a sensible white knight for heritage High Street giants.”
Boohoo last week said it was in exclusive talks to buy three of the remaining Arcadia brands, Burton, Dorothy Perkins and Wallis, and today Arcadia administrators Deloitte confirmed that exclusive discussions were continuing.
Chris Elliott, head of market insights at Edge by Ascential, said: “The rapid adoption of ecommerce due to Covid-19 has played into the hands of pure players like Asos and Boohoo. Data at Edge by Ascential shows that in 2020, apparel sales grew 21%, up from a forecasted 13% prior to the pandemic. Ecommerce now makes up 43% of apparel sales in the UK and this is continuing to grow. Even once lockdown measures are eased, the ease of ecommerce will keep many shoppers online and out of stores. All of this means that Asos and Boohoo are in strong financial positions, both currently and certainly in the future, to consider acquisitions. With a plethora of new acquisitions under their belt, we could see these two retail titans reshaping online retail via their sprawling digital marketplaces and apparel brands must ensure they master marketplace strategies in order to win consumers and grow.”
Asos is a Leading retail brand in RXUK Top500 research, while Topshop is ranked Top100 and Topman and Miss Selfridge are Top150.
• Aldi is calling for those affected by the collapse of the Arcadia and Debenhams retail empires to apply as it aims to create 4,000 jobs across the UK this year. The UK supermarket, which announced recently that it would create the jobs as part of a two-year £1.3bn investment in new and upgraded stores and distribution centres, said today that it would welcome applications from those recently employed by Arcadia and Debenhams.
In doing so, it hopes to offer long-term retail roles to thousands of people who have lost their jobs as a result of the two high street giants who have recently collapsed.
Kelly Stokes, recruitment director at Aldi UK, said: “We are currently opening an average of one new store a week as we continue to try to meet the huge demand for amazing quality food at unbeatable prices that shoppers can only get at Aldi. That means finding around 4,000 new Aldi colleagues this year and, if we can do that while also helping those who have recently lost out due to closures elsewhere, we will do.”