Debenhams will transform from a department store business with 118 shops to an online marketplace following Boohoo Group’s acquisition of the department store’s ecommerce business for £55m cash. Boohoo now plans to sell goods from fashion and beauty to sports and homewares through the website. The site will give Boohoo’s other brands – from boohoo and Nasty Gal to Karen Millen, Coast, Oasis and Warehouse – a new route to market, while Debenhams’ own fashion brands will be absorbed into its own portfolio.
Boohoo Group co-founder and executive chairman Mahmud Kamani, says: “This is a transformational deal for the group, which allows us to capture the fantastic opportunity as ecmmerce continues to grow. Our ambition is to create the UK’s largest marketplace.
“Our acquisition of the Debenhams brand is strategically significant as it represents a huge step which accelerates our ambition to be a leader, not just in fashion ecommerce, but in new categories including beauty, sport and homeware.”
The relaunch as a marketplace is expected to take place in the first quarter of Boohoo’s next financial year, which starts in five weeks time. In the meantime, the Debenhams website will continue to operate as part of the Debenhams department store business while the department store business continues to wind down. It will transfer to Boohoo once its remaining 118 department stores are able to reopen from lockdown and stock can be sold there instead. Boohoo will not take on any of Debenhams’ shops, or its 12,000-strong workforce.
Geoff Rowley, FRP Advisory partner and joint Debenhams administrator, says: “We are pleased to have secured the future for this great brand, and to have created the opportunity for a new Debenhams-branded business to emerge in a different shape beyond the pandemic. I expect that the agreement with boohoo may provide some job opportunities but we regret that this outcome does not safeguard the jobs of Debenhams’ employees beyond the winding down period. We are very grateful that they have worked tirelessly through this very challenging period and will continue to support the closing down sale.”
He said that Debenhams’ Danish business, Magasin du Nord, would continue to operate independently.
Debenhams could soon be joined as an online-only brand by high street stalwarts Topshop, Topman and Miss Selfridge after Asos today confirmed it was in exclusive talks to buy the brands.
Together the two announcements represent a significant shift towards taking the high street online at a time when many shoppers continue to work from home following repeated Covid-19 lockdowns. Not only are they more likely to be shopping from home online or in suburban high streets, but they are also not visiting the city centre shopping areas developed to serve office workers.
Boohoo says that as a top ten retail website – with more than 300m visits a year – Debenhams has high brand awareness both for its fashion products and for its beauty products. It now plans make more of its online presence by turning it into a marketplace.
In its latest financial year, to August 31, Debenhams turned over £1.5bn, of which about £400m was online. Boohoo characterises about a quarter of that turnover as coming through marketplace sales of fashion and homewares, and a further quarter through own-brand – including Maine, Mantaray, Principles and Faith – fashion sales. The remaining 50% of sales were through a traditional wholesale model – 20% beauty sales, and 30% third-party fashion, homewares and sport sales. The latter will not continue to operate under its new ownership.
The new Debenhams marketplace will use its own pureplay brands and third-party brand relationships as a starting point. It will develop new relationships with fashion and beauty brands, in a way that promises to hand more control to brands, who will be able to decide what products are offered through the marketplace to the Debenhams customer base. In due course more product categories and supplier partnerships will be added.
The move represents a first, and significant, step into the beauty market for Boohoo, since Debenhams has 6m beauty shoppers and its Beauty Club has 1.4m members. Boohoo also sees further opportunities to expand into new categories, from sport to homewares.
Boohoo Group chief executive John Lyttle says: “The acquisition of the Debenhams brand is an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail. We have developed a successful multi-brand direct-to-consumer platform that continues to disrupt the markets that we operate in. The acquisition represents an exciting strategic opportunity to transform our target addressable market through the creation of an online marketplace that leverages Debenhams’ high brand awareness and traffic through the development of beauty and fashion partnerships connecting brands with consumers."
Boohoo itself was founded in 2006 as a fast fashion retailer and since then has expanded through the launch of BoohooMan and, from 2017, through a series of acquisitions, starting with PrettyLittleThing and Nasty Gal, followed by MissPap, Karen Millen and Coast in 2019 and Warehouse and Oasis in 2020. Each acquisition has been integrated into its multi-brand e-commerce platform.
The Debenhams acquisition is Boohoo’s latest purchase out of administration. In recent years it has bought Karen Millen and Coast and Oasis and Warehouse in this way and last May it raised nearly £200m in order to take advantage of opportunities during the pandemic such as today’s purchase of Debenhams. Today’s transaction will be financed out of a £386.9m cash balance. The Debenhams acquisition includes the retailer’s online business, intellectual property, customer database but not its retail stores, stock or any financial services.
Meanwhile, Asos, which has itself transformed into a marketplace, today says it is in exclusive talks with Arcadia administrators to buy the Topshop, Topman, Miss Selfridge and HIIT brands. It says in a statement today: “The Board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base. However, at this stage, there can be no certainty of a transaction and ASOS will keep shareholders updated as appropriate. Any acquisition would be funded from cash reserves.”
Our view: In recent years, department stores including Debenhams have been working to develop business models for the future for companies founded in previous centuries – Debenhams itself was founded in 1778 and grew into a department store business during the 19th and 20th centuries. Now Boohoo says the future of this department store is online with the much newer marketplace business model.
Debenhams’ management has worked hard on strategies to give customers new reasons to come into its stores. The enforced closures of stores over the last year as a result of Covid-19 have made that option much less viable. At its peak it had more than 200 shops that were the backbone of shopping centres around the UK – in 1950 the retailer was the UK’s largest department store chain. Today it has 118 – and is looking to an online future in which Boohoo hopes it will challenge Amazon and eBay as marketplace leaders.
Now that Debenhams is moving online, it will be interesting to see how other department stores solve the riddle of updating their business model for the 21st century. None of the solutions are likely to involve having hundreds of large shops.
Debenhams and Oasis are ranked Top50 in RXUK Top500 research, Boohoo and Karen Millen are ranked Top100, while Coast, Warehouse and NastyGal are Top250.