A ‘reckless’ move that killed UK retail giant

Two new, shiny and expensive Debenhams stores had opened a few days apart. One was located near the train station Stevenage, a suburban town north of London. It was billed as a glitzy “flagship,” which was odd considering it was in a town of less than 100,000 people.

Nearly 17,000 kilometers away, the doors opened to another Debenhams. The one who took over the basement of a mall in Melbourne at the not quite Parisian end of Collins St.

Each opening involved bells and whistles and celebrities cutting ribbons. Management had high hopes the expansion would pay dividends, with customers buying a lot of cosmetics and clothing, stopping only for an in-store coffee break.

The store openings were a disastrous decision.

A retail analyst told news.com.au that the company’s strategy of continuing to open more stores while other retailers are closing branches was the most “reckless” decision taken. by Debenhams and one of the main reasons she went bankrupt so spectacularly.

It was a move that not only brought down Debenhams, but almost destroyed an Australian department store with it.

“All the signs were there not to open more stores and they did it anyway,” said CEO of retail consultancy Retail Doctor Brian Walker.

Debenhams’ ‘reckless’ mistake

Last weekend, the last clutch of 124 Debenhams stores closed for good – their shelves stripped by shoppers looking for bargains.

Founded in 1788, Debenhams was to the UK what Myer is to Australia: mid-range, reliable and venerable.

Its iconic department stores were found in every UK city as well as in many major towns and suburbs.

All the major brands were gathered in one place. In the 1990s, the “Designers at Debenhams” collection of diffusion lines by top designers won over UK buyers.

This is where you went for Clinique makeup, Jasper Conran clothing, and Van Heusen shirts.

In 2006, after going through several bumpy ownership changes, Debenhams returned to the stock market with the company valued at £ 1.7bn (just over A $ 3bn). Sounds good, but it was on the lower end of market expectations – investors were immediately nervous.

No management, however. Full of cash and with its strong market share, Debenhams went on a half-billion dollar store-opening frenzy. Over the next decade or more, spending on new stores would only increase.

But since it already had stores in most major cities across the UK, many of these new stores were in smaller suburbs or market towns with fewer shoppers. Places like Wrexham, Bury St Edmunds – and Stevenage.

In south London, Debenhams has opened a new store in Wandsworth – hardly a shopping mecca – just 2 kilometers from an existing store in Clapham Junction. In good traffic it’s only a five minute drive in between.

“In 2006, it was 10 years after the opening of Amazon and the start of online growth and Debenhams was on a store-opening frenzy,” Mr. Walker said.

“It was a really reckless expansion strategy.

“He developed excessively when there was a real need to be judicious.”

Department stores might work, Walker said, but profitable locations were more likely to be CBDs and other high traffic destinations, preferably with lots of tourists.

“At one point, Debenhams had 240 stores when it really only needed 50.

“They were over-indexed to space with high operating overheads and too much square footage, but not enough differentiated brands.

“The margin of error was just too big.”

The fact that Debenhams continued to open new stores until the late 2010s, despite the boom in online sales and the growing power of fast-fashion retailers like Primark, H&M and Zara, is baffled.

RELATED: ‘Sad’ Final Hours of Iconic British Retailer Debenhams

Debenhams’ role in the failure of a major Australian retailer

One of the British giant’s most baffling decisions was his brief stay under it.

He teamed up with Adelaide-based Harris Scarfe to initially sell Debenhams-branded clothing in his stores. Then, in September 2015, a Debenhams store opened in the center of St Collins Lane.

The plan was to open a small collection of Debenhams stores in major capitals – an upscale alternative to Harris Scarfe.

“It was a brave move, but there was no proof of logic,” Walker said.

“At the time, Roger David and Ed Harry had gone bankrupt and even H&M had probably grown too much in physical space in Australia.”

Indeed, H&M has since closed some regional stores in Queensland.

Mr Walker said he expected Harris Scarfe and Debenhams to note that some Australian customers were buying Debenhams clothing online, so assumed they would flock to the Melbourne store.

They did not do it.

“It was pride – they just didn’t read tea leaves well.

“When Debenhams first opened, they didn’t do a spectacular job either.”

Deprived of customers, the doors of Debenhams Melbourne closed at the end of 2019.

The ill-fated opening of Debenhams in Australia was such a disaster in department stores that it played a key role in Harris Scarfe’s insolvency, which fell under administration in December 2020.

A report filed by BDO Trustees in March 2020 said the closure of Debenhams in Melbourne had “resulted in an imminent irreversible default under the lease with a significant associated cost,” reported the Herald sun.

Harris Scarfe, now owned by Spotlight, has abandoned 23 of its 66 stores. But at least, unlike Debenhams, he continues to have stores.

RELATED: Australian Retail Icons Risk a Debenhams-style ‘Failure’

12,000 jobs lost

There were other reasons for Debenhams’ downfall. Its stores were large, cumbersome, and came with high rents that demanded high sales.

Still, it was seen as unstable and tired compared to more nimble and newer competitors. It has failed to make its online offering as appetizing as rivals such as ASKS and The Iconic.

Then online came COVID-19.

It is estimated that around 12,000 people will lose their jobs as a result of Debenhams’ disappearance. The brand will live but online only after being bought by Boohoo for 55 million pounds (100 million Australian dollars), a far cry from its stock market listing of 3 billion dollars in 2006.

QUT marketing expert Professor Gary Mortimer said Debenhams’ plight was a reflection of retailers around the world.

“The days of full-line department stores have changed. Failure like Debenhams could happen in Australia and we’ve seen it happen before, ”he told news.com.au.

But he also made huge mistakes.

Head to Melbourne or Stevenage today and the buildings that once housed Debenhams are there – but the iconic brand no longer exists.

They are both monuments to the bad decision that ruined a retail giant.

About Julius Southworth

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