In 1778 Debenhams opened its first shop in London and over the centuries its department stores grew to become a staple of the high street. Fast forward 242 years and the British multinational retailer has been snapped up by Boohoo, an online fashion retailer founded in 2006.
To be more precise, Boohoo has acquired the Debenhams brand and its website, jettisoning the firm’s remaining 118 physical stores and up to 12,000 jobs.
It comes after years of financial struggle for Debenhams in what has become a familiar story for bricks-and-mortar retailers. The rise of ecommerce giants such as Amazon have increasingly eaten into high street revenues, but the pandemic has provided the knockout blow to those that have struggled through previous turmoil.
Debenhams administrator FRP Advisory said the £55m secured from Boohoo is “the best outcome for Debenhams’ stakeholders”.
For Boohoo, it’s an opportunity to acquire a 242-year-old brand for a fraction of its prior valuation; in 2011 it was valued at £1.6bn.
“This is a transformational deal for the group, which allows us to capture the fantastic opportunity as ecommerce continues to grow. Our ambition is to create the UK’s largest marketplace,” said Boohoo executive chairman Mahmud Kamani.
“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 acquisition gives Boohoo a chance to win over loyal Debenhams customers to its highly successful ecommerce model and potentially tap into a consumer base that might not normally buy clothes online.
“Arguably, it’s this heritage that drove Boohoo to save the brand, despite 2020 retail sales seeing the largest annual fall in history,” said Hugh Fletcher, global head of consultancy and innovation at Wunderman Thompson Commerce.
“The emergence of a new Debenhams-branded business, one with a digital competency that is expected by shoppers may be the missing ingredient that the brand has long sought after. And the brutal truth is consumers will no longer tolerate an online shopping experience that lags, is unreliable and cannot take the shopper from browsing to payment quickly.”
Business has been booming for Boohoo as it has catered to changing consumer demands. In the six months to 31 August 2020, Boohoo Group’s pre-tax profits rose by 51% year on year to £68.1m.
And feeding on the remains of the high street is familiar territory for Boohoo and other ecommerce players.
It has previously gobbled up struggling high street brands Oasis, Coast and Karen Millen, but again leaving the bricks and mortar stores on the scrap heap.
A similar story may play out between ecommerce firm Asos and brands in Sir Philip Green’s Arcadia Group. The online retailer is in “exclusive” talks to buy the brands of Topshop, Topman, Miss Selfridge and HIIT out of administration.
Once again it is only the brands and online presence that are being coveted, leaving questions about what the high street will look like when pandemic restrictions are lifted.