Is Covid-19 to blame for the demise of Debenhams and Arcadia?

4th December 2020

“The Covid-19 pandemic was the final nail in the coffin” is a term that has been used by several media outlets to describe the demise of Debenhams and the Arcadia group. Whilst there is no doubt that the pandemic has had a significant impact on these businesses, have Debenhams and Arcadia not been digging their own graves for a long period that pre-dates the current pandemic?

The troubles at these retailers started long before the onset of Covid-19. Years of poor management decisions, inability to adapt to changing customer behaviours and their arrogance to take new entrants to the market seriously (or react to that threat) has meant loss of customer loyalty and ultimately,  declining sales for several years.

The Senior Management at both of these businesses could have (and should have) taken some lessons from the grocery retailers. In the late 2000s/early 2010s, the big 4 supermarket chains ignored the rise of the German and other high street discounters and instead kept on investing in expanding their store portfolios which offered 1000s of products in comparison to the typical offering of 5,000 – 6,000 products at the discounters,  at prices that were 20-30% cheaper.

At the same time, they also ignored the fact that the way customers wanted to shop was changing with a significant shift to online. The result was a significant loss of market share and declining LFL sales. This was until the point when the grocery sector started their fight back and taking the threat of the discounters seriously whilst at the same time adapting their operating models to best serve their customers. The grocers invested in price, quality and service whilst investing millions of pounds in their online platforms. The focus shifted from large out of town superstores to convenience formats, online and click & collect models.

What the grocers probably didn’t realise was that they were future proofing their businesses and unknowingly, they were ready to tackle a global pandemic. The result? During the last few months, the big 4 grocers have seen customers switching back to them from the discounters for the first time in years whilst the discounters saw market share losses.

Debenhams and Arcadia on the other hand did not adapt their business models or future proof their operations. They ignored the rise of fast fashion retailers such as Primark, the significant growth of supermarket brands such as F&F and George on the high street whilst also ignoring the significant rise of online retailers such as Boohoo and ASOS. They failed to address the threat that fast fashion and online retailers posed to them. They carried on investing in growing their store estate whilst underinvesting in their digital and omni channel platforms. They also failed to appeal to a new generation of shoppers or hold on to their previously loyal customers who once shopped at Top Shop or Top Man. It’s been a catalogue of errors and ultimately neither brands were resilient enough to withstand the impact of a global pandemic that shut down their stores for months.

It may be convenient to blame Covid-19 for the demise of Debenhams and Arcadia, but the fact is, what the current pandemic has done is simply accelerate what was inevitable for these brands. Whilst it will be a real loss for our high streets and shopping centres to see these brands disappear and the significant impact to 25,000 people who stand to lose their jobs and livelihoods, other retailers should pay close attention to what led to the demise of these (once) behemoth brands.

Retail today and in the future is truly about survival of the fittest and those who fail to adapt and future proof their businesses will become their own virus.

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