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Some fashion retailers are known for bold colours; others for neutral classics. Some specialise in cheap casualwear; others in formal tailoring. Some sell online only; others offer a luxury experience. And then there are those still stuck in the middle: trying to flog beige cardigans from two-storey units in mid-market shopping centres. But, as Boohoo.com’s acquisition of Karen Millen shows, that middle is now being outflanked and squeezed by something more powerful than Marks and Spencer’s support hose. Beige may be Vogue’s “colour of the season” but, among UK shoppers, the trend is to polarisation.
Boohoo’s £18m deal to buy the ecommerce business of Karen Millen and sub-brand Coast out of administration is the latest example of a retailer focusing on opposite ends of the spectrum. As Stifel’s dedicated followers noted: “We see the move in line with . . . the polarisation of consumers’ preferences . . . as they increasingly mix value with aspirational items.” They cited the example of online retailer Zalando “which already focuses on the low end of the market” now collaborating with the more upmarket, and multichannel, Inditex.
In Boohoo’s case, it will continue to provide the value — through its Pretty Little Thing and Nasty Gal affordable fast fashions — and Karen Millen the aspiration, through its £100+ dresses. Its customer demographics will broaden, if not polarise, too — as the age of Karen Millen shoppers is politely described by one industry observer as “quite a bit higher” than Boohoo’s 16-30 somethings.
Boohoo’s interest solely in the online operations also shows that both ends of the market have no need of middling stores. With its offer for Karen Millen’s brands and intellectual property rights accepted, there is nothing for the company’s 30 standalone stores and 175 concessions to sell — so they will now be closed and disposed of via the administration process. In making this decision, Boohoo is giving up more than 80 per cent of Karen Millen’s £174m annual revenue, as total online sales are only £28m. However, its willingness to do so acknowledges another trend towards the extreme: the worst monthly UK retail sales since records began, and a 4 per cent decline at department stores where so many of those concessions are based.
While product choice polarises, though, product sourcing may be brought together. Boohoo’s successful “test and repeat” model — whereby low volumes of new lines are ordered until winners emerge — can be readily applied to Karen Millen designs. In fact, some of Boohoo’s lower volume, higher quality, suppliers may be able to take on entire Karen Millen runs, but shorten the lead times to better respond to changing fashion.
In clothing retail, then, a divergent offering can still offer growth potential. But for high-street brands that are neither one thing nor the other — such as M&S, Debenhams — it may now be too late. One almost got it right: Mike Ashley’s Sports Direct was split between value and the upmarket Flannels brand, until it got stuck in the middle with department store House of Fraser and now Jack Wills. And, as Mr Ashley sometimes proves in his Newcastle United football shirt, the middle is not a good look.
matthew.vincent@ft.com
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