BHS is, or perhaps that should read was, a familiar presence to shoppers across the UK, with over 160 stores in high streets and shopping centres. The general merchandise retailer combining clothing and home products had traded for nearly 90 years before it was placed into administration in April 2016. A buyer for the total business could not be found and the stores will progressively close, while the BHS name itself will disappear. This is the biggest collapse of a UK retailer since Woolworths (800 stores and 30,000 employees) collapsed in 2008. There have been several other significant collapses of smaller specialist chains in the intervening years, including Focus DIY (home improvement, 175 stores), Jane Norman (fashion, 200+ stores), Past Times (Gifts, 51 stores), JJB Sports (sports goods, 160 stores), Comet (consumer electricals, 236 stores), Barratts (shoes, 190+ stores) and Blockbuster (video rental, 264 stores).
The UK government regulators are keenly interested to understand the reasons for the collapse of BHS, amidst suggestions of poor governance and corporate behaviour. Inquiries will take place and explanations will be sought. But what cannot be in doubt is that, at a trading level, BHS had long since ceased to be relevant to many of the people that were formerly its shoppers. As a general merchandise retailer, BHS faced intense competition from many quarters, including specialist clothing retailers with a much stronger low price positioning (such as Primark); others with more fashionable offers (such as Next and TopShop); from the main UK supermarket food retailers expanding into general merchandise, and from a growing presence of online retailers. BHS entered a spiral of decline from which very few retailers are able to emerge: merchandise is dull, shoppers stop shopping there, stores are under-invested in and become tired, promotions are rife in order to try to stimulate sales but profits suffer in consequence. Add all that up and the result is predictable: there is little money to invest in a business that desperately needed investment if it is to have any chance of becoming relevant again to shoppers.
All this was happening to BHS at a time when its shoppers – as well as its competition – were changing in fundamental ways too. The UK shopping landscape looks very different to what it was even 10 years ago. A growing proportion of shoppers simply do not see shopping as necessarily a store-based activity at all. Busy lives, the proliferation of mobile devices, and reliable high speed internet access means that online shopping is much the fastest growing part of the UK’s retail market. Yet BHS had little capability to develop and service this part of the market by comparison with retailers, such as the John Lewis department store business which has invested very heavily in all of the logistics and technology infrastructure needed to support a properly integrated operation that combines physical stores with an online presence.
Other retailers in the UK have flourished over the same period that BHS has foundered and ultimately perished. Shop Direct is a case in point. This retailer has quickly transformed a number of tired retail businesses (most notably the old Littlewoods department store and catalogue retailing business) into a very effective, growing, and profitable online only retail business. It’s a form of retailing aligned to the needs of a growing proportion of shoppers and it doesn’t involve any physical shops at all.
The collapse of BHS serves as a sad illustration of a number of fundamental truths about the nature of the UK retailing industry in 2016. This is a hugely important sector in terms of its contribution to the economy, to jobs, and to the physical fabric of the country. But it is a sector undergoing profound and far-reaching changes both in terms of the competitive landscape and also the ways in which shoppers want to, well, shop. The relentless nature of change and the need to invest heavily in order to reinvent puts tremendous pressure on even the most established and recognisable high street names. The price for failing to adapt sufficiently and with sufficient speed and decisiveness may not just be business under-performance, it may well be corporate collapse.
Headline Image credit: End of an era: BHS, Swansea by Jeremy Sergrott. CC-BY-2.0 via Flickr.