Several well-known brands now face an unknown future as administrators seek buyers
The coronavirus pandemic has caused mass disruption to retail industry as businesses struggle to stay afloat. With the national lockdown coming to an end, another retail giant has collapsed as a result of the pandemic ‘ Topshop owner Arcadia has gone into administration, putting 13,000 jobs on the line.
Sir Philip Green’s Arcadia Group has collapsed into administration as the retail tycoon’s high street career comes to an end. Arcadia Group, who owns Topshop, Topman, Miss Selfridge, Dorothy Perkins, Evans and Burton appointed administrators from Deloitte on Monday. Sir Philip Green’s retail empire operates from 444 sites in the UK and 22 overseas as well as online – and currently has more than 9,000 staff on furlough. The workforce faces an uncertain future, though no redundancies have been made and the group’s stores and websites will continue to trade as normal. Matt Smith of Deloitte, the joint administrator, said the coronavirus lockdowns, combined with broader challenges for high street retailers, had resulted in a critical funding requirement for Arcadia, forcing it into administration. Arcadia’s collapse on Monday evening came after it rejected a £50m loanoffer from Frasers Group, controlled by Sir Philip’s high street rival Mike Ashley.
This is an incredibly sad day for all of our colleagues as well as our suppliers and our many other stakeholders, Ian Grabiner, the chief executive of Arcadia, said. The impact of the Covid-19 pandemic, including the forced closure of our stores for prolonged periods, has severely impacted on trading across all of our brands. Throughout this immensely challenging time, our priority has been to protect jobs and preserve the financial stability of the group in the hope that we could ride out the pandemic and come out fighting on the other side. Ultimately, however, in the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe. Administrators at Deloitte said they would now seek buyers for the business. Arcadia stores will reopen in England on December 2 when the coronavirus lockdown is lifted.
Some business leaders believe several different variables have caused the downfall of Arcadia, such as the shrinking of the middle class, failure to connect with consumers at a values-based level and a lack of digital innovation. Arcadia’s collapse into administration under the pressures of the pandemic is a major blow for the UK High Street ‘ especially when years ago Topshop was a best-in-class example of retail innovation, Melissa Minkow, Retail Industry Lead at digital consultancy CI&T said. There are a few different variables at play that could serve as great lessons for other retailers currently succeeding. Firstly, most of the brands under Arcadia Group, especially Topshop, sit in the mid-range for price points. We’ve seen mid-priced retailers struggle across the board because of the massive rift between low- and high-income groups. As the middle-income demographic shrinks, so does the success of mid-range retail.
On a similar note, Arcadia Group’s brands’ failure to identify with either fast fashion or more quality, high-end messaging means a failure to connect with consumers at a values-based level, she added. The brands have been experiencing a sort of identity crisis for a few years, making it difficult for shoppers to place these retailers within their lifestyles. Beyond the increasing irrelevance of mid-tier retail, the lack of digital innovation is certainly a key culprit. Arcadia Group’s decision to leverage more of a brick-and-mortar backbone, investing less than it needed in keeping up with social and e-commerce, allowed it to fall behind in establishing the omnipresence possessed by its rivals. Digital commerce is constantly evolving, and retailers that maintain more of a transactional, versus experiential, online platform are falling behind fast.
Arcadia’s collapse comes at a shock, ending the king of high street’s once glittering career. The pressure of the pandemic has had devastating impacts on thousands of retail jobs, and retailers will now face a new series of challenges as lockdown comes to an end and shops reopen amid the busy Christmas season.