Introduction
The British High Street retailers are in decline and may soon become obsolete, making way for internet shopping. High street firms are struggling to stay up and need help with internet retailers. It has been a horrible period for UK high-street retailers, with Arcadia’s administration accidentally leading to the closure of Debenhams (Neate, 2020, p. 2). Following the failure of large British retailers, the obstacles that contributed to the downfall of Debenhams and the chances that Asos used to become successful should be of great interest to every investor. The lessons will assist investors in understanding the market and making informed judgments in the fashion industry.
Debenhams
After 243 years of operation, the surviving Debenhams department shops closed their doors in May 2021. Debenhams Corporation was a department store in Britain that operated in the United Kingdom, Ireland, and Denmark. It began in 1778 as a standalone shop in London and expanded to 178 outlets in those nations (Qamar, 2019, p. 2). The products range from middle-to-high-end apparel, cosmetics, home items, and furnishings. The company encountered financial hardships in the twenty-first century and went into administration. Debenhams’ major subsidy operator, Arcadia, also went into receivership in November 2020, ending negotiations with Frasers Group and JD Sports over a possible rescue.
The Rise of Debenhams
In 1778, William Clark opened a draper’s establishment at 44 Wigmore Lane in London’s West End, where he offered luxury textiles, bonnets, parasols, and gloves. In 1813, William Debenham contributed to the business investment, which later became Clark & Debenham, kicking off the Debenham family’s engagement (Chapman, 2018, p. 1). Things began to happen for the corporation when they extended into Cheltenham in 1818 with a replica of the old establishment. However, it was not all plain sailing for the retailing behemoth. It grew to emerge as one of the UK’s leading retailers, with over 200 multiple outlets in 18 nations and exclusive collaborations.
The Fall of Debenhams
After decades of expansion, the sales began to fall in 2013. The corporation disclosed a 26% decline in earnings and a 12% fall in stock. After the profit warning, the chief financial officer quit in January 2014 (Thomas, 2020). By 2015, Debenhams had its first increase in yearly earnings in four years, at 2.9%. The years that followed were even worse. Debenhams announced a 44% drop in yearly pre-tax earnings to £59 million by October 2017. Once KPMG was brought in to save face a year afterward, shares fell 17%. Debenhams declared a company shutdown on December 1, 2020, firing 6,500 employees after entering receivership.
ASOS
ASOS is an online clothing store that increased by 19% in the previous year. It has a product inventory of over 85,000 goods and adds 5,000 new things every week (Alumni, 2021, p. 2). ASOS has a team of data scientists that enables the shop to progress beyond predictive analytics. It employs a machine learning matching tool to connect the firm with its consumers in real-time (Sjåfjell, 2018, p. 12). The tool connects clients to experiences that maximize engagement and deliver desired outcomes. The organization may track individual activity in real time and provide customer scalability advice. Image recognition allows buyers to purchase apparel based on quality.
Issues at Debenhams
Debenhams has a slew of problems. They included having 165 shops at a time when revenues were down, and expenditures were growing. Rent was costly at 13% of sales (Salmon, 2019, p. 1). The third concern was that internet sales were advancing, but just to half the level witnessed by competitors, and finally, fashion choices were not attracting buyers as they had previously. Before 2018, revenues were essentially stable; gross profits were approximately 13%, and retained profits were 5% (Salmon, 2019, p. 3). It demonstrates that sales per shop were declining due to the challenging market circumstances and a lack of appealing fashion lines.
Lessons from Debenhams
Investors should evaluate investment prospects financially. Debenhams sales were declining, and profitability was stagnant, yet they continued to spend without hesitation. Growth is positive, but profitability must improve to offset rising interest charges (Neate, 2020, p. 1). Failure to capitalize on chances like when Debenhams missed reinvesting enough earnings in the firm during boom years. Businesses must guarantee that they invest in people, processes, and infrastructure for the future. Debenhams traded on negative net current assets for the past decade because merchants had much cash. Net current liabilities signified that the company did not have sufficient cash to satisfy liabilities and continue the business.
Lessons from ASOS
In this day and age, investors must recognize that technology is one of their most crucial assets. Technology enables rapid growth and meets the needs of customers who anticipate the maximum speed and convenience in their purchasing experience. Investors should celebrate and thank consumers as the shop showcases its devoted fans via its visual shopping channel. It is critical to maintain close contact with one’s employees (Alumni, 2021). ASOS has an effective employee advocacy campaign. Their stylists are transformed into social media influencers. It is critical to invest in social media and content platforms. Asos has around 70,000 subscribers and more than 1,000 videos on YouTube, while its flagship Instagram account already has Four million followers.
The Potential for Disruptive Innovation
By investing in technology, modifying the institutional framework, and fostering a culture of continual experimentation, the firm has managed to maintain a competitive advantage in data leveraging. A digital organization with cross-functional teams collaborates to build best practices for machine learning and modeling (Alumni, 2021, p. 1). The approaches have assisted ASOS in engaging with consumers and providing value. ASOS was able to extract value by understanding consumer preferences. ASOS’s essential consumer engagement and business metrics have likewise continually increased. ASOS is well-positioned to develop its platform approach, test new concepts more quickly, and respond to shifting customer patterns more simply.
Sustainability of ASOS’ Innovation Strategy
Investment research is the period investors devote to researching and assessing the performance of monetary assets to compile a list of high-performing assets. To put it another way, it is the preparatory stage of investing in which both retail and corporate finance firms seek, locate, and research information on equities or other assets to uncover investment possibilities (Liao, 2018, p. 1). It enables investors to learn more about specific topics, such as growth, equities, and technological innovation. Careful consideration is required since the evolving competitive landscape might utterly contradict some corporate assumptions. Ignoring media news, like Debenmans, destroys the firm entirely, regardless of size.
Conclusion
In 1778, William Clark started a draper’s shop at 44 Wigmore Lane in London’s West End, selling premium fabrics. Debenhams filed bankruptcy on December 1, 2020, laying off 6,500 employees after going into receivership. On the other hand, ASOS is an online clothing company that grew by 19% in the preceding year, with inventory levels of over 85,000 items, and produces 5,000 new items every week. Since the fall of Debenmans, investors should analyze financial investment chances. As Asos grows, it must acknowledge that technology is among its most important assets since it permits quick expansion.
List of References
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Qamar, A. 2019. The Retail Crisis Catches Up with Debenhams. UniversityofBirmingham. Web.
Salmon, G. 2019. Debenhams: what went wrong, and what can investors learn? HargreavesLansdown. Web.
Sjåfjell, B., 2018. Redefining the corporation for a sustainable new economy. Journal of law and Society, 45(1), pp.29-45.
Thomas, D. 2020. What went wrong at Debenhams? BBC. Web.