07 Nov 2018
New Look In Strategic Pivot To Online Retail
In the face of profitability challenges, high street fashion retailer New Look is now making a strategic pivot to online retail. News that New Look would be closing 85 UK stores is a continuation of a tidal change in the industry. Brick and mortar retailers are under pressure to finetune their business models for a changing landscape.
Since its founding in the 1960s, New Look has made a name for itself through fashion for both men and women. Its products include the Idol celebrity-inspired line, the Lingerie line, as well as Generation(for teenagers), and Inspire (plus sized variant).
Closing Stores To Reduce Costs
Shutting down some of its nearly 600 stores could end up reducing the company’s costs. The cash flow savings from such a move can be applied towards a new focus in New Look’s online operations.
The BBC originally reported that 60 stores would close, as of March of 2018. The closures would also involve the elimination of around 1000 jobs. Now the company plans to shutter 85 stores across the UK, with potential to bring the total up to 120.
In its announcements, the business indicated that is was struggling to keep cash flow at adequate levels to cover both rising costs, such as rentals, and existing debt service.
What Others Are Doing That New Look Doesn’t
New Look’s competitors have been more successful in selling to online audiences. Fast fashion London retailers such as Boohoo/PrettyLittleThing and ASOS are applying unique strategies that New Look has yet to adopt.
For example, Boohoo has grown to annualized revenues of over half a billion pounds based on an ecommerce focus, with unique strategies such as:
- Selling “throw-away” cheap clothing which brings in massive numbers of buyers
- Acquisition of PrettyLittleThing and Nasty Gal, brands with global recognition and existing fanbases
- USA sales led growth, up 140%, while UK sales are up 33%
- Targets young women as the core customer demographic
ASOS shares many of the same strategies, indicating in its 2018 financial guidance filings that it would continue to strive to be the destination of choice for “fashion loving twentysomethings.” The company managed to grow profits by 28% to £102m, while revenue was up 26% from £1.9bn to £2.4bn in 2018.
A Spate Of Closures from London to San Francisco
New Look is not the only fashion retailer that has suffered from a challenging environment for brick and mortar retailers. Everywhere from London to San Francisco, the retail industry is undergoing a radical change that has left old brands exposed.
High Street Store Closures Amidst Shift To Online Shopping
Marks and Spencer’s is also among Great Britain’s high street retailers closing down stores due to, among other things, increasing competition from online shopping.
In 2017, for example, The Guardian put the number of store closures at 6,000 throughout the year. Some of the hardest hit were fashion retailers, but high street retailers in most verticals were affected. The big names closing stores included:
- Ultimo - lingerie retailer
- Toys R Us - Toy merchants
- Evans Cycles - Bicycle retailer
- Debenhams - Department store
Retail Apocalypse in America
The trend is by no means confined to the UK. Over in the US, Sears, the iconic fashion retailer, in 2018 announced the closure of many of its stores and filed for bankruptcy. Other chains closing stores included Kmart, Macy’s, Bloomingdale’s, JCPenney, Radio Shack, and other big names.
This has, in turn, led to the shuttering of countless shopping malls across the country amid indications the industry has been overtaken by the sweeping tide.
Not only is the movement of consumers to online shopping to blame, but, at least in the UK, a weakening currency (the Pound), has hit consumers’ wallets hard.
How to Make the Switch to Online Work
While the future looks bleak on New Look’s current trajectory, there is hope that it could improve its fortunes by embracing online shopping as the new way of life. The following strategies can help retailers like New Look win in the new digitally-enabled shopping environment.
Invest In Online Sales Channels and Strategies
In the online environment, having a vibrant presence matters. Retailers like New Look can use the savings from store closures to develop their online footprints.
Moreover, retailers need to learn the language and strategies that work online. For example, understanding online analytics, while complex, is a must. Mastering the culture of content marketing is another strategy that can help.
Some of the brands, like Boohoo, that have won big online have trail-blazed new strategies based on low cost fast fashion for customers. Such products are popular because they are seasonal, trendy, and often involve discounts. These are some of the strategies that brick and mortar retailers will need to learn as they navigate the online world.
Connect With Digitally-Savvy Shoppers
Today’s market is seeing a gradual transfer of buying power to the Millennial generation. The Millennials are a generation born from around the early 1980s to the early 2000s that are in their young adulthood.
As they become more active in the economy, their shopping behaviors will drive future trends. For example, Millennials are already the most active home buyers. We can expect this change to translate into other areas as well. This will impact not just the broader economy, but verticals such as fashion retail.
Millennials, meanwhile, are tech savvy and expect brands to be, as well. In a sign of things to come, Accenture found that Millennials are also influencing their parents to climb up the digital learning curve. Retailers who succeed in the new environment will be those that start now to connect with these new, digitally-savvy, shoppers.
Surviving The Future Of Retail
The retail store closures at brands like New Look are painful but are likely to persist for the foreseeable future. It is clear all retailers need to approach these changes with an open mind in search of solutions.
Given the shift in consumers’ behaviour to online shopping, investing in online selling channels presents an opportunity. Retailers will need to learn what works online, and connect with the savvy digital shoppers that are defining the future of retail.
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