What must BHS do to survive its CVA revival?

BHS’ owners breathed a sigh of relief this week when creditors voted in favour of a Company Voluntary Arrangement (CVA) that will see rents cut on many of its stores, but this is just one small victory on the road to recovery.

The department store chain’s past has been somewhat chequered in recent history. Loss making for 7 years, BHS was bought by invesment group Retail Acquisitions for just £1 in March 2015, when retail Tycoon Sir Philip Green failed to revive its fortunes.

BHS’ chief executive, Darren Topp, has placed the blame for its latest poor performance squarely at the door of retail property prices, claiming the retailer’s problems are down to cost rather than sales.

The CVA will certainly ease some of this pressure, as 47 stores will have rents slashed by either 50% or 75%, while negotiations will take place to reduce rental on the remaining 40 stores (excluding those held separately by BHS Properties Limited) by 25%.

What’s more important, though, is that Retail Acquisitions use this lifeline to raise the capital needed to reinvigorate the BHS brand, as its lacklustre results are down to much more than rising costs. “The shops are tatty and the clothing lines dowdy,” remarked the Financial Times’ Jonathan Guthrie in his analysis of the situation.

However, Guthrie’s conclusion that “department stores have themselves fallen from fashion with shoppers” couldn’t be further from the truth. BHS has to look no further than John Lewis and House of Fraser – both of which pre-date the 88-year-old chain – to see two examples of similar businesses that have evolved much more successfully.

So, where did BHS go wrong – and what does it need to do in order to put it right? Certainly within omnichannel retail, the business has been caught napping. John Lewis and House of Fraser have put significant investment into their digital strategies, both in terms of online offering and promoting technology-led engagement in the store. House of Fraser has gone mobile-first with its website, while John Lewis’ retail app was recently voted third best in the UK. Both companies have invested heavily in click-and-collect.

In contrast, BHS has been driving down its margins even further with seemingly permanent discount promotions, and trying to diversify into new areas such as foods rather than reinventing its core clothing and homeware range.

Recently, though, there has been light at the end of the tunnel. The convenience food initiative is still in play, but BHS seems to have turned a corner with regards to prioritising what needs to change. 23 stores have already undergone a rebrand, and Topp has vowed to streamline its product range and focus on the brands which resonate with its customers. It’s also implementing an aggressive ecommerce strategy, to increase online shopping’s share of sales from 12% to 20%.

Interestingly, BHS has hired ex-House of Fraser brand marketing director, Tony Holdway, as marketing and creative director. He has already vowed to overturn the company’s lack of brand appeal and investment.

The fact that Holdway has jumped ship from House of Fraser is almost a bigger coup for BHS than the CVA. Having someone who knows how to run department store marketing, 2016 style, will help the retailer to shake off its outdated image and start embracing the omnichannel, multi-touchpoint journey to purchase that hallmarks modern retail.

One thing is for sure; if BHS doesn’t aspire to the relevance and agility of John Lewis and House of Fraser, it’s going to find itself back in the danger zone pretty quickly. And it would be a huge shame to lose one of the High Street’s most recognisable heritage brands.

Has Marks & Spencer sparked a smarter way to increase loyalty?

Unless you’ve been hiding under a rock, you’ll know that Marks & Spencer has just unveiled its new loyalty scheme, Sparks, to rapturous applause across the retail industry.

Hailed as ‘groundbreaking’ by the retailer, Sparks differentiates itself from traditional applications by rewarding both purchases and non-transactional activities, such as product reviews.

Accumulating large volumes of points will open up access to money-can’t-buy experiences, such as exclusive events and collection previews – which Marks & Spencer believes will foster a two-way relationship with their most loyal customers, tailoring the brand experience.

The retail industry has been quick to praise this new approach to customer retention, and not without reason. Our discount-driven culture has devalued promotional and price based loyalty; consumers now expect a good deal as standard. In fact, many are tired of having to make a purchase altogether to pledge their allegiance.

Instead, loyal customers are building a new role for themselves, in which their brand advocacy becomes part of the retailer’s marketing strategy. Today’s consumers don’t just feel satisfied when they’ve had a good experience – they blog about it, tweet about it, Instagram their new purchase, review the experience online, and so forth (something we discussed in our recent report about how social media can make or break customer relationships).

Smart retailers realise this and are finding ways to reward it.

However, Marks & Spencer isn’t the first. This type of non-transactional incentivisation is already being pushed hard in the hospitality industry. Starbucks, for example, has experienced tremendous success with its mobile app, which gives users custom offers, early access to new products, even enables them to pay at the same time as collecting points.

Even other retailers have forged ahead with experiential offerings for its most loyal customers. Harvey Nichols springs to mind here – the premium department store has made its entire programme mobile-based, using an app to fast track high value customers through to exclusive events and personalised privileges.

What’s seminal about Marks & Spencer’s Sparks, though, is its sphere of influence.

Regardless of the ups and downs it has weathered in recent years, M&S is a stalwart British brand, reflecting British people. Families have shopped there for generations, and trust the retailer to deliver to a certain level of quality. Therefore if Marks & Spencer are offering it, they’ll start expecting other household names to follow suit.

The battle isn’t won yet for M&S, though. Now it needs to integrate Sparks within its offering, to recognise true customer value across all channels. This is easy to do online, but it’s harder work in the store – and customers cannot feel they are being treated as a second class citizen when they choose the bricks-and-mortar route to purchase.

So in conclusion, Marks & Spencer’s loyalty scheme has the potential to ripple across the High Street, redefining how retailers value and reward their customers. But it will only truly hit the nail on the head if it’s part of a joined up omnichannel experience.

Are we teetering on the edge of a fashion brand crisis?

Brits don’t care about brands. That’s the latest declaration from Kantar Worldpanel, which this week revealed fewer UK shoppers are buying goods based on the label.

Fit, quality and price are now much more important purchasing factors – which is understandable, considering the memory of economic austerity still looms large for most shoppers. Indeed, purse pinching has led to a rising thrift shopping trend, meaning many consumers are likely to boast about a second-hand purchase rather than new designer threads.

There have already been casualties of falling brand sentiment; Kantar points to the decline of Ben Sherman, and the metamorphosis of other labels such as Diesel, which has begun producing cheaper ranges to supplement its flagship ranges.

However, this potential brand crisis isn’t solely the fault of cautious consumers. In reality, it’s growing increasingly difficult for brands to have a close relationship with their customers. The plethora of marketplaces through which they trade have obscured their view of shoppers, so not only are the transactions taking place within a third party portal, consumer data is being retained by that third party too.

Even on the High Street, brands often have to make compromises, particularly where they employ a concession strategy. They do not have the capacity or resources to merchandise the same way as in their own stores, and the personnel serving their customers aren’t always as clued-up on their products and values.

But this isn’t necessarily a death knell for the fashion brand as we know it – it’s just time to change approach. Many brands are exploring new routes to trade directly in online markets, while others are looking at technologies that can enhance bricks-and-mortar experiences.

Fashion retailers such as House of Fraser have already reshuffled their business infrastructure around the needs of the customer, and brands need to make sure they are doing the same.

More than that, they need to ensure this customer-centricity trickles right through their every presence – which may mean investing in point of sale technology to better ‘sell’ the brand to shoppers in-store, or a network that enables faster communications and transactions for greater convenience.

For mid-range brands currently struggling to make their mark, it’s worth looking at the techniques being employed by luxury goods designers. By focusing on customer experience, and building a store network that can support the digital devices needed to bring store bricks-and-mortar shopping to life, luxury shopping has weathered market difficulties and emerged relatively unscathed.

The more brands can turn their physical presence into a theatre, the greater chance they have of engaging shoppers. If the name itself can’t carry customers, they need to make sure their service can.