It was laden with £750m of debt. Would a radical rethink of its business model have saved Peacocks? And can your business learn from its mistakes?
Low-budget fashion retailer Peacocks has just been sold out of administration to Edinburgh Woollen Mill, protecting 6,000 jobs but incurring 3,100 redundancies. There was plenty of appetite for the business – administrators KPMG said it received around 100 enquiries within 48 hours of the administration being announced. Usually, KPMG told us, it would expect six or seven calls in that period.
Edinburgh Woollen Mill is the lucky buyer, acquiring 388 stores and concessions, the Peacocks brand and the business HQ and logistics. (Edinburgh Woollen Mill snapped up Jane Norman last year, and is no doubt interested in Peacock’s physical stores, plus its standing as a well-known low-price fashion retailer.)
But let’s backtrack to a couple of months ago, when Peacocks’ board realised they were facing untenable debts of £750m. (The story behind that staggering debt sum and the hedge-fund-backed management buyout that triggered it is fairly messy and long-winded: Retail Week has a great synopsis.)
So, in early December, Peacocks considered axing 200 of its total 611 stores (including concessions) in a bid to bring down its overheads. Except it didn’t close them.
Why on earth not? Clearly CEO Richard Kirk (who had led the management buyout five years previously that racked up so much debt), believed there was still some kind of hope. On January 17, the day before Peacocks was put into administration, Kirk was in talks with a “mystery investor” to try to save the business. Optimistic much?
But what if Peacocks (and sister company Bonmarché – for the purposes of this article, let’s lump them together) had been a bit more revolutionary with its business model. What if Peacocks had axed all its stores?
Now bear with me for a minute. Let’s look at Peacocks’ number one rival, Primark. We all know that in tough times consumers shirk mid-priced products and, as the saying goes, only the Primarks and Pradas of this world survive.
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Primark has dominated the low-budget fashion sphere in recent years with frightening hegemony. But the 128-year-old Peacocks was suddenly catching up: its brand was getting better known. A range designed by the scenester Pearl Lowe was giving it credibility among the fashion press. Those who like to shop were whispering to each other that it was a pretty great little spot to buy clothes that all the Primarni-clones wouldn’t be able to find.
Its ascension felt very similar to Primark’s not so many moons ago.
But one thing that Primark doesn’t do is online retail. You can’t shop online. The Primark website is, in fact, rather embarrassing – the kind of thing a schoolkid with a knack for IT might knock up for their A-level project.
And therein lay the opportunity for Peacocks. Grab all that SEO traffic for “cheap fashion”, and all Hydra-like variants therein. Sure, you have some competition from the likes of online superstar ASOS, and from the mid-tier high street brands like TopShop and Miss Selfridge. But those brands are mid-tier.
What cash-strapped consumer is going to pay £45 for a TopShop minidress when they could pay £7 for a Peacocks minidress?
Yes, Peacocks already sold online. But it clearly hadn’t invested much into really leveraging its online offering, nor into using its already established brand to power online sales. The Peacocks website lacks the slick sliders and browsing-friendly page after page of products that ASOS has mastered so well, and the oh-so-SEO-friendly reams of editorial.
A quick survey of our almost entirely female staff here at LondonlovesBusiness.com, several of whom can safely be classed as shopaholics, reveals that none ever noticed the Peacocks website appear in Google search results or ad slots for fashion products searches.
And yes, it’s expensive to maintain the type of digital marketing budgets that keep you at the top of Google results. It’s none too cheap either to get the tech in place to create a website of the calibre of an ASOS or a MyWardrobe.com (a full explanation of whose genius deserves another column). But is it as pricey as paying the rent and maintenance and utility and cleaning bills for 600 stores, and all the staff and administration needed to manage them? I think not.
Let’s do a very back of the envelope working. Say the average lease for a Peacocks store costs £50,000 a year. At 611 stores, scrapping them could have saved Peacocks £30.5m in property leases alone, every year.
Let’s guestimate that, since Peacocks head office only had 500 staff before half were made redundant a few weeks ago, that the majority of its 9,000 staff worked in store – let’s say half, to be on the very conservative side. It’s an extremely difficult decision to make, but if 4,500 in-store staff were cut with the stores, on average salaries of £24,000, Peacocks could have saved itself another £108m a year.
These workings are of course hideously sketchy. And you’d obviously need to bring in an incredible tech team, and digital marketing executives. But those teams would be small.
My point is that in times as tough as this, when so many businesses are facing the prospect of administration or savage losses, sometimes a radical change is the only way to survive.
Recessions – or almost-recessions, the situation we find ourselves in now – are times when the most entrepreneurial, the most risk-embracing, the most disruptive companies thrive. That means changing fast when things aren’t working – flipping your business model over again and again until you find a way to make profit from a hyper-lean operating base.
It may sound harsh to say, but if Peacocks had just taken that bold leap into the radically new, there’s a chance it might not be owned by Edinburgh Woollen Mill today.
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