House of Fraser – where did it all go wrong?
House of Fraser (HoF) will soon shutter the doors of several of its stores across the UK as part of a restructuring deal, as the owner of Hamleys, Chinese conglomerate C.banner, takes control of the ailing chain. It is yet another high-street casualty – so where did it all go wrong for the 169-year old brand?
The action plan will see HoF launch a company voluntary arrangement (CVA) insolvency process to close 31 of its 59 brick and mortar stores, threatening job cuts to the some 15,000 staff employed throughout the company and its concessions.
Chairman Frank Slevin vowed "to confront the seismic shifts in the retail industry” with the “significant capital injection in the business” from C.banner, and has not lost hope that things can turn around.
"There is a need to create a leaner business that better serves the rapidly changing behaviours of a customer base which increasingly shops agnostically,” Slevin said.
Buzzwords may temporarily placate investors, but is it a case of too little too late? The brand has faced seven straight years of losses, which haven’t proved to be enough of a catalyst for a radical overhaul akin to the one that’s now being proposed. To succeed in turning the business around, it will have to face up to a number of issues.
Problem 1 – the revolving C-suite
There’s been a carousel spinning at the very top of the business without reprieve for the past two years.
Current chief executive Alex Williamson joined from sporting company Goodwood less than ten months ago, replacing previous chief executive, Nigel Oddy who suddenly resigned from the company just two years into the top job. Oddy had been the answer to John King’s exit after what now seems like a remarkably long eight years at the helm of the chain.
Its chief marketing officers have fared no better. In 2016 Andy Harding departed after less than 18 months in the newly-created role of ‘chief customer officer’. His successor, ex-M&S executive David Walmsley - who boldly promised to overhaul the “theoretical” marketing strategy and “confused” definition of the HoF brand he inherited - also departed after just over a year.
The role was then scrapped entirely, and since 2017, Paddy Earnshaw has been the man charged with overseeing the brand as chief marketing officer.
Outside of the marketing department, in the first few months of 2018 HoF also lost in quick succession its executive director for buying and design Maria Hollins, chief operating officer of ten years Peter Gross, and chief information officer of three Julian Burnett. Last month, commercial director Shahnila Rashid also jumped ship.
Bringing in, and retaining, a management team is an obvious priority if HoF stands a chance at surviving the coming months.
Problem 2 – what the brand stands for has been lost
While high street rent reviews, store culls and “offloading of unused basements” will undoubtedly stem some losses, there’s no accountant’s solution to the fundamental brand problem HoF is facing – what does it actually stand for?
Brian Cooper is executive creative director at the Aesop Agency, which helps brands define their ‘story’. He said HoF, quite simply, doesn’t have one.
“What’s its point of view? Indeed, what is the point of it? Its biggest problem is that it has totally lost its relevance in the marketplace,” he said.
Though department stores saw success by radically altering the way people shopped by bringing everything under one roof, HoF has arguably let the 677 third-party brands it houses within its walls allow its own brand to become lost.
“Having gobbled up the nation’s independent department stores and filled them with concession after concession - a perfect model for the brand-hungry flashiness of the nineties and noughties - today, they’re left with soulless shells where you dawdle from one brand’s ‘mat’ to another with no sense of hubbub, heart and soul, or differentiation,” noted Richard Danks, brand director, Portas Agency.
“Why would you bother going to Ralph Lauren at House of Fraser when you can pop around the corner and buy the shirt 30 quid cheaper in TK Maxx?" he added. "Or better still, you can take a trip to Bicester and have the full-on Ralph experience at half the price.”
Although HoF remains well thought of in terms of quality (fourth in the UK for high-street stores) customers don’t recognise that it offers any value. YouGov data supports the brand's swoon, ranking it 22nd on YouGov’s list of 55 rivals, a long way behind Debenhams, John Lewis, M&S and Argos. Among those aged 18 to 34 the situation is worse; HoF clocks in as the 39th rated among this group with a score of -3.9, showing it is a long way short of the score currently held by the group’s favourite brand, Asos (at +20.)
“The biggest surprise in all of this is the success of the likes of John Lewis and Argos. The reasons for this may in part be to do with price and innovation - John Lewis is never knowingly undersold, and the Argos refits make for a much-improved customer experience. But probably the biggest reason of all is I get what the point of [those brands] is. I know what they stand for. I know their story,” added Aesop’s Cooper.
Problem 3 – failure to keep up on and offline
It wasn’t until e-commerce accounted for a fifth of its total sales that HoF embarked on a £25m upgrade of its digital platform. Compare this to online fashion rival Asos, which in the first half of the same year (2017) invested around £50m into technology and transformation programmes while John Lewis said in 2015 that it would pump £500m into e-commerce developments, which saw It launch a start-up incubator, now in its fourth year.
HoF's plans to shut its underperforming stores will mean, for many shoppers, that it will become an online-only brand and will have to redefine what it stands for in this environment. Moreover, with a more significant slump in online sales during the most recent festive period than in-store sales (7.5% against 2.9%), it certainly has its work cut out.
However, as Danks stressed, e-commerce is an easy scapegoat on which to blame HoF’s challenges. “Pure players like Amazon, Missguided and Boden are all opening real-life shops; and John Lewis, with 50 stores, is thriving commercially and transcending from retailer to national treasure. Bricks-and-mortar is both a vital and vibrant part of modern retail,” he said.
So though e-commerce will be important, the stores HoF is left with at the end of the restructuring programme will have to improve the offline experience considerably.
“As a network of stores, HoF shows what a bad time it is to be average. The department store has committed no major sins. Its stores are in good locations, its range is alright, staff are friendly enough and it has heritage. But good has never been so bad,” suggested Aaron Shields, strategy director at Fitch.
“Being ‘good’ simply won’t do. Retail brands need a dominating difference to survive and thrive. Primark is a footfall magnet through its low price. Amazon has become the West’s biggest convenience store, John Lewis engenders trust through brilliant service and Selfridges offers an unparalleled shopping environment. Having a look at this list, it’s easy to see that Fraser’s house of brands approach needs a refreshed retail proposition to survive.”
To that end, its new majority stakeholder may have a lot to bring to the table. C.banner owns Hamleys and has ridden out the same challenges that have toppled the likes of Toys R Us by betting on 'experience', and doubling down to create a new store format that is half theme park and half retail.
“These high-experience stores drive in unprecedented levels of traffic and keep customers in store with fun attractions,” said Shields.
Eyes will be firmly fixed on the brand’s longstanding agency 18 Feet & Rising, to see how above the line campaigns reflect the “seismic shift” HoF has found itself in the midst of, and what kind of influence its new majority stakeholder has on advertisers. The Drum understands that, for the agency, nothing has changed with the shake-up and it will continue with marketing plans set by chief marketing officer Paddy Earnshaw.
As For Dank, though, the department store needs to go much much further and embrace “a root and branch” transformation.
“This should begin with understanding who it’s for, what it can offer that’s unique and exciting, and then delivering that through new brands, products, services and experiences,” he said.
“Advertising is the last thing it should do.”
This article was updated on 7 June to reflect 31 of its stores would close following confirmation of the CVA plan from House of Fraser.