How could Sports Direct’s House of Fraser buyout affect the brand?
After months of uncertainty for House of Fraser, Mike Ashley-owned Sports Direct has dramatically swooped in and spared the retailer from collapse. But with its reputation already undermined, what does the incongruous pairing mean for the House of Fraser (HoF) brand, and indeed its new parent company?
For now, Ashley's £90m buyout looks to have secured some 17,000 jobs, but the implications for the business are ambiguous – with initial speculation suggesting Ashley may rebrand some of HoF’s 59 shops as Sports Direct stores.
Ashley, who once said he wanted to turn Sports Direct into the “Selfridges of sport”, hasn’t yet made clear his plans for the chain.
A revolving c-suite, a lack of brand relevance in a world where consumers have a seemingly endless choice and a failure to keep up both on and offline have all been contributing factors in HoF's downfall.
In June, one month after it revealed initial store closure plans, YouGov reported that public perception of the brand's quality had dropped four points from 32 to 28. Its perceived value sat at just 1 out of a possible 100, and among millennials this was even lower at -4.
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Sports Direct, which has increased revenue by 11.7% to reach £3.24bn over the past year, has also faced its own share of issues including scandals over pay and workers' rights, and opinions are mixed on whether Ashley fits the bill as the exec to turn all this around.
"On a human level the news that Mike Ashley has dragged HoF from the clutches of the grim reaper will be of great relief to a number of families, up and down the country. Jobs will be saved and that is a good thing,” says Rupert Pick, co-founder of creative agency Hot Pickle.
“But from a purely professional perspective I can't help feeling that Ashley's rescue plan is a temporary stay of execution, one that will only serve to prolong the pain.”
This, Pick says, is because while Ashley has shown himself to be a skilled commercial retail operator – a trader with a taste for a deal and a salesman who “understands better than most that ‘value’ is key to the UK consumer” – that’s just not what HoF needs.
“It needs more than a trader. It needs a miracle and an entire brand and product overhaul,” he adds.
As of May, exactly who will be leading that brand shakedown remains a mystery.
HoF cut ties with longstanding agency 18 Feet & Rising less than a month after it announced a round of store closures as part of its initial company voluntary arrangement (CVA) insolvency process.
When those talks fell through last month, HoF said an ad agency review to find a replacement would still go ahead as planned. The Drum contacted its administrators E&Y on Friday (10 August) to confirm this was still the case, but at the time of writing the consultancy had yet to respond.
A 'fantastic opportunity'?
Known for its giant mugs and cheap trainers, Sports Direct’s budget brand appears from the outside somewhat incompatible with HoF’s confused, but admittedly more stylised, image. Where HoF stocks Jo Malone, Mulberry and Kooples, Sports Direct deals in white ankle socks and LA Gear leggings.
At this early stage, whether Sports Direct's purchase of the 160-year-old brand will result in a budget overhaul remains to be seen.
But for David Coombs, head of strategic services at marketing agency Cheil, the buyout makes it inevitable that there will be some repositioning of the HoF brand.
"HoF clearly lost the battle in the mid to high-end fashion market, and with Ashley’s expertise at the budget end of the market it seems to me this is where he will look to focus the HoF brand," he says.
"This could be a fantastic opportunity to re-invent a classic brand," enthuses Coombs. "It's clear the business model must change but if HoF doesn't clearly differentiate itself from the established budget fashion brands like Primark it will continue to be a rocky road."
How this fits into the current turmoil on the high street will all depend on how clearly Sports Direct defines and sells the new HoF proposition to the public, and how much of a genuine opportunity they have identified, adds Coombs.
Drawing on the example of Lillywhites, a London sportswear store Ashley acquired in 2002, Pick isn't confident – pointing out that Ashley will need to invest heavily in HoF's customer experience in order to fight off competition from the likes of Amazon if he wants to go down the budget route.
"I hope I am proved wrong here but I hold out little hope for a brand revival. If Lillywhites is anything to go by, the tills will ring but the tune will be rather unspectacular," he says.
"Before technology put a shop in our palm the likes of HoF offered people choice and convenience under a single roof. This is simply no longer the case. Shop on Amazon and people get all of this as well as great prices and if they can't find that unique item well there's a specialist retailer available at the click of a button.
"Experience offers the only lifeline. It's the single thing that differentiates the physical activity of shopping from a transactional digital process but it will cost cash, serious cash, to deliver this on the scale of HoF and I suspect Ashley won't have the stomach for the fight."
George Lawrie, an analyst at Forrester, speculates that Ashley might actually use his latest purchase to realise Sports Direct's 'Selfridge' ambitions.
“The House of Fraser acquisition fits with Sports Direct’s strategy of competing for more affluent buyers with premium taste," he says.
"I suppose the move has also to do with a lot of competition at the discount end. When making a strategic decision about the future of high street chain, the new owner will need to keep in mind that House of Fraser’s shoppers are more likely to be brand loyal."