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In Detail: balance of retail power shifts as Boohoo buys Debenhams and ASOS likely to land Topshop

Lauretta Roberts
25 January 2021

In 2006 Sir Philip Green, then owner of fashion retail giant Arcadia, was awarded a knighthood for his services to retail. He was not only the "king" of the high street but he was, as he liked to be known, "the emperor" with his palace based at 214 Oxford Street – better known as "Big Topshop" and the most exciting fashion retail location in the country.

At around about the same time that Green was visiting the Queen's actual palace to receive his KBE medal, Mahmud Kamani, a former supplier to the high street, set up an entity in Manchester with his business partner Carol Kane, which was to go on to become online fast fashion brand Boohoo. (It was initially known as Wasabi Frog for reasons unknown).

Meanwhile in modest offices in Holborn, London ASOS was a plucky online fashion retailer that had paved the way for the likes of Boohoo. A rare survivor of the dotbomb era of the early 00s, it began selling clothes and other lifestyle items that had been seen on TV shows and in the movies (its initials stood for As Seen on Screen) and by this time was starting to show some ambition to be taken seriously in fashion. Its sales at that time were around £20m.

Some 15 later Boohoo has acquired the name and website (but not the stores) of the UK's longest standing department store, Debenhams, while ASOS is now in exclusive talks to acquire the jewel in the crown of Sir Philip Green's collapsed empire Topshop, as well as Topman and Miss Selfridge. Arcadia had been the biggest concessionaire at Debenhams and the department store announced it was entering liquidation proceedings at the start of December 2020 after Arcadia called in the administrators.

Of course in the intervening 15 years both ASOS and Boohoo have grown hugely in size and in fashion credibility but, nonetheless, events of today are a landmark in the shift in the power base in fashion retail from the old guard to the new.

Both deals are something of a surprise (and let's remember the ASOS/Topshop deal is not done yet, though barring disaster it should complete). Boohoo had been named as a potential purchaser of Topshop early on but in recent weeks, analysts considered it an outside bet as more and more bidders from Next to Authentic Brands in partnership with JD Sports, Marks & Spencer and more entered the race. ASOS's name came up but until last Friday, after Next had formally exited the race, it was not considered to be a frontrunner. 

Over at Debenhams, the belief was that Mike Ashley's Frasers Group might be able to fashion a deal to secure some of the remnants of the Debenhams business, but no one really expected anyone to save it as a going concern. Few expected Boohoo to buy it in any shape of form.

Debenhams was seen as the most valuable part of the business

But this morning the group announced it had paid £55m for the Debenhams name and website and plans to build an online, multi brand platform around the name that takes the group into the new territories of beauty and home, as well as expanding its fashion offer. Debenhams' website was always considered to be the best part of the business and was estimated to turn over £400m. On that basis, Boohoo looks to have landed a bargain. But does it make strategic sense?

"It's a smart move for them," says pre-eminent retail analyst Richard Hyman. "They've paid £55m for £400m of business and they will be able to make a better return on it than Debenhams ever did and significantly expand it," he adds. "Building a platform around the Debenhams brand is a good idea."

Whom it's not such a good deal for, of course, is the staff. The loss of jobs as a result of Boohoo not taking any stores (and let's face it, not many people would have) is huge. It seems highly unlikely that many of the 12,000 jobs will be saved.

"It is devastating news for our high streets that Debenhams’ administrators have sold the company brand to an online only retailer. Throughout Debenhams’ difficulties the company and their administrators have refused to engage with USDAW, the staff are being treated appallingly," said shop workers' union USDAW's National Officer Dave Gill.

Retail charity retailTRUST is on hand to help staff who face the unenviable task of trying to find new roles in a time of crisis for the high street.

“retailTRUST has been supporting Debenhams's colleagues for over a century so we were deeply saddened before Christmas to hear the news of its demise after over 200 years serving generations of customers on the British High Street.

“This morning's news that the Debenhams brand will be kept alive following the Boohoo acquisition is obviously a double edged sword - the potential loss of almost 12,000 jobs on top of those already lost throughout the pandemic to date is truly heartbreaking - but we are remaining hopefully optimistic that it will eventually result in the creation of many more new jobs as these roles transition with the continued growth of retail online,” says CEO Chris Brook Carter.

Brook Carter is right to try to look to a potentially brighter future, although the pain in the short-term is great. Despite it taking the market by surprise, Boohoo has the opportunity to do something quite special with Debenhams and create a marketplace that sounds very much like an online version of high street giant Next. It certainly has the online smarts to do this and is cash rich right now. But it may not be all plain sailing, as analysts point out.

Emily Salter, Retail Analyst at GlobalData, a leading data and analytics company, says. “[It is] a surprising turn of events that proves the speed of the significant changes that the retail sector is undergoing. [...] The group will relaunch Debenhams’ website as an online marketplace, with its expertise at operating digital pureplays providing some hope that the retailer’s fortunes could be turned around, benefitting from the shift to online shopping. 

“However, there is strong competition from other online marketplaces, not least from leading force Amazon, but also from the likes of Next and ASOS, so the boohoo group will have to develop a more compelling branded offer for Debenhams for it to succeed. The acquisition of Debenhams also provides the group with a chance to expand its empire into new categories such as beauty, sports and homewares, likely translating into the launch of branded products in these sectors on its existing websites such as and PrettyLittleThing, helping them stand out in the crowded fast fashion market.”

While the reluctance to take on stores may be understandable, particularly in the current volatile environment, Debenhams stores were a huge presence on high streets up and down the country and served to drive traffic to its hugely popular online business, even if they weren't great stores to visit.

"Debenhams will help Boohoo diversify from clothing and expand into new sectors including beauty and homeware once it relaunches as a digital only platform in Q1 of 2022. Part of a broader push to become one of the UK's largest marketplaces for consumer goods - it will be interesting to see just how much of an impact the Debenhams brand can have without the presence and footfall of the physical stores," says Jonathan Buxton, Partner & Head of Consumer at Cavendish.

Also, taking on a business like Debenhams, and doing a good job of it, could help to rehabilitate the Boohoo brand in the eyes of the public, with reports of mistreatment of staff at supplier of Boohoo in Leicester, still fresh in minds.

"They've got a lot of rehabilitating to do," believes Hyman, "and they need to do a lot more work on that but I do believe this is a good move that has strategic merit."

Of course convincing customers of the move and the many brands who supplied Debenhams is another matter. Boohoo will have its work cut out keeping some of the brands across beauty and lifestyle, for instance, that made the Debenhams website such a compelling place to shop.

John Lyttle CEO

Boohoo CEO John Lyttle

Boohoo CEO John Lyttle, speaking to analysts earlier, said the business was ready to start talks with brands immediately. "In terms of the third party relationships, we’ll be looking to work with the existing third party partners who are working with, and obviously we will be starting those conversations this week," he said.

For the coming few months the administrators will continue to operate to clear stock before Boohoo launches its new version, and some stores may re-open after lockdown to liquidate more stock. Then it will be a case of seeing what happens to their stores.

It seems likely that Mike Ashley's Frasers Group, a long-term suitor of Debenhams, and Next may wish to take some units, and possibly Marks & Spencer too. So they may not all be lost to retail and that could generate some much needed opportunity for retail workers.

And Boohoo, which as we have said, is cash rich, may not be done with spending just yet. ASOS may be in exclusive talks to buy Topshop, Topman and Miss Selfridge, but Burton, Wallis and Dorothy Perkins are still up for grabs. No, they aren't as glamorous, but given that Boohoo is determined to build an online multi-brand portfolio, it may still be interested.  "If I was them, [I'd buy them]," says Hyman. "There can't be many players in for them, so why not?"

Topshop Topman Oxford Street

Topshop & Topman, Oxford Street ©

Losing out on Topshop is likely to have stung Boohoo a bit but one can't help thinking that that brand was destined to end up in the arms of ASOS. If the deal goes through it would be nothing more than a poetic outcome for the online group, which pretty much made gunning for Topshop, if not its whole raison d'être then a strong source of motivation, in the early days. ASOS founder Nick Robertson took great glee in poaching staff from Arcadia to shore up ASOS's fashion credentials, which in the mid-00s were not the best. How times change.

Unlike Boohoo, ASOS has not grown through acquisition but when Topshop came into play, it was bound to take a look. After years of fruitless meetings it managed to persuade Arcadia to allow it to sell Topshop and Topman on its website in 2019. Sir Philip Green made approaches to buy ASOS in the early days of its existence but, true to form, none of his offers amounted to a credible sum of money and ASOS, having floated on AIM just two years after its launch in 2000, was able to rebut the offers easily enough.

The tables turned as ASOS grew in size, stature and credibility and conversations with Green soon turned to how ASOS could help it navigate the online world, which Arcadia had cottoned on to far too late. However Green didn't seem keen to take advice or support from an upstart and turned them away. 

Now, it seems, he could see his prize asset fall into the hands of a business that had come to be a thorn in his side for many years. For ASOS, the deal makes a lot of sense on the face of it. The customer is right in its sweet spot and it's had the experience of selling the brand for a couple of years now. Plus it has the design and digital expertise to turn Topshop into something truly special again.

With reports that it has bid more than £250m, it stands to pay a pretty price though, believes Hyman. "Topshop turned over £500m [online and across its stores], let's say 25% of that was online, then we're talking £125m of turnover. That's a pretty high price," he says. "But ASOS is a good business and a very well-run business. They know that they are doing."

But, like Boohoo, it seems likely that ASOS will not take any of Topshop's stores (or won't it?). For Hyman, Topshop is a brand that really performs well in a physical environment and there's one environment in particular in which it shines best, 214 Oxford Street.

Topshop's flagship is being marketed separately from the brand and is attracting interest from other would-be tenants. But might ASOS, in the year it comes of age at 21 years old, be tempted to finally make the move into physical retail by taking at least that one store?

"That shop was still buzzing and it may not have buzzed as loudly as it once buzzed and it may have lost some of its sparkle, but it still sparkled," says Hyman of the store which has been a trailblazer of experiential retail and a honey pot for fashion-hungry young women since it opened in its current guise in the early 90s.

"I don't know [if they will take it], but I for one think they should. That store IS Topshop," Hyman says. (For what it's worth, the author thinks so too.)

Again, while the loss of Topshop's other retail stores will be a huge loss for the high street, the thought of ASOS, with its creativity, energy and tech-savvy, taking on 214 Oxford Street (and if we're pushing our luck maybe a few more strategically sited stores across the country) is a rather delicious one. If it came to pass, it would be a true and highly visible marker, as if we needed one, of just who rules the high street now.

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