In My View by Eric Musgrave: Frasers' dominance of the branded menswear market is bad news for brands and customers
If Frasers Group has won the battle for dominance in the UK premium branded fashion sector, it is bad news for brands and consumers.
Suppliers are being squeezed for retrospective discounts, recent acquisitions are being axed and people made redundant, and the standards of retailing across the extensive Frasers estate are often shoddy.
It seems Mike Ashley’s publicly-quoted group (in which he retains more than 60% of the shares) owns around 30 House of Fraser department stores, around 140 locations for its entry-level fashion chain USC (although I am not sure how many are standalones and how many are areas in other stores) and about 60 stores for Flannels, its premium chain and its flagship fascia. This is in addition to its 500-plus Sports Direct stores, which sell relatively little premium branded fashion.
This was already a massive footprint across the UK branded fashion market before, either side of Christmas, Frasers completed deals to acquire 14 retail, online and wholesale businesses, including another 50 to 60 fashion-focused stores, in a £47.5m deal with its former arch-rival JD Sports.
In addition last week Frasers bought Philip Browne, the well-regarded Norwich-based menswear independent, from JD. The business is still headed by Browne, who set up shop in 1986. This deal followed soon after JD had announced the closure of two other prominent indie businesses in its portfolio – Oi Polloi in Manchester and Leicester-based Wellgosh. It clearly has given up on the fashion sector to concentrate on sportswear.
These various transactions mark the end of a long-running battle between Frasers and JD for a position of authority in the premium branded fashion area of the market. Although there is plenty of womenswear involved, this is seen usually as a menswear-dominated sector.
Since the transfers of ownership were confirmed the sector has been coming to terms with what Frasers will do with its primary position and its acquisitions, most of which compete with its existing chains to some degree by stocking pretty much the same brands. Rationalisation of this repetitive portfolio was widely predicted in the industry when the deal was announced.
It is clear to me there is a lot going on but many people are too scared to talk to me or other press. Redundancy consultations have been started at Tessuti and Scotts, which are probably the largest chains acquired from JD.
The websites of Base Childrenswear, Choice, Tessuti and Scotts have effectively been closed down as anyone clicking on them is redirected, without explanation, to the Flannels site.
The websites of Xile in Scotland, Liverpool-based Cricket and small London-based menswear brand Prévu Studio have mysteriously acquired a holding page stating business is temporarily paused. My information is that this arrangement will be permanent, not temporary.
This week two related discount-focused sites, Woodhouseclothing and BrownBagClothing, have been closed by Frasers and staff let go. People losing jobs is the biggest tragedy of this sorry saga.
In a separate and parallel development Frasers is leaning on suppliers that took orders from the companies when they were owned by JD, that delivered stock and have stock waiting to be delivered for spring-summer.
Employing the classic bully-boy tactic of asking for retrospective discounts on orders already delivered but not paid for or those in suppliers’ warehouses – a favourite practice of Philip Green in his Arcadia heyday – Frasers may well be in breach of contracts brands agreed with JD.
Frasers is using the situation to indicate very forcibly to lesser brands that they are not likely to be part of the supply base going forward. The CEO of one of the most consistently in-demand brands confirmed to me he was one of “the top 10” that were being paid promptly but many others lacked the clout to resist Frasers.
Discounts of between 20% and 50% have been mentioned to me. Some smaller brands are digging in and refuse to give Frasers a discount. “They have no integrity to honour the contracts of the businesses they bought but they are happy to pay Adidas within hours,” one angry boss told me.
Charging Frasers interest on money owed, suppliers getting their banks to put pressure on the group and demanding agreed fees for any cancelled orders are all being considered, I understand.
Some of the ex-JD businesses have complained to me about lack of communication from Frasers head office, where Ashley’s son in law Michael Murray is running the show. One instruction has been clear, however – get rid of as much stock as possible.
A visit to the House of Fraser store in Birmingham helps explain why Frasers Group does not want more inventory. Four floors of the former Rackhams department store building have been converted into an outlet store and the approach to retailing branded goods is shocking.
These photographs were taken on Saturday afternoon, 11 February in the store on Corporation Street, Birmingham.
They do not truly bring over the grim sight of four floors of the huge 1960s building being given over to a dumping ground of vast quantities of surplus stock. The lower ground floor is occupied by Evans Cycles, another business owned by Ashley.
Top brands like Boss, Nike, Fred Perry, Polo Ralph Lauren and Michael Kors are crammed on to mobile rails and tables in poorly-lit floors with unguarded electric bar fires for heating.
In August 2018 Mike Ashley promised to convert the House of Fraser into “the Harrods of the high street” when, after a long pursuit of the business, he secured 59 stores in a £90m pre-pack deal with HoF’s administrators.
In December 2019 Ashley’s parent company Sports Direct International plc surprisingly was renamed Frasers Group plc, which suggests he had some pride in his acquisition, but the evidence of how the stores have been traded since then is perplexing.
In just over four years 28 HoF stores have been closed, more are to follow and it is believed only six stores have been rebranded as Frasers.
While the Birmingham building’s future as a department store may be over, surely a better job could be done of running this as an outlet. It was almost devoid of customers at around 5pm on the Saturday I was there although the city centre was busy and the nearby huge Primark store was packed with customers.
I was underwhelmed also by the group’s approach to full-price retailing at its Cruise store in George Street, Edinburgh last week. Oddly, two premium fashion stores in Scotland once owned by legendary independent retailer Jim Gibson have retained the Cruise name when a rebranding to Flannels could have been expected.
The offer, however, is nothing like as interesting as it was in Gibson’s heyday 20-plus years ago. The three floors are given over to a predictable selection of “big brands” like Stone Island, Balenciaga, Moschino, Boss, Canada Goose and Belstaff, virtually all of which are offering near-identical sportswear-inspired ranges these days.
Does this fashion mix really excite consumers these days?
Leaving aside the buying, however, what struck me in this premium store in a premium street in one of the UK’s major cities was the lack of attention to detail.
At the top of the staircase leading to the small first floor, the carpet was “repaired”, if that is the word, with a strip of yellow & black warning tape. Frasers Group has a turnover of £4.6bn. Can’t it afford a bit of new carpet?
Even worse, on the third floor is a counter unit and hanging off one end of it is a large piece of vinyl covering. I wondered why no one on the shop staff had made a simple repair with a bit of Sellotape or Blu Tack. It’s a 30-second job.
I thought of all my independent shop-owning friends who would have freaked out at even a greasy fingerprint on a front door let alone trim hanging from a counter. This, which was right next to the staircase and so could be seen by every customer (and member of staff), and my experience in Birmingham, said a lot to me about Frasers’ attitude to premium fashion retailing.
You can see the group’s roots are in Sports Direct.
One final thought on Frasers Group. When will someone ask the Competitions and Market Authority (CMA), the current monopolies watchdog, to have a look at its business practices?
Read our contributor Marcus Jaye's thoughts on this subject in his recent comment piece "What had happened to the branded menswear market?"