Why are JD Sports and Frasers Group so interested in independent retailers?
Independent retailers have faced growing pressure in recent years: increased rents and rates, the dominance of online shopping and, more recently, COVID-19 and the lockdowns and the slump in footfall that came with it.
However independent retailers remain an important part of fashion's ecosystem and this is a fact that has not been lost on some of the high street's biggest names - JD Sports and Frasers Group – who have both acquired premium independent retailers in recent weeks (Wellgosh and Psyche respectively).
But what are the benefits to independents of selling up and why do these major retailers want them?
TheIndustry.fashion speaks to independent retailers across physical retail – including new and historic retailers – independent e-commerce sites and industry experts try to find the answers.
Independent retailers and big businesses both need to benefit from a full or partial buy-out. In a post-COVID world it's fair to suggest finances factor largely into decision making, with independent retailers having struggled with the repercussions of a lockdown and a lack of opportunity for consumers for showcasing fashion purchases.
JD Sports and Frasers Group however both benefit from a (very minimal) reduction in competition, a new loyal customer base, extra buying power and access to new brands.
Potentially the answer is much more simple - rivalry. The two large-scale industry rivals have been fighting for and purchasing indie businesses for almost 10 years.
Frasers is pushing towards a premium retail line-up with its acquisitions of big brands Flannels and Jack Wills, in 2017 and 2019 respectively. Most recently however, Frasers acquired Teesside-based independent designer clothing retailer Psyche for an undisclosed sum.
Its owner Steve Cochrane reportedly declined a previous takeover offer from Ashley’s business in 2017, but reconsidered with the high street “under the cosh” due to the pandemic and Brexit uncertainty.
Commenting to Teesside Live, Cochrane said at the time of announcement: “After 38 years as an independent fashion retailer we have never seen such uncertainty surrounding the pandemic with local lockdowns. It is great to have the security and backing of one of the strongest UK retailers to continue employing our talented staff and serve our loyal customers."
Cochrane also said that while he thought there would still be a clothes shop on Linthorpe Road, Middlesbrough in a couple of years, he was unsure whether it will still be called Psyche – suggesting Frasers may have other brand intentions for the former Uptons department store building in which Psyche is located.
JD Sports has, in recent years, quietly bought several sportswear and footwear indie retailers with loyal followers and rare products - buying independent footwear retailer Foot Patrol in 2008, menswear retailer Choice in 2018 and Leicester-based Wellgosh in 2020.
Our leading fashion figures give their views.
Eric Musgrave - Veteran Fashion Commentator
“There has been friction between these two organisations for a number of years based initially around active sportswear brands. As each company has developed its fashion footprint, the activities of premium independents have become of interest to them – with the number one reason being access to the brands that independent retailers have.
“Flannels is a fine example of Mike Ashley’s brand elevation strategy - it was one of the first premium menswear independents that he acquired. Founder Neil Prosser could see the type of retailing with which he’d made his reputation was not going to be the name of the game anymore.
“I share the concern of some small independent who worry about these big companies growing their control over the market – as small independents they will be small clients to the brands. There’s no way independents can continue to compete online with these big companies if they have access to the same brands and stock.
“I think JD’s strategy is a lot clearer than Frasers. It does what it does with JD Sports stores, and separately the smaller businesses it takes over appear to continue to use their original name and continue to run within certain parameters – there’s not a cookie cutter shape given to those businesses.
“Frasers Group on the other hand is a little less clear – for example, Michael Murray, Head of Elevation suggested a couple of years ago that they wanted something like 120 Flannel stores – I thought 'what a ridiculous idea, they should be aiming for 20 stores not 120'. These brands should be limited and a destination shop – not something that is available in every location possible.
“A good independent is a destination store that pulls in consumers from a large geographical area – Frasers may have a problem going forward with over exposure of the brands that they are selling.”
Jessica Gee - Co-Founder of Independent E-Commerce Big Mood
"It is hard not to be tempted by the idea of being bought out by a bigger business. For one, it would mean far less work for ourselves. It was also mean that we could watch our business grow from what is currently a small business to something far greater. Whilst it would no longer be our baby, it would still bring us pride knowing it was once ours.
"Needless to say, financially, it would also be beneficial. We are currently in difficult times and it has, at times, been strained. If we were bought out, a lot of the issues we have seen in the last year would be alleviated.
"We are just two sisters from North London who built something from nothing, and that story in itself is what makes a small business appealing. It brings almost an empathetic edge. I personally love purchasing from small businesses, as I first hand know the impact each sale has on the business owner.
"If a big brand were to buy out Big Mood, then the backstory would no longer be the backstory, which sits at the very ethos of our brand. It takes away that degree of personality, which makes it less appealing to your everyday buyer"
Junaid Khan - Manager of Dimension London
“We’ve been in business 15 years, starting with a small store near Shepherd’s Bush Market and have progressed to three stores. The category we’re in (footwear) is constantly developing and changing. As an independent business we strive to reach the same level that JD Sports and Sports Direct (Frasers Group) has reached, the end goal is to have the same template as what they’ve got.
“This last year hasn’t changed my outlook on how we go forward in the business and we wouldn't sell the business but I can see how it would have swayed a lot of people. I’m from the generation of face-to-face conversation – we expanded to three stores without a website, just using the word of mouth and having the right products.
“First hand communication and interaction are what we offer – potentially big stores neglect that, maybe that’s why they look at purchasing these independents retailers, new or old – they have that raw feeling to it. Most independent businesses like us are driven by the street market, including hip-hop and urban scenes – the bigger corporations get, the more stringent they get on the rules and lose access to these scenes.
“With someone like JD acquiring a business, it may simply help reduce purchase costs for products and help with brand development – they can potentially push a business through its’ algorithm that they know works.”
Anonymous - Independent retailer in Manchester
“Having been in business for over 10 years, there’s sometimes a struggle in keeping our stock relevant to what customers want. We’ve prided ourself on being ahead of trends with several key brands stocked in our store before mainstream retailers noticed them. Establishing that early relationship with these brands has allowed us to continue with most of them today.
“There’s definitely a feeling that JD and Frasers are taking advantage of the situation we’re in currently, probably more so than is fair. But if a big business offered money for a buy out – why would anyone say no in this climate?”
Tom Bottomley - Contributing Editor of TheIndustry.fashion
"The strategy of buying up long-established independents by the Frasers Group and JD Sports is nothing new – think Frasers taking a 51% majority stake of Flannels back in 2012 before acquiring it in full in 2017, and JD acquiring Tessuti in full in 2016 after taking an initial stake back in 2014 - but it’s certainly intriguing as to why they do it.
"They go in for the kill when the retailer is seemingly looking weak, with full knowledge that they are acquiring once strong businesses that could be turned into something far more powerful with the right investment and business savvy – something they can provide in abundance.
"Apparently, Steve Cochrane turned down an approach from Mike Ashley for his Psyche business back in 2017, but the changing trading headwinds of recent times have put the high street 'under the cosh', resulting in the recent acquisition finally happening. Cochrane will stay on as CEO for now, but it’s unsure what the Frasers Group will do with the Psyche business going forward.
"When Ashley first visited the 40,000 square foot Psyche store he allegedly said it was the best store he’d seen outside of London. Locations, buildings and control in key towns and cities all seem to be part of the game-plan for Frasers, and the cost of prime real estate in such a climate as now must also be factor.
"Additionally, as one retailer said to me recently, the likes of Frasers Group and JD Sports have too much brand influence now. As always though, it’s the nimbleness of independents, and their ability to seek out new brands and desirable products, that means there’s still always room for new indie blood to come to the table. After all, it’s what keeps it interesting."