‘The clock is ticking on Boohoo’s agenda for change’

Boohoo, which now owns BoohooMan, PrettyLittleThing, MissPap, Nasty Gal, Oasis, Warehouse, Karen Millen and Coast, as well as its eponymous brand, prides itself on being one of the cheapest and quickest fashion players in the market.

But with great prices comes great responsibility – right? Wrong.

While some issues in Boohoo’s supply chain have been raised in recent years, only now have they really been brought into the spotlight.

While some issues in Boohoo’s supply chain have been raised in recent years, only now have they really been brought into the spotlight

Starting with allegations of modern slavery made against Boohoo supplier factories in Leicester in July, a domino effect followed as other alleged failings were uncovered, including corporate governance issues and allegations of cases of pricing fraud.

To tackle its problems, Boohoo has launched an “agenda for change” – a comprehensive list of tasks it will undertake over the next few years including hiring new independent non-executives to oversee its supply chain, publishing a list of approved suppliers and creating a robust auditing system.

While these are all great on paper, a real cultural shift is needed across the company if they are truly going to turn things around.

Supply chain concerns

Boohoo may be known for its low prices, but that comes at a cost that many of its buyers seem unaware of.

The report by Alison Levitt QC – an independent investigation into its Leicester supply chain that Boohoo commissioned in the wake of the scandal – revealed that buyers were given complete autonomy to place orders wherever they saw fit and to negotiate their own prices. This led suppliers to accept orders they could not realistically fufil while paying their workers a fair wage and subcontract out to other questionable sources.

While the group is making a concerted effort to map out its suppliers, its team will need to buy into the new way of sourcing and accept that it may impact profit margins.

While the group is making a concerted effort to map out its suppliers, its team will need to buy into the new way of sourcing and accept that it may impact profit margins

The retailer’s fundamental model relies on the ability to produce 500 of any garment, using a test-and-repeat approach for those products that fly off the proverbial shelves, and allowing Boohoo to react quickly to potential trends.

Sourcing in Leicester, which currently makes around 80% of Boohoo and its subsidiaries’ items, is therefore ideal – clothes can be made and driven to their destinations across the UK in a matter of hours, rather than weeks – but compliance will come at a higher price than the products.

Moving operations abroad could seem like an attractive option, but the fast-fashion retailer would in turn be met with freight costs and shipping times, hindering its pace to market. 

In both cases, Boohoo is going to have to account for increased costs, leaving it with two options – either suffer the decline in gross margin, or boost prices and risk losing its competitiveness in the fast-fashion world.

Corporate governance issues

Is fast fashion inherently unethical? While another £10 dress is certainly not the best thing for the planet, other retailers have proved in theory that a fast-fashion business can be run both above board and with integrity.

Asos chief executive Nick Beighton was quick to reinforce his business’ ethical standards following the Boohoo scandal and a look at Asos’ corporate website reveals a comprehensive list of all its suppliers.

Why then has it not been possible for Boohoo to evolve under similar lines? One answer could lie in its boardroom.

Levitt’s inquiry found that founder and executive chair Mahmud Kamani was unconcerned and uninterested in the Leicester allegations, choosing to conduct his interview over video from his hotel in Istanbul, rather than in person.

Levitt’s inquiry found that founder and executive chair Mahmud Kamani was unconcerned and uninterested in the Leicester allegations

“Interviewing Mr Kamani was a colourful experience,” Levitt said.

“One possibility is that he didn’t care what I thought; the other is that these answers represent his real opinions. Either way, this is a cause for concern in terms of the light it throws on the governance of Boohoo.”

The Kamani interview revealed that he had little to no knowledge of any concerns that had surfaced around Leicester in previous years and did not even know the name of the group’s internal auditor.

It has also been documented in the past that Kamani can be difficult to work with – his relationship with former chair Peter Williams was notoriously strained, but he seems to hold chief executive John Lyttle in high regard.

Will this bring change?

With Kamani still at the top it seems a true cultural shift for the business will be unlikely, no matter how many “independent” non-execs they put in place – auditor PwC dropped the company specifically noting governance concerns. 

It is intriguing therefore that no one has been held accountable for the failings at Boohoo, despite clamour from investors and MPs. 

Looking at the numbers, Boohoo has little impetus to change – influencers continue to work with its brands, and customers continue to place orders, but in an increasingly ethically aware world this could change in an instant. 

On the surface, Levitt’s recommendations could do wonders to right the wrongs in its supply chain, but in practice Boohoo needs to ensure that such negligence could never happen again by accepting its mistakes, holding someone accountable and placing ethics over profit.

The clock is ticking on the bulk of Boohoo’s to-do list

The report, and its attached agenda, came out two months ago with the first round of recommendations due to be completed within six months, meaning the clock is ticking on the bulk of Boohoo’s to-do list. 

While Boohoo has made a number of appointments to oversee compliance, it has yet to get a handle on and publish an approved supplier list – something that will mark the beginning of new buying practices. 

The real work will come later down the agenda where to cement the changes the whole company will need to buy into the new ways of working – ideally from the very top down.

Now should be Boohoo’s turning point.