As Frasers Group strikes a new partnership with Hornby Hobbies to push its credit and loyalty platform, Frasers Plus, Retail Week takes a closer look at the buy now pay later platform and its first-ever partnership with THG earlier this year.
As Frasers Group strikes a new partnership with Hornby Hobbies to push its credit and loyalty platform, Frasers Plus, Retail Week takes a closer look at the buy now pay later platform.
Frasers Group and THG have made plenty of headlines over the years, but rarely together. This changed earlier this week when the two giants announced a multi-year Ingenuity partnership.
In an announcement to the City, THG said it would provide Frasers with courier management services and re-platform Frasers’ Australian fulfilment and logistics operations on its Ingenuity platform, which is THG’s digital fulfilment division.
THG has also sold its “portfolio of luxury goods websites” including clothing retailer Coggles, to Frasers, with Ingenuity continuing to support these brands.
The most interesting aspect of the partnership, however, was that in return, Frasers’s credit and loyalty platform Frasers Plus will now be integrated into Ingenuity’s checkout and will be made available to THG’s beauty and nutrition customers, as well as Ingenuity clients.
When the group launched Frasers Plus last year, chief executive Michael Murray said it had effectively “created our own version of [Amazon] Prime” and that it gives “one lens for our consumer and keeps all of our data in a central place”.
The retailer had gone quiet on its new proposition until yesterday when it bagged THG in the platform’s first third-party deal. Here, Retail Week takes a closer look at what Frasers Plus is and what the deal means for the two retail giants.
What is Frasers Plus?
Murray has previously described Frasers Plus as a membership programme and flexible payment solution rolled into one – giving consumers access to bespoke offers across its brands, while unifying customer data in one place for Frasers.
In simple terms, think of it as a hybrid between Klarna and a Boots Advantage Card. Like many other Frasers stories, this too began with an acquisition.
The retail giant first entered the financial services space with its £12m equity investment in fin-tech company Tymit in 2022. Later in the year, the group acquired Studio Retail, which had a proprietary and regulated flexible payment solution called Studio Pay.
In October 2022, the group developed Frasers Plus after gaining expertise from its acquisition and stakes. However, the platform was only launched on the Sports Direct website in June 2023 before being fully integrated into the wider Frasers ecosystem in September.
From this perspective, Frasers Plus is new to the market. In its last financial results for the 26 weeks ending October 29, 2023, Frasers said financial services, which includes Studio Pay and Frasers Plus, contributed just 2.1% of its total revenue.
Between 4% and 6% of Frasers customers on Sports Direct, Flannels and House of Frasers used Frasers Plus to carry out payments.
The group said Plus customers had a 40% increase in average order value, while 25% of customers who used the service shopped across fascias within five months of onboarding.
The deal is a big first step for Frasers Plus, says Lumina Intelligence senior retail analyst Beth Bloomfield.
“The partnership with THG offers it a much wider pool of customers and gives data and insight into areas such as nutrition, which serves it well within its sports segment, as well as beauty – which Frasers isn’t necessarily known for,” she says.
“Given the premium elevation strategy of the retailer and the cost-of-living crisis, Frasers Plus also offers customers a route to purchase more expensive items and spread the cost, which should encourage spending. The service also offers the group an additional revenue stream which it is likely to grow over the next few years as it seeks more third-party partners.”
What’s in it for THG?
While the move makes sense for Frasers, what is THG getting out of it?
In this deal, at least, THG gets access to financing options as well as a cross-platform loyalty program without having to take on development costs.
Investec analyst Kate Calvert says: “One is giving the other, something they don’t have in a way. So one of the things it does is save development costs, so you can get to where you want to quicker. [THG] have decided [a payment solution] is not a core thing for them to do and it gives them something extra without taking on the cost.”
Lumina Intelligence senior retail analyst Kate Doherty says the deal will help THG to focus its resources and avoid spreading too thin.
She adds: “Both businesses bring significant large-scale, multi-category, multi-brand retail experience to the table. THG’s proprietary technology platform and advanced operational infrastructure will support Frasers’ ongoing scaling up of its business.
“The sale of luxury goods websites will also allow THG to focus investment on other business segments, particularly beauty, nutrition and Ingenuity, which are by far its strongest performing categories.
”While this is the first third-party deal for Frasers Plus, it is unlikely to be the last as reports emerge that the retail giant is on the lookout for more partners.”
More to come
According to The Sunday Times, Frasers isn’t resting on its laurels having got its first Frasers Plus deal over the line. It’s already taking an active approach to acquiring more third-party retail partnerships, reaching out to the stable of brands it has stakes in such as Asos, Boohoo, Currys and AO.
While THG had more to gain from a Frasers Plus partnership, it’s difficult to understand how fast-fashion brands like Asos and Boohoo may benefit from it. The proposition is less attractive as both players already offer a range of buy now, pay later (BNPL) options to customers including Klarna and ClearPay.
And while a BNPL option makes much more sense for Curry and AO as the average order value is much higher, both retailers offer existing finance options to all customers.
Frasers has set its wheels in motion to extend Plus to as many brands under its portfolio or the ones it has a stake in as possible, but it has a way to go to provide something more than the existing offers and truly become a Prime option.
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