Shopify president Harley Finkelstein described retail as a tale of two worlds when he spoke to us last week – the “resistant” and the “resilient”.
“Resistant” retailers, he said, are “just waiting for this pandemic to be over so that they can go back to doing things the way they always did”.
The “resilient”, by contrast, are “future-proofing” their businesses by embracing the digital shift that has accelerated at a rapid pace during the coronavirus crisis.
The polarising fortunes of those two retail worlds have perhaps never manifested themselves quite so starkly in one day as they did last week.
Black Friday lived up to its name in more ways than one. On a day when the resilient flourished, raking in revenues during a digital discounting bonanza, the resistant floundered.
“Arcadia will not be the first and certainly will not be the last fashion victim of this pandemic. But its demise could have been avoided”
As retailers that have built their ecommerce capabilities kept the tills ringing at a pace despite their stores being closed, those that have rested too heavily on their bricks-and-mortar laurels could only watch helplessly as they suffered further market share erosion on one of the busiest shopping days of the year.
It did not have to be that way. Dixons Carphone offers a great example of a traditionally bricks-and-mortar-based retailer that has shifted investment into its digital capabilities over the past few years and is reaping rewards.
Its Currys PC World business received almost six orders per second on Black Friday, helped by the ShopLive video shopping tool it introduced during the pandemic, which allows customers to get advice from store staff in the comfort of their own homes.
Home delivery orders were up 59%, while the number of click-and-collect orders more than tripled compared to Black Friday 2019. As a result, the retailer dispatched around 4,000 products an hour over the weekend.
End of an empire
Arcadia could only dream of such figures, as Sir Philip Green’s fashion empire endured a Black Friday for very different reasons.
The group, which has been squeezed by value players Primark and H&M and online rivals Asos and Boohoo over the past decade, slipped further towards administration – a fate that was sealed by Monday.
Arcadia wasn’t the first and certainly will not be the last fashion victim of this pandemic. But its demise could have been avoided.
Topshop was one of the biggest players in UK fashion less than a decade ago. But as Finkelstein alluded to, that business, and its stable of sister brands including Burton, Dorothy Perkins and Miss Selfridge, were all guilty of “doing things the way they always did” and hoping that would be enough to sustain its success.
“The £60m Arcadia pledged to plough into its online capabilities was never going to be enough. It earmarked a greater sum, £75m, to refurbish its stores”
They failed to keep up with changing shopping habits or to invest in their digital capabilities at the speed that was required to protect it against emerging online rivals. The fault for that lies at the very top of the business.
Following its CVA last summer, Arcadia blamed its woes on the “increasing switch from in-store to online shopping”. That shift had been happening long before 2019 but it refused to cut its strategic cloth accordingly.
By the time that insolvency process scraped through a creditor vote, the £60m Arcadia pledged to plough into its online capabilities was never going to be enough. It earmarked a greater sum, £75m, to refurbish its stores.
That, in a nutshell, encapsulates Green’s undoing. The tycoon was described this weekend as “an analogue man in a digital world” – he almost despises new technology, famously still using an old Nokia phone.
His retail empire and the 13,000 people it employs could now pay the ultimate price for that short-sightedness. And wouldn’t it be ironic if pureplay rival Boohoo was the white knight that rides to the rescue of Topshop, the jewel in Arcadia’s crown.
Flipping the model
It is not too late, however, for others to heed the stark warning that Arcadia’s demise sends. It is not too late for retailers to focus their energies on their digital capabilities or to form partnerships with businesses that can plug gaps in their areas of expertise.
Just ask Marks & Spencer and Pret a Manger. Both are businesses that relied heavily on stores and, by their own admissions, were slow to embrace a digital culture.
Since 2018, M&S has started working with tech giants Microsoft, partnered with Decoded to create a Data Academy and invested £750m in a joint venture with Ocado to take its food proposition online for the first time.
At the start of November, it lifted the lid on its MS2 plan, combining its online, data and digital trading teams in a move that “flips the model” on which the entire business is run.
Pret has had to make similar shifts during the pandemic, transforming what boss Pano Christou labelled as “woeful” tech capabilities to create its own smartphone-driven coffee subscription proposition within the space of just six weeks.
Such achievements are possible with the right strategy and the right investment focus. The past few days have only served to emphasise the critical need for both.
Retailers cannot afford to be on the wrong side of a divide that Black Friday so brutally exposed.
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