Karen Millen deal may show BooHoo way to happy future

Cantillon: Bricks and mortar retailers collapse but brands get digitally saved

 Karen Millen outlet in London: along with Coast, its web operation is being bought by online fast-fashion group BooHoo. Photograph: Andy Rain

Karen Millen outlet in London: along with Coast, its web operation is being bought by online fast-fashion group BooHoo. Photograph: Andy Rain

 

While the Irish stores of Karen Millen and Coast entered provisional liquidation on Wednesday, a day after their UK parent went into administration, it seems the brands will live on in digital form.

Online fast-fashion group BooHoo this week agreed to buy the web operations of the collapsed brands, at a stroke highlighting the travails of traditional bricks and mortar retailers, and the increasing influence of their digital rivals.

The deal may also provide an operating template for Offaly man, former Primark executive John Lyttle, the new chief executive of BooHoo, as he attempts to steer the company through an anticipated period of intense growth.

If he hits his target – to raise BooHoo’s valuation by 180 per cent over the next five years – Lyttle is on course for a shares windfall of £50 million. He is already one-quarter of the way there after less than five months.

BooHoo, which also owns Pretty Little Thing and Nasty Gal in the US, is an exemplar of the online fast fashion model. If you zapped Primark through a digital converter and beamed it online, it would look like BooHoo: on-trend fashions aimed at 16-30 year olds with big ideas but small budgets.

Environmental zeitgeist

The business model faces challenges, however.

First, it seems at odds with the environmental zeitgeist. The clothes are so cheap as to be effectively viewed as disposable by some customers, creating huge waste.

Second, some of the online fast fashion retailers complain that a minority of customers use their operations as de-facto free rental services. Customers may buy a dress, wear it once, and then send it back within the free returns period.

BooHoo’s deal for Karen Millen and Coast will help to bump it up the value chain, by targeting more “grown up” customers who are less likely to blithely send clothes back and more likely to pay higher prices.

With the travails of high street retailers set to continue, there may be more such deals to be done in the future for BooHoo. Good news for it, and for its target-chasing Irish chief executive.

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