As U.K. retailers enter the back half of the year, they are making some changes to improve overall operations.
Bankruptcies Push Up Store Closures
Boohoo is fine-tuning to improve overall profitability, including the closure of its U.S. distribution center by Nov. 10. Meanwhile, Asos is changing its return fees for some U.K. shoppers, paying attention to those who frequently send back their ordered items.
Separately, the U.K. saw nearly 7,000 retail stores close in the first half of 2024 across high streets, shopping centers and retail parks. The good news for fashion retail was that it saw fewer store closures compared with year-ago levels.
Boohoo to change operations in the U.S.
Boohoo Group plc is reversing course and now plans to shutter its U.S. distribution center (DC) in Pennsylvania by mid-November.
In a notice with the London Stock Exchange, the British online retailer said it will also broaden its product offering for U.S. customers, and expand its routes to the market. Under the change, the company revert to supplying U.S. customers from the U.K. Boohoo said it will now fulfill all U.S. orders from its “state-of-the-art automated U.K. distribution centre in Sheffield.” The company added that it has recently tested an increase in product options offered to U.S. consumers where orders were fulfilled from the U.K. and saw “encouraging results.” Up until the test, U.S. consumers were offered only around 60 percent of the styles offered in the U.K., the e-tailer said.
Boohoo in October 2022 chose DHL Supply Chain to lead the operation at the e-tailer’s new 1.1 million-square-foot DC in Elizabethtown, Penn. The DC opened the following year, which also allowed Boohoo to offer next-day service to the New York City metro region. The DC operation was expected to reduce transportation costs and drive greater agility and speed to get orders into their customers’ hands faster.
The planned closure will result in Boohoo taking a write-down for the related costs, although the company said the shut-down will also result in a “significant reduction in ongoing costs over the medium term.”
Boohoo said the steps are the latest in a series as part of a “strategy to reposition the group for sustainable, profitable growth.” The e-tailer has had financial issues since last year as consumers grapple with inflationary pressures. Boohoo, like its U.K. e-tail rival Asos, has also had a tough time adjusting to the post-COVID marketplace, which includes stiffer competition from fast-fashion rivals Shein and Temu.
Boohoo said it is in advanced talks with major U.S. brands to sell other brands within its group, and noted that Nasty Gal recently launched in Nordstrom stores.
PWC’s U.K. data says 2024’s first half saw 6,945 retail closures
Despite the closure of 6,945 retail stores in 2024’s first half, PWC said fashion has seen a significant improvement in the store closure rate versus the first half of 2023.
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“The net closure rate has slowed by nearly two-thirds, despite a number of high-profile fashion retail businesses falling into administration announcing closures,” PWC said in a report. The consulting firm noted that fashion retail sales have been hard hit by unseasonal weather in the first half of the year. That has led to declining sales for 11 months in a row in volume terms, with more chains already noting closures in the second half of the year. PWC sees the fashion sector as an interesting category to watch moving into the golden quarter, otherwise known as the holiday selling period.
PWC expects that more stores will close due to the long-term trend of consumers moving online. The store closures in the first half were across “Great Britain’s high streets, shopping centers and retail parks, equivalent to 38 shops per day.” Over the same period in 2023, the average per-day, shop-closure rate was 36. PWC also found that chemists, chain pubs and banks were the top categories for store closures along high streets.
But PWC also noted that store openings also grew slightly in the period, up from 24 to 25 per day.
Asos changes U.K. return fee policy for repeat offenders
Asos plc is eyeing customers who have a high rate of returns.
Beginning Oct. 8, the e-tailer plans to charge U.K. shoppers who frequently return ordered items a fee of 3.95 pounds ($5.19) to send back the goods, unless they keep up to 40 pounds ($52.52) worth of their order. The current policy for U.K. shoppers allows for free returns if made within 14 days. Frequent returners who are Premier subscription members can avoid the fee if they keep at least 15 pounds ($19.70) of their original order. The change in policy was first reported in The Guardian.
Asos said back in 2022 that would have to mark down more product due to a surge of returns. Its rival Boohoo at the time also called out an uptick in customer returns, a pattern in customer behavior that some believe was the result of rising inflation post-COVID. What isn’t clear is how the e-tailers determine what constitutes a high rate of return. Nevertheless, the bad habit of returning large amounts of online orders also saw retailers fighting back.
Inditex brand Zara in May 2022 began charging 1.95 pounds ($2.56) for returns dropped off with a third party. Customers still had the option of making their return to a Zara store free of charge. Fashionistas reacted by posting tweets citing how companies should pay more attention to their inconsistent sizing so customers won’t have to make returns.
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