Following today’s news (Tuesday 06 August) that the boohoo group has made an offer to acquire the online businesses of Karen Millen and Coast, Emily Salter, Retail Analyst at GlobalData, a leading data and analytics company, offers her view:
“The boohoo group seems an unlikely suitor for premium womenswear brands Karen Millen and Coast, a far cry from its previous acquisitions of MissPap and Nasty Gal which both operate in the area of the market it specialises in – fast fashion for 16-24 year olds. Karen Millen and Coast, however, have strong reputations for quality occasionwear, targeting a core demographic of 25-45 year old shoppers. This contrasts to boohoo’s focus on selling a high volume of product quickly, offering frequent promotions, and using social media as an important marketing method.
“The acquisition risks devaluing Coast and Karen Millen as their success stems from high quality product and sophisticated designs, significantly different to the boohoo group. Arguably, the brands would fit better into Phillip Day’s portfolio due to the similar target demographic and high street presence of the brands.
“boohoo is only interested in the online businesses of the brands, and though Coast now only has a physical presence in the form of concessions, the loss of this will be detrimental to sales. Stores are important for Coast and Karen Millen due to the higher value of products, so operating as an online pureplay is likely to significantly increase return rates. The closure of concessions will also be another blow to embattled department stores, in particular Debenhams and House of Fraser.
“As Coast and Karen Millen are well-established brands, boohoo is likely to find it hard to generate rapid revenue growth, in contrast to the impressive growth of PrettyLittleThing and Nasty Gal which were acquired as small, relatively unknown brands. The group excels at marketing, especially on social media to generate awareness and a buzz around its brands, so should use this strategy to inject renewed life into Coast and Karen Millen, if its offer is accepted.”