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Why did Arcadia fall?

Why did Arcadia fall?

17 March 2021|Crisis Management, Latest Posts

Why did Arcadia Fall?
Why did Arcadia Fall?

Forensic accountants will crawl over the failed Arcadia business but, quite simply, Arcadia failed because the management team had zero understanding of the value of an online customer base that spanned many generations across multiple brands. By forcing its brands to compete online just as they do on the high street, the company missed the chance to capture and engage customers as they moved through the entire brand portfolio, from 16 to 56. What a waste, says Russell Loarridge, Director, ReachFive.

Lost Opportunity

It is no secret that all the Arcadia brands, from Topman to Burtons and Miss Selfridge, lagged behind when it came to eCommerce investment. The online offer, when it eventually appeared, was a world apart from the quality of the experience provided by online-only retailers – and the business suffered as a result.

But this was not the management’s biggest failing. For the past two decades, retailers have been falling over themselves in a bid to collect customer data, to use that information to deliver an experience that builds loyalty, drives retention and maximises customer lifetime value. This is a massive business cost, especially for fashion chains which have to manage a constantly changing customer base because tastes change as customers age. 

Yet despite having a brand portfolio that appeals to customers across many different age groups, Arcadia did none of that – at least not at anything more than brand level. Instead, it insisted its brands competed online, rather than maximising their value to capture customers across the entire business, all the way from teen to middle age. 

Assuming that because its brands competed on the high street, the same model should be applied online was an extraordinary, wasted opportunity. And a bizarre misunderstanding of the way successful online retail works. On the high street, competition is inevitable, but online retail provides a chance for inter-brand collaboration that transforms customer retention and builds strong brand loyalty.

The Collapse of Topshop

Since the mid-1970s, Topshop’s target audience has been the 13 to 24 age group. Since then, flares have turned to funnels, tastes have changed, and the world is completely different from three-channel television and Woman’s Weekly, where Topshop towered above other outlets by catering directly for their specific demographic. 

Turn the clock forward nearly 50 years and the commitment to fashion innovation is still strong with the Topshop buyers. However, the in-store assistant who directed customers to the right rail or the right look has never appeared online. At best, the Topshop site resembles an online catalogue, taking serious commitment to browse. Innovative engagement with the consumer is negligible and there is no acquisition of consumer preferences to enable recommendations.

Couple that with no ‘baton handoff’ to portfolio retailers as the consumer ages and we have the core reason the Arcadia empire collapsed – little to no personalised consumer engagement and no coordination between their retail brands.

From Teen to Middle Age

So what went wrong? Under the umbrella of the Arcadia holding company, brands such as Miss Selfridge, Topshop, Dorothy Perkins and Wallis went head to head to win consumers rather than maximising their market position to build engagement throughout a customer’s life. By running each brand separately, there was no attempt to maximise customer lifetime value, to move them between brands as they matured. 

Just imagine how much more successful every brand would have been if the model had changed, if individuals had been encouraged to view themselves as an ‘Arcadia’ customer, as well as Miss Selfridge advocate. Of course, the retailer should have been asking questions to discover a customer’s gender, age and preferences and used that information to personalise the immediate experience and create loyalty. It didn’t – and that was another failure. 

By building a profile for each customer across the entire retail estate, Arcadia could have followed customers as they moved through teen fashion and started to look for something more sophisticated. Rather than losing customers to the competition at this point, it could have captured those individuals and provided offers that nudged them across the brand portfolio. And, critically, retained them within the overall Arcadia business.

But, of course, that never happened. No one at Arcadia woke up to the value of this amazing online customer asset. No one attempted to build a personalised experience that encompassed all the relevant brands. Instead, the model was inter-company competition – just like on the high street. It didn’t work.

About the Author

Russell Loarridge, Director, ReachFive
Russell Loarridge, Director, ReachFive

Russell Loarridge, Director, ReachFive, brings over 30+ years of international sales and management experience in enterprise solutions that include social media and mobile. His vertical market knowledge is extensive throughout the UK & Europe with specific expertise in retail, finance, entertainment, manufacturing, and Telco.  His wide industry experience coupled with his extensive market knowledge means that clients and prospects alike are keen to engage him in dialogue that ultimately adds value to their stakeholders.