What lessons can we learn from the failure of bhs?

At the grand old age of 88, BHS has a special place in our hearts.

Those of us of a certain age might remember shopping (or being dragged) there as youngsters for necessities such as school uniform. It might have become a familiar and reassuring sight in the high street but, well, at some point we forgot to shop there. No business can survive on feelings of goodwill and sentimentality alone.

It may be a corporate cliché, but Customer is King stands true

BHS has been widely criticised by shoppers and retail experts alike for not adapting to fast moving customer and shopping trends. As a result, it has been unable to compete with newer kids on the block in fashion and homeware, such as Primark, H&M or Dunelm.

Retail guru Mary Portas points out that the recession and global competition have all revolutionised the way we shop - and those retailers that want to be successful have to be innovative and creative every step of the way. Yet BHS remained unchanged (made patently clear if you ever stepped into one of its stores). “It was not reimagined”, she says. Relying on traditional business models is not an option for retailers of the future. 

Strategy is not an afterthought; it’s at the core of successful business

Few chains have escaped the recent effects of harsh trading conditions. Strategy and innovation are the agents that serve as a buffer to those.

What was BHS’ strategic direction? What did its brand represent? Consider Aldi and you immediately think low-price, high-quality produce, limited choice and no frills; John Lewis - second-to-none customer service and shopping experience, aspirational labels and ethical; M&S - premium food! 

Management failed to carve out a niche for BHS, or invest in a unique offering that could reverse its under performance and re-capture and build a core customer base that knew exactly what to expect, and what value they would derive from its product range and shopping experience. Instead it tried to be all things to all people – even expanding into food in 2015 as part of a turnaround plan. 

Operationally, a last ditch attempt at survival by cutting costs and raising cash using a company voluntary arrangement that focussed on slashing rents at some stores by up to 75 per cent, selling property and a proposed restructuring of head office was not enough to protect the retailer from a collapse. Why? Perhaps the strategic, creative and innovation gap proved too great. 

Leadership matters 

Internally, BHS has been the victim of unpalatable leadership practices. The villain of this story has been Sir Philip Green, its former owner accused of loading the business up with debt and taking out millions in dividends, before selling it for £1 to Retail Acquisitions last year. The company has now been shackled with a £571 million pension deficit. It is also currently £1.3bn in debt. 

While there are many examples of unethical leaders creating thriving businesses, the demise of BHS has nevertheless vindicated the already vast but growing body of research that advocates that ethical leader behaviour and management practices, coupled with effective people management systems, are a source of advantage and the means for creating successful, enduring, sustainable organisations, regardless of sector. 

Supply Chain delivers competitive edge

Once upon a time BHS was held up as a glowing example of how to achieve a rapid turnaround. This was under Green back in the early noughties. 

A responsive or “agile” supply chain rather than new store concept or fancy marketing campaign was credited for this. According to Cranfield School of Management, BHS had long identified the importance of a flexible supply chain to the apparel business despite it being largely ignored by many rivals (although a notable exception back then was Zara whose supply chain management approach is now hailed as iconic). Green breathed new life into the concept at BHS, and it became a source of competitive advantage. 

Cranfield explains that building a responsive supply chain is not just about information systems, logistics processes and organisational structures but also mindset. This involves building strong relationships, cooperation between a range of departments and gaining commitment and trust from key stakeholders. 

Perhaps this was the missing ingredient in recent times. Did BHS look to its supply base for innovation and creativity or to help it rethink its direction, as so many leading organisations do? 

Have multichannel ambition

Digital strategy is to be ignored at your peril. Commentators have observed that failing to adopt a multichannel strategy early on enough weakened BHS’ position.

Such a move requires substantial investment into the technology side but it’s a step that tech-savvy John Lewis  -  even older than BHS at 152 years - has thrown itself into. 

Though its Chairman Sir Charlie Mayfield recently dismissed the phrase “omnichannel” as mere retail speak, the integration of in-store and online to create a completely seamless experience for the customer is JL’s core goal, convinced that is where success in the future lies.

The business has been investing heavily to be able to innovate in Click & Collect, omnichannel shopping, mobile commerce operations and more. Last year, it announced it is ploughing £500 million into warehousing, customer analysis and IT to continue its digital strategy. 

“There is a fundamental difference in retail now between those who are stretching their legacy systems and others who have reached the point where they recognise the need to invest – not just for today, but for 10 years’ time,” John Lewis’ Operations Director, Dino Rocos told the Financial Mail on Sunday.

It’s also going to be the differentiator.

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