Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

	{audio:0:01:04} I run an investment fund and we invest mainly in UK-listed companies. I'm trying to learn as much as I can about online listed ecommerce businesses. Boohoo is in that universe and I've been looking at them over the last year. I was hoping to chat about that, but also about fashion ecommerce more broadly. Why don't we start with what you're up to now, if that's okay?

	{audio:0:02:00} I was at Boohoo for 11 years. I joined in 2010 when it was at a pivotal place where it could either skyrocket or keep ticking along. At that point, Carol and Mahmud decided to bring in more senior hires. I joined with a marketing background and grew through the ranks. I worked a lot on international development growing the business overseas. I was on Boohoo for six years, then moved to Nasty Gal, the first brand Boohoo Group purchased six years ago. It is insane to think that in seven years they now have 13 brands. I was commercial director on Nasty Gal, essentially developing a blueprint for brand acquisition for how we set it up and structure it. There were a lot of complexities with that because it was a US-based business, so how we would integrate employees into the Boohoo model. 

	{audio:0:03:12} I grew that business and, last year, I was ready for something different after 11 years. I wanted to try my hand at a different side of retail and got approached by Atterley.com. They are a marketplace, in essence, but very much for supporting small businesses. We work with 400 boutiques across the world, very much what you would see on a small high street. They give us a product feed which plugs into our website, and that means customers on a global basis can shop on the designer premium end fashion. They can shop at many boutiques who stock labels which are not freely available in Selfridges or Nordstrom in the States. I was co-CEO there and it was similar to Boohoo, where most of my day involved growth and marketing opportunities to improve customer experience and the general proposition. It has been a crazy few years since Covid and no two days are ever the same as trends move up and down. You have a good run of a week, then something seems to hit you. Every market is changing. 

	{audio:0:04:37} Atterley is similar to Boohoo in that we look at global markets, so we're not a business whose eggs are in one basket just being in the UK. That is helpful because this year, Atterley had a great start to the year, but after the Ukraine war talk started hitting and the energy conversations started dripping through, it dropped off. We decided to pivot the strategy to be more US facing and went after growth there much heavier. Fingers crossed that has paid dividends and got us through the summer. Luckily, the UK has bounced back from September.

	{audio:0:05:26} Several people told me July and August were bad but September was better.

	{audio:0:05:31} We obsessed over these things at Boohoo. Was July and August busy for UK people going away because no one had a holiday for two years? Many people at that time of year would be buying a summer wardrobe, but they probably still have clothes from two years ago that they have never worn. These are anecdotal conversations we have in the boardroom, but it's interesting that many people say the same.

	{audio:0:06:01} Atterley focus on the edit and it's about curation. Are you bringing all these smaller brands together and trying to present them?

	{audio:0:06:13} We have 4,500 brands, anything from Levi's and Birkenstock, affordable luxury mid-market, to Balenciaga, Chanel, Gucci and everything in between. There's a lot of mixed basket building. Many APAC customers will buy into a sustainable cashmere brand that is not Dior or Gucci, but they'll mix a basket with a Gucci handbag and a pair of Frame denim jeans. We get true label lovers, but also those who want up and coming brands such as what GANNI was three or four years ago but is now massive. There are many Scandinavian and French brands, but we also have the usual suspects such as Levi's and Converse.

	{audio:0:07:09} How do you fulfill? Do the brands ship directly?

	{audio:0:07:13} No, it comes from boutiques. Obviously, boutiques buy from the brands. Let's just say there's a little shop in Manchester and an order comes in via Atterley, we send it to the boutique who fulfill it directly to the customer.

	{audio:0:07:26} Can you buy from several boutiques at once?

	{audio:0:07:29} Does your system filter those orders to each boutique?

	{audio:0:07:32} It all comes separately. There are challenges with that but 90% of boutiques dispatch in less than two days. They're getting more savvy to ecommerce after Covid. None of them had an online website but, post-Covid, most of them do. If a boutique in Australia is shipping to America, it might take five days versus one from the UK to America. We only charge one delivery fee which is a benefit to the customer who get three items for one delivery fee. Most of the time, it would be free, because anything over £200 is free, but we have to take a hit as we send everything by DHL Express purely for tracking. If you're buying a Gucci handbag, you want to know it's coming on a preferred service. That is costly but luckily most baskets are two items because most boutiques stock a similar universe of product. If you like Carhartt for example, you might see a similar brand in that boutique.

	{audio:0:09:00} There is a take rate on each, but is there a ratchet on basket value?

	{audio:0:09:13} No, it's a flat rate. The UK have more players working with boutiques, such as FARFETCH® and TROUVA, so it averages at 15%. That's the expectation in the market for boutiques, plus we charge a credit card fee and the boutiques pay for postage. The US and Europe are more open to higher fees, where the average is 17% to 19%.

	{audio:0:09:52} Is that simply because people have more available options?

	{audio:0:09:57} There's more options but UK boutiques are savvy to their own ecommerce.

	{audio:0:10:03} That happens as it's easier to ship in the UK than in many other places. Smaller UK businesses are more comfortable with ecommerce because the logistics are easier to cope with, but I know it's currently difficult with all the postage stuff going on.

	{audio:0:10:26} Were you at Boohoo for 11 years?

	{audio:0:10:37} Now you're on the outside, what is your opinion of what's going on now? I want to talk about management because I'm struggling to get my head around whether they're up to the job in front of them. Do you have any view on the more senior people?

	{audio:0:11:05} I will be really open in saying it's either for you or it's not. I've seen lots of people come through with high shoulders and bright eyes and four weeks into the job, they leave because it's an intense working environment with a clear lack of strategy. It was great when it grew at a massive rate because there was momentum in the market. We might have had a first mover advantage in some markets because, 11 years ago, there was only ASOS, but as more people entered the market, it got harder. 

	{audio:0:11:57} There is probably too much tactical thought processes happening and it's a constant case of changing things or going after new things, but once you change that many things, you don't know what worked or not because it's such a mess. I stayed there for 11 years because I genuinely loved both the business and the people. The reason I left was it got so big. The biggest disadvantage I've seen is 13 brands was too much for one IT team to cope with. Yes, we're putting more bodies in to fulfill it, but everyone is bolting on to one platform. 

	{audio:0:12:48} The reason we did so well in the early days was that we could move so quickly and be reactive to market opportunities. Opening a new territory or product or introducing a new checkout would be done in weeks, whereas today it takes six to 12 months because there are 13 brands. I wanted Nasty Gal to have this but there was a queue of 12 people in front of me. That agility piece slows down with so many brands in the portfolio. I loved the culture and I genuinely loved Mahmud and Carol, who instilled so much energy and passion into the team that we felt like it was a family. That definitely changed when the brands came in and brought with them many external people. By the time I left, there were 50 directors, most of whom were reporting into John Little, and that structure is not fit for purpose.

	{audio:0:14:11} Is it fixable if they halt brand acquisitions and digest their acquired brands?

	{audio:0:14:27} It is fixable but they have bought many similar brands. We would be in meetings where MissPap, Nasty Gal, Boohoo and PLT were arguing against each other. That is not the way to run a healthy group, but many brands have the same customers. They are run by the same product team buying product and the same marketing team working across multiple brands. There are efficiencies but the brands merge into one world. I would consolidate the brands down. I know they want to move many brands into Debenhams and run that as a marketplace, which there is merit in doing if they choose the right brands. They need to focus on what drives value, because if Oasis or MissPap isn't bringing money in after four years, you could spend years trying to fix them but your cash cows like PLT, Karen Millen and boohooMAN are successful, so they should rather focus on establishing those again.

	{audio:0:15:58} Some people believe that, as the original brands and early acquisitions start to saturate, a growth driver could be that you bring on adjacent brands that target almost the same customer, but not quite. That's one of the ways to grow but I'm not sure how much brand loyalty people have to Oasis. It doesn't strike me that you need the SKUs to be labeled under that brand to attract that customer, so could you tweak the existing brands to drive growth that way rather than bolt on all these new brands?

	{audio:0:16:51} Looking at the last few years that's definitely fair. A brand like Oasis could have a place on a marketplace where people are not particularly brand loyal, but it's just product badged under a name without its own identity.

	{audio:0:17:14} No, it's different on a marketplace.

	{audio:0:17:14} Yes, you don't feel that, so it could be called anything. You need to have a name for a brand, whereas trying to develop a brand identity, a creative look and feel with a DNA on its own site, you do need to put a lot of effort into that. Clearly, there is no longer loyalty to the Oasis brand.

	{audio:0:17:38} How are their brands moving away from the original target demographic? Karen Millen would be a good example but Debenhams are trying to go up in both their age scale and income bracket?

	{audio:0:18:08} Karen Millen was a strong business but benefited being in Manchester. It had that London focus but it was away from all the madness in Manchester. Mahmud would tear around the building telling people to buy 20,000 dresses for 5p. It was allowed to take a great brand and revitalize the product strategy to get that higher end price point in the group and be successful in its own right. Looking at Karen Millen recently, it feels as though they're trying to be a bit for everyone. They've got a lot of young design fashion but at a fairly premium price point, whereas they were always great at work wear and occasion wear.

	{audio:0:19:11} That fits with what you were saying about it being all over the place; people constantly change strategies and there is no confidence in the strategy for each brand?

	{audio:0:19:23} It's that constant drive, but Boohoo isn't doing as well as it should, so it has to be filled elsewhere. There's always this conversation of this worked for this brand, so you should try that. As the leader of a brand, you realize that's not right for my brand, but if it's going to bring money in, maybe I should just do it, but six months later you look back and think what has this brand become, we've diluted it so much that it doesn't make sense to the customer who was loyal to it.

	{audio:0:19:55} Management is pushing the narrative to investors that there isn't a demand problem with Boohoo brands and the Boohoo Group, nor is there a gross sales problem. There may be a net sales problem because returns rates are higher than people thought they would be after the pandemic, but most of the problems are pinned on the supply and fulfillment side. From what you're saying, maybe that's not true and there is a slight wavering in the core demand for these things?

	{audio:0:20:40} Externally, I'm not hearing supply issues in the industry, but there definitely is an issue with returns rate. Perhaps not on the core brands like Boohoo, PLT and Karen Millen, but there is a demand problem for Oasis and MissPap, otherwise they wouldn't be making the changes.

	{audio:0:21:16} They need a period of reconciliation to admit they over acquired on brands. They bought them out of administration so they were tempted to bid on everything.

	{audio:0:21:40} That trading mentality has driven the lifeblood of the business. I'm not saying that's the wrong thing, but the leadership mentality is about getting something for cheap that you can make a lot of money from. That's been the core of the business for a long time but you have to get to a point where you have 13 businesses and a team and supply network stretched across it all, to realize the model no longer works.

	{audio:0:22:16} Getting things for cheap and being reactive with their test model, obviously that was important with their core brands, but is that applied everywhere?

	{audio:0:22:44} That is true across the brands, even from my marketing side where we would try things. It's great in that it allows you to be entrepreneurial as long as the benefit is coming, but if it doesn't work, cut it off and move on. That is driven as part of the leadership and learning at Boohoo across all areas, not just product.

	{audio:0:23:10} Did the investigations into the Leicester supply chain and the commissioned reports make it harder for them on the product side of things to do that?

	{audio:0:23:34} It's limited the supply base they can use, as retailers use the same sources. It makes it very competitive trying to get decent factories to work with you and deliver in the time frames you need. They are all geared for fast fashion, but you think some suppliers are brilliant, then someone investigates it and actually they're not, which cuts off what you can do.

	{audio:0:24:16} What did you think about that last year when it was all happening?

	{audio:0:24:19} It was awful and it affected us all. We had a lot of people leave, especially the younger generation who were more educated on sustainability. The older ones, myself included, were all shocked at what was happening.

	{audio:0:24:46} Was it a genuine surprise?

	{audio:0:24:50} I don't think we thought it was as bad as it was. I've walked in factories that I wouldn't want to work in, but none of us would. I also wouldn't want to work on a supermarket checkout till or stack shelves, but it is income for some people. Trying to manage the supply base of that many brands is so difficult.

	{audio:0:25:21} How has that played with the target demographic or consumer base for fast fashion brands? My blunt question is, do you think they care?

	{audio:0:25:48} This is tricky because I definitely meet people who surprise me. At Atterley, we had two office interns who were spending more money on clothes than I would, and when I asked them why they said they would rather spend £200 on a sweatshirt and wear it 50 times, than spend £10 on a sweatshirt and wear it five times, but they were from wealthy families, not your average 18 year old girl in college with a part-time job who wants to go out on a Saturday night and have a new outfit for Instagram. Of course, you want to feel like you are supporting sustainability. I love walking in H&M and seeing something that I like is from the Conscious Collection, thinking it's £25, but it's also sustainable, tick, tick, tick. There is a bigger pot of people who want affordable clothes and to look good. As you rise through the income brackets, that changes, but if you are a Pretty Little Thing or Boohoo customer, all that matters is how you look and how much you're spending on it. You might spend a little bit more on a sustainable T-shirt for £10 and the other one is £8, but you won't buy exclusively sustainable.

	{audio:0:27:24} Maybe that's the answer, similar to free range eggs which cost slightly more, and I'm seeing more labels have something like a hallmark of sustainability.

	{audio:0:27:43} The flip side of it is how much is it Boohoo's job to work with suppliers? An argument for group brands is their collective buying power, but could Boohoo, H&M and Zara come together to say this sustainable factory will give you all this, but those sustainable T-shirts that were £15 pounds, we now need them for £14 or £12, but we're going to give you all this. It goes both ways; it's about Boohoo the group, trying to bring the prices down to make it affordable, but equally paying the right wages.

	{audio:0:28:33} When I look at fast fashion broadly, there is a narrative that sustainability is more important than ever and customers make decisions on that basis, but the speed of growth of Shein and its appeal is difficult to reconcile with that. I know there hasn't been a full-blown scandal around it yet, but that will come because you can't possibly produce and ship for those prices?

	{audio:0:29:13} Did you see the Channel 4 documentary they did about Shein? It was pretty horrific, but it won't slow it down. I don't know if this discussion will be different in 10 years, but short term it's the education of seven-year-olds in school now who when they are 17, might think differently because they were brought up in sustainably. Shein and Boohoo target people on the breadline who need cheap clothes. Primark will always have a place because it sells bloody good stuff for no money and is always full of mums and students, so there will always be that pot of people in society. Will the industry make those products sustainable and take a hit on profit to do that?

	{audio:0:30:26} The key for a brand targeting that customer is to keep prices competitive. Western brands held to higher standards are vulnerable to Shein as they can't compete.

	{audio:0:30:50} They operate on an unregulated level. Watch the documentary; it is bad.

	{audio:0:31:01} They work 14 hours a day and are charged for every mistake they make.

	{audio:0:31:07} Everything about it is structured to offer the lowest price SKU they can. They don't sell into China because that allows them to benefit from a tax exemption, so there are many things they do to keep driving prices down. The only way to stop it is having a regulated minimum standard. I don't see how you stop price competitive customers choosing once the gaps in prices become so large. Moving on to returns, one of the theories I have heard about why returns have snapped back higher than they were pre-pandemic, which surprised many people, is that the mix, post-pandemic, has moved to more returned items such as dresses, because people didn't buy them as they didn't have events or weddings for a time. Dresses as a part of the mix are over represented compared to pre-Covid. Is that it or is something else at play?

	{audio:0:32:34} It definitely plays a part but product that was sold during the pandemic was less fit critical. You can still wear jogger sweatshirts whether you're a small or a medium; it doesn't matter. Obviously, during the pandemic people weren't going out, so if it didn't quite fit, they still kept it. The post office might have been shut, so there were less easy ways to return. Post-pandemic, we're back selling shoes and dresses which are more fit-critical items. We've also made returns so easy for everyone, you no longer have to print anything out, you simply use a QR code. You can drop it at a petrol station or ASDA, there's so many options for returns. There's also an element of Topshop, Oasis, Coast and Miss Selfridge all being shut. People no longer try things on to get the right size. They have a mentality of I'll get an 8 and a 10 and we'll see what fits.

	{audio:0:33:52} There are two elements of returns; the fit aspect and people ordering more than they need because they want to try things on and see what looks nice. It feels like that's going to be hard to address, outside of moving to a bricks and clicks model where you have fitting rooms and people order there with a hub and spoke logistics service, then they try it on and return in store at the same time. For fitting, will we move to having scanners on phones?

	{audio:0:34:37} Possibly, and there are different fit analytics software but Boohoo has 400 suppliers, so how do you standardize that? The inventory is so vast that you will have variations without a single consolidated supply base.

	{audio:0:35:01} I've heard people tout the idea of sizing relative to a fit model.

	{audio:0:35:13} Which is right, but what comes from the supplier can still vary from that.

	{audio:0:35:18} Most items are fit on a size 10 fit model; do the variation from that. You still get delivery into the warehouse and find three size 10s are all slightly different.

	{audio:0:35:35} That's impossible to solve.

	{audio:0:35:41} Luxury brands who only do 20 lines in each collection can do that, but any retailer with a vast amount of SKUs will suffer from that.

	{audio:0:35:55} Even if you get the pattern right, there are too many parts of the process.

	{audio:0:36:03} There are many moving parts but it comes back to the type of product and the price paid. For luxury items costing over £300 each, more attention is put into it, so they're more likely to fit better, but anything low cost is whizzed through a machine.

	{audio:0:36:33} Will selling dresses and shoes normalize over time?

	{audio:0:36:43} This year swimwear has picked up, which has had a bad few years. One of our biggest search terms over the past two weeks was designer occasion wear, which has been absent for a while, so I think those areas will normalize.

	{audio:0:37:05} Is that a Christmas party?

	{audio:0:37:06} Yes, definitely, which you would expect at this time of year, but we've not had that for two years. Someone will buy one Christmas party dress and wear it three times this year versus buying three different Christmas party dresses last year.

	{audio:0:37:26} Can we talk about the US given you ran an acquired US brand? Do you believe that Boohoo is waiting to take advantage of this huge US opportunity?

	{audio:0:37:50} They've had a decent run at it in the US for eight years.

	{audio:0:38:00} Is the opportunity there in the same way it was before the pandemic, and the only thing missing from Boohoo capitalizing on it again is they can't ship quickly?

	{audio:0:38:25} Pre-pandemic we were shipping to the US in two days for $8 a parcel. When we were in the throes of the pandemic, it was $20 a parcel and took 10 days. That will allow them to accelerate and get those parcels out. Shein is their biggest challenge in the US. During the pandemic, they've thrown so much money at it, saturating every market and stealing market share from PLT and Boohoo in the US. Their biggest challenge is coupling logistics improvements with accelerated traffic driving initiatives. Shein spent so much money doing tons of app downloads and paid social, which is low converting, but they're getting the awareness out there.

	{audio:0:39:41} The longer they take share of mind, the harder it gets for Boohoo, PLT and other brands to work their way back into people's minds?

	{audio:0:39:50} They've dropped down a few pegs while they've gone after it aggressively. They should consolidate those brands and put all the budget into them alone.

	{audio:0:40:10} Do customers of those brands have any loyalty? Is novelty important?

	{audio:0:40:29} Of course customers change brands and when we did research, we found customers of Nasty Gal were also customers of Boohoo and PLT.

	{audio:0:40:39} Do they change to get something new or does the item draw them?

	{audio:0:40:45} It's marketing, price and having fresh and new items, so it's trend-driven. Most strategy for all brands has been around celebrity collaboration. People buy into the Kourtney Kardashian or Molly Mae Collection, and that's the hook to keep pulling them back to site.

	{audio:0:41:17} People worry about trendy fashion labels because if you extrapolate too far, you can get into trouble, because preferences and trends change, and people move from one brand to another, which makes it difficult to predict.

	{audio:0:41:51} That's definitely been harder recently. Eight years ago, if a celebrity or influencer wore an item to a show, we could have a similar item on site within three to four weeks. Today that's closer to eight weeks, which is why Shein are doing so well because they're still fast, whereas Boohoo has gotten slightly slower, but is still fast.

	{audio:0:42:35} Is that fast enough; you don't miss a season with eight weeks?

	{audio:0:42:38} You are not going to miss a season but you might miss the initial high peak. If an asymmetric dress is the trend, you will still represent that in your product range, but a very specific product might take several more weeks to come through.

	{audio:0:43:01} What three things do Boohoo Group need to focus on to get back on track?

	{audio:0:43:24} Consolidation of their brands; have a longer-term strategy and focus on who the real brands that will drive the difference, then put a group effort into that, rather than having multiple teams work on tiny pieces of the pie.

	{audio:0:43:53} Is it a bad sign if they continue acquiring and grow their brand portfolio?

	{audio:0:44:00} It depends which brand, they shouldn't acquire fast fashion like Misguided. They should acquire a kids wear, home wear or beauty brand. They need to accelerate the marketplace model and get that working to show the group has a diverse offering and it's not all own brand product. That comes with huge logistics and warehousing needs but in a marketplace model, they have some of their own product, so they can have relatively light touch logistics. It's also about culture, and I would love to see them get back to that true family culture feel, which is hard when the business is so big, but it feels that's got lost and it's become an unfriendly environment to work in.

	{audio:0:45:17} Brand consolidation and culture.

	{audio:0:45:23} And strategy and probably the US up there.

	{audio:0:45:28} They're putting a new distribution center in Pennsylvania and if that goes to plan, they'll be back to next day for the core Northeastern states and two days for others. The plan is to do that first then step up marketing. I understand the dilemma of pushing hard on marketing as you're throwing money into a void if you cannot fulfill.

	{audio:0:46:03} The proposition has to be right; there's no point driving all that traffic to site to sell product that will take 10 days to get there, when Shein delivers in two days.

	{audio:0:46:20} I don't know how they do that. Do you have any thoughts on ASOS? The two groups are often compared, but I see big differences. Did you think about ASOS a lot while you were at Boohoo, were they the big gorilla in the room?

	{audio:0:46:45} I was more of an ASOS customer than a Boohoo customer, slightly older. ASOS had a brilliant design team with clear handwriting which offered fast fashion at the premium end of the market. It was not designer, but a £100 dress was unique, and that feels to me as though it's completely gone and they've skewed very young. They're trying to live in this BoohooMAN PLT hybrid world, similar to Jaded London.

	{audio:0:47:33} I've seen them on the ASOS website.

Boohoo & UK Online Fashion

Former Director at Boohoo

inpractise.com/articles/boohoo-and-uk-online-fashion

Executive Bio

Former Director at Boohoo

Interview Transcript

Did the investigations into the Leicester supply chain and the commissioned reports make it harder for them on the product side of things to do that?

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Boohoo & UK Online Fashion(November 25, 2022)

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