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.
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.
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.