There is no neater illustration of the shift in our lives from the real world to the virtual world than the news that Boohoo will acquire the Debenhams department store name.
Boohoo, the online fashion retailer that was started in 2006, will pay £55m for the intellectual property of Debenhams, the department store chain that dates its history back to the 18th century, and which went into administration last year. Crucially, the deal excludes bricks-and-mortar stores, meaning Boohoo is taking on only Debenhams’ online operations.
As if to underline the shift in retail from real-world to online, a concurrent deal is also in the offing for Asos - Boohoo’s fellow internet fashion house - to buy chunks of Arcadia, the company which owns a number of traditional fashion chains, many of which featured as concessions in Debenhams stores including Topshop and Topman. Once again, Asos is interested only in online.
First thoughts should be with the around 20,000 Debenhams and Arcadia staff who now stand to lose their jobs. More widely, however, the deals provide evidence - if more evidence were needed - that lockdown has greatly accelerated the demise of traditional retail. Certainly, department stores were facing a grim future before 2020, but the enforced closure of stores has forced any remaining internet-sceptic shoppers to bite the bullet and embrace online shopping. The notion of multi-floored stores packed with goods to view now seems hopelessly outdated.
The shift was thrown into sharp relief last week by Office for National Statistics retail sales data showing a 46.1% rise in online retail across 2020 as a whole compared to 2019. That rise for online came despite an overall 1.9% decrease in retail sales last year - the first annual fall in sales volumes on record. Even struggling department stores, which posted a 5.2% fall in sales last year, saw success online with internet sales rising 65%.
The deals at Boohoo and Asos should expand the offerings of the two companies, particularly at Boohoo which will become a destination not just for clothes, but for homeware and other items as well. The deals also suggest that there is life in online retail beyond just Amazon, with smaller rivals betting that name-recognition and brand loyalty still count for shoppers when they make their internet purchases, just as they did on the High Street.
For investors, it is yet another example of how long-foreseen changes in the way we lead our lives happen very slowly, but then all at once. As with the shift to home-working, the shift to online shopping is decades old but has been the external ‘black swan’ of a global pandemic that has provided the tipping point that has changed behaviour decisively.
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