165 year old British department retailer, House of Fraser, is currently weighing up Chinese conglomerate Sanpower’s £450m bid versus an IPO by the end of the year. While it will no doubt take some weeks to come to a decision on that, we instantly dig into our apparel database to understand what does and doesn’t work for the retailer; where they see their biggest successes and what may be areas of weakness.
One of the simplest and most telling ways to understand strategy at a retailer is to look at the way they spread their assortment across different price points. At the click of a button, our Market Analytics software highlights that House of Fraser have a unique pricing architecture amongst UK department stores. 51% of HoF’s range sits beneath the £40 mark, which is a low percentage compared to its direct competitors. 58% of John Lewis’s range is below £40, meanwhile 69% of Debenhams’ and a huge 82% of Marks & Spencer’s sit below the £40 mark. It is only Selfridges, as a luxury department retailer, who have a smaller sub-£40 offering, representing just 13% of their assortment. This is an interesting strategy from HoF, who are not regarded as a luxury department store, and perceptions would expect John Lewis to have a pricier offering. HoF build out their pricing well, with an emphasis on £40-80 and a steady drop-off from there, as opposed to Debenhams’ swift drop-off. This suggests that despite their similar positioning, the types of products people buy from HoF differ greatly from what is being bought at Debenhams or Marks & Spencer. This is reflected in the average price point: at HoF it is £65, while Debenhams and Marks & Spencer are a more modest £46 and £49.
House of Fraser currently have 32% of their offering discounted – an amount which sits without too much alarm between Debenhams’ high 40% and John Lewis’s healthy 22%. However, HoF have an exceptionally high amount of stock discounted by more than 50% – 4.8% of their total assortment versus 1.2% at both John Lewis and Debenhams. Within womenswear, the most discounted category for HoF is dresses, which currently see 42% of the offering reduced. The least discounted categories at HoF are nightwear and accessories.
Until HoF have fixed some of the problematic categories, and replenishment issues which we will go on to, reducing the proportion of their range discounted by 50% or more would lead to more dead stock and devalue the brand. Currently they are able to move poorly selected product through fairly swiftly. Debenhams could lift their over-50% discounting in order to bring down their general rate of discounting through the season.
House of Fraser appear to have problems in bringing sold out stock back into store. They have a 1.9% replenishment rate on current stock, compared to 5.2% at Debenhams and 3.1% at John Lewis. They are most likely missing out on opportunities when their buying decisions have been a success, unable to capitalize on consumer demand. HoF’s women’s footwear and underwear see the highest rate of replenishment, but their accessories category, whose low rate of discounting suggests correct product selection, has a disappointingly low replenishment rate, at just 0.2% of current stock.
Being able to get new product in front of consumers frequently and at a consistent rate is key to healthy retail in today’s near seasonless shopping – retailers like ASOS and Topshop really capitalize on this by having high rates of new drops each month, which they can create exciting communications from at any point of the year. Department stores have a harder job cut out for them, reliant on brands delivering on orders and having trade tied so closely to the holiday calendar. John Lewis do a great job of evenly spreading their newness throughout the season and are early into the start of a new season, as indicated by the spike in new drops in January rather than February, like HoF and Debenhams. HoF are good at getting high levels of new product in consistently – but we know that this is because their replenishment rate on existing product is low, and not necessarily a sign of high success. 94% of House of Fraser’s current collection arrived in the last three months, compared to 92% at Debenhams and a healthy 71% at John Lewis.
5. Consumer Focus
House of Fraser excel in knowing their consumer. They are not swayed by temporary trends, and keep their existing customer base in extreme focus. The product which sells most consistently for womenswear is occasion, evening and workwear dresses – they have a fantastically broad offering and sell fast and consistently here. An incredibly high number of best selling womenswear garments are floral, as well as draped, lace and maxi styles. HoF’s consumer is more likely to play with colour than they are with shape – there is consistency in shape through season, and for SS14 HoF have played to this well, selecting the pastel trend as their new season story, but not taking their consumer down the 90s route other retailers have taken from runway. Instead they have merchandised their faithful styles well to offer the consumer an update on items she is comfortable purchasing. Menswear that sells well at HoF is more casual: simple tees and polo shirts, Henley tops, checked shirts and G-Star denim.
House of Fraser is a solid and innovative communicator, with a wider Twitter audience than Debenhams or John Lewis. They send between eight and sixteen email newsletters a month (with the latter figure being around sales periods). Their marketing calendar reflects their success in eveningwear, focussing on key dates like the races, proms, summer balls and weddings. However, HoF missed an opportunity to really ramp up interest on full-priced eveningwear in the build up to Christmas and New Year, instead opting for sales blasts. The retailer also uses email campaigns to draw attention to other social channels, with active campaigns across Pinterest, Facebook and an Instagram hashtag encouraged.
Their forward thinking here extends to the latest stunt: they announced in March a search for 10 new designers. Teaming up with The Great Retail Revival Foundation to host an in-store pop-up for the new talent, 9 of whom will be chosen by an expert panel and the final designer will be chosen via social media. Campaigns like this help HoF dispel any notions of stuffiness, without risking the bulk of their collection or without altering the shopping experience of the majority of their consumers.
Like any retailer, HoF has areas of excellence – their consumer focus and their unique price architecture – as well as need for improvement (on replenishment). If you’d like to drill down into any of the data discussed here in greater detail, find out more here.