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The Rise and Fall of Topshop: What Went Wrong

Parent-company Arcadia’s collapse marks the UK’s biggest corporate casualty of the pandemic. What comes next for the brand that was once the crown jewel of the high street?
(L to R) Suki Waterhouse, Sir Philip Green, Kate Moss, Cara Delevingne, Sienna Miller and Naomi Campbell attend dinner celebrating the new 'Kate Moss for TopShop' collection in 2014 | Source: Getty
(L to R) Suki Waterhouse, Sir Philip Green, Kate Moss, Cara Delevingne, Sienna Miller and Naomi Campbell attend a 'Kate Moss for Topshop' dinner in 2014 | Source: Getty (David M. Benett)

Topshop’s giant flagship store on a corner of London’s bustling Oxford Circus is a monument to its heyday as the coolest brand on the high street. It’s also a symbol of its dramatic decline.

On Monday, Topshop’s parent company, Arcadia Group, entered administration, concluding a long and turbulent downward spiral for the once-dominant fashion business. The company appointed Deloitte as an administrator to oversee a so-called “trading administration,” allowing the Arcadia business to continue operating while attempting to sell its brand assets.

The collapse is the latest in a decade-long decline across Europe’s high streets and in America’s malls that has been compounded by the pandemic. Major retailers including Neiman Marcus, J. Crew, Lord & Taylor and British chains Oasis and Warehouse are among those that have filed for bankruptcy since the pandemic took hold earlier this year.

Like its peers, Arcadia Group was struggling long before the pandemic hit, losing ground to more nimble ultra-fast-fashion e-commerce players. Its stable of established brands, which also include Miss Selfridge, Dorothy Perkins, Evans and Burton, lost out as new players offered consumers trends at a lower price, faster pace and packaged for social media.

But Topshop’s fall from grace is particularly dramatic. The high-street retailer once jostled with high-end labels on the pages of glossies like Vogue, while celebrities including Rihanna and Kate Bosworth were snapped in its hard-to-get collaborations with up-and-coming Brit brands like Christopher Kane and JW Anderson. Its London Fashion Week show regularly attracted a front row of fashion’s It girls: Kate Moss, Alexa Chung and Cara Delevingne among them. Moss even had a line with the retailer, for which frenzied fans were prepared to queue for hours to get their hands on the latest collections.

“In the old days, it was the height of fashion, it was super cool,” said said Guy Elliott, senior vice president of retail at Publicis Sapient, a consultancy firm. “Now, it’s kind of average clothes at a medium price point with no differentiation.”

Nonetheless the insolvency is expected to trigger a scramble from creditors and competitors eager to snap up and wring value from one or more of the group’s brands, with Topshop still the crown jewel.

Fraser’s Group, owned by Green’s billionaire rival Mike Ashely, has already expressed an interest. Another potential contender to make a bid is Manchester-based Boohoo Group, which, early on in the pandemic, raised £198 million for new M&A opportunities and has already snapped up high-street brands Oasis and Warehouse, which filed for bankruptcy in April.

Topshop is “undoubtedly going to attract the most interest from potential buyers,” said Chloe Collins, senior apparel analyst at Globaldata. “They’ve still definitely got a place in the market.”

Whether divorcing Topshop from its ailing parent company will be enough to resuscitate its allure is an open question.

The Decline of Topshop: What Went Wrong?

Though Topshop was once the key driving force in Arcadia’s portfolio, its decline is not just down to the group’s sluggish performance; the brand was slow to digital — and leveraging social media in particular — while product dilution and failure to break into key global markets like the US also undermined growth potential.

Fast-growing e-commerce players like Asos and Boohoo undoubtedly dented Topshop’s position. It has also lost out to rival brick-and-mortar stores with a clearer point of view. That includes companies like Brandy Melville, who play to the teen consumer, Primark, which catches the budget consumer, and Zara, which is geared toward a fashion-conscious shopper.

“The problem is they’re bland. They don’t have a position and they’re stuck in the middle and the people with a clear proposition have the attention,” said Publicis Sapient’s Elliott. “They haven’t captured the shift in retail or the shift in consumer trends since their heyday, and so they’re a bit of a nothing right now.”

But Topshop has also been hampered by broader problems within Arcadia. Beyond its old-school physical business model in a fast-digitising world, the group’s brands were also stunted by an era of under-investment, despite record dividend payouts for its billionaire owner.

Green’s reputation is a problem, too. The high-profile businessman has been a controversial figure since the collapse of UK department store chain BHS in 2016, one year after he sold it for £1. More recently he’s faced allegations of sexual misconduct and abusive behaviour. That sits particularly poorly in the current era of values-driven branding.

“[Topshop] doesn’t really have that kind of celebrity following anymore,” said Collins. “People don’t want to be associated with those brands anymore, really, because of him.”

Arcadia’s current share of the UK clothing market has fallen from nearly 5 percent in 2015 to less than 3 percent this year, according to Globaldata. By comparison, fast-growing e-tailer Boohoo Group has grown its share from 0.3 percent in 2015 to level with Arcadia, while Asos now enjoys a larger piece of the market.

The group narrowly avoided bankruptcy last year, embarking on a major restructuring, but the pandemic blew apart its turnaround plans. Arcadia’s value has plummeted 40 percent this year, according to estimates from Euromonitor International — more than double the estimated 18 percent decline of the overall UK apparel and footwear market.

After Bankruptcy: What’s Next?

Regardless of the outcome for its brands, Arcadia’s collapse is likely to radically reshape the UK retail landscape. It marks the UK’s biggest corporate casualty of the pandemic to date, putting over 13,000 jobs at risk and calling into question the future of more than 400 retail stores.

Topshop and Topman are ultimately likely to survive in some form, according to analysts. The brands remain Arcadia’s most valuable assets, thanks to their strong heritage and high level of consumer awareness. Structural problems aside, Topshop’s hold on a generation of fashion-conscious consumers carries high currency.

“Topshop is an amazing legacy brand,” said Elliott. “It can certainly be resuscitated... they have a pretty strong brand awareness. They just need to become relevant.”

Other names in the portfolio are more of a question mark. Wallis, and plus-size retailer Evans, are particularly weak links, Collins said.

Whether potential acquirers continue to see value in such a large physical footprint remains to be seen. Analyst favourite Boohoo has form taking well-established retailers online only. That could bring an end to Topshop’s decades-long presence on British high streets across the UK — including its famous Oxford Circus flagship.

“It would be a real shame if Topshop and Topman were going to disappear from the high street,” Collins said. “I think a lot of people would definitely miss that.”

Related Articles:

The Trouble with Topshop

As Scandal Sinks Topshop’s Brand Temperature, Should Philip Green Sell?

Topshop’s Stunning Collapse Proves No Retailer Is Too Big to Fail

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