Following the buyout of fading fast fashion etailer MissPap by larger rival Boohoo Group last week, Drapers examines the implications for the wider sector
Three weeks ago, the outlook for MissPap was bleak. Liquidators were poised to move in to try to salvage some money for its creditors, after its shareholders passed a resolution to wind up the company.
But last week it was a very different picture – literally – as a photo appeared on Instagram of MissPap founder Ashley Ali standing next to Boohoo Group executive chairman Mahmud Kamani. That same evening, Boohoo Group confirmed it had acquired the brand and intellectual property (IP) assets of MissPap for an undisclosed sum.
For many, the acquisition makes sense for Boohoo Group, which owns the Boohoo brand, BoohooMan, PrettyLittleThing (PLT) and US etailer Nasty Gal, whose IP rights and customer databases it bought in 2017 for $20m (£16m). With this latest deal, Boohoo has snapped up a smaller rival at what most assume was a “competitive price”.
At the time of the MissPap acquisition, John Lyttle, CEO of Boohoo Group, said: “MissPap is a brand with great potential, which can leverage the group’s expertise. This acquisition further strengthens our multi-brand platform, representing an exciting opportunity to accelerate our offering to our ever-growing range of customers globally.”
It’s a low-margin, high-volume game. Fast fashion only works when you get to scale
Former MissPap supplier
Sofie Willmott, senior retail analyst at GlobalData, comments: “It’s not a surprise they have bought MissPap – the product offer, pricing and look of their website fit well with Boohoo and PLT.
“Awareness of MissPap is quite low. Boohoo Group could redefine its proposition and put marketing behind it. Boohoo have learned the lessons of how to build a brand, so they know what works.”
Nonetheless, MissPap’s collapse remains a cautionary tale for the online fast fashion sector.
House of MP, which trades as MissPap, owes its trade and expense creditors more than £1m, including more than £950,000 to Revenue and Customs, £10,000 to employees, and £300,000 to customers in the form of refunds. House of MP went into liquidation on 26 March. The liquidators have confirmed that the sale of the brand and IP assets to Boohoo Group was carried out before that date.
One creditor tells Drapers: “Nothing has been communicated about what is happening. We know of people who are owed substantial amounts.”
Boohoo Group declined to comment further on the acquisition.
‘A champagne lifestyle on a lemonade budget’ – MissPap’s style agenda – read the Drapers Interview with Ashley Ali
MissPap, which launched in 2014, boasted turnover of around £24m and EBITDA of £2m in 2017 – all without receiving any outside investment. However, the fight for survival among upstart fast fashion etailers is becoming increasingly cut-throat, and experts speculate that MissPap failed to carve out a strong-enough USP.
Unless they can spend a fortune on content, pureplays need to invest in technology
One former supplier to MissPap tells Drapers: “It’s a low-margin, high-volume game. Fast fashion only works when you get to scale, and that’s the trouble with a lot of these guys – the pool is getting smaller and smaller, and the big guys are getting bigger.”
Indeed, as well as fighting for market share from the big etailers, such as Boohoo, Asos and Missguided, MissPap is on a growing list of smaller fast fashion firms shouting for attention, including In The Style, Oh Polly, Femme Luxe, Missy Empire, I Saw It First and Never Fully Dressed.
Mike Branney, managing director of womenswear etailer Oh Polly, says: “[MissPap] was operating with the same suppliers and product as its competitors. It was sourcing the vast majority of product from Manchester wholesalers, and the rest from Leicester – as do dozens of others. Anyone could go in, buy the product wholesale and put their brand on it.”
Others point out that ecommerce is no longer the golden goose of fashion retail, and necessitates heavy investment in technological innovation to stay ahead of the curve.
One ecommerce expert says: “MissPap had other ambitions – for example, its tie-up with Topshop [the etailer launched a capsule collection in Topshop’s Liverpool One store in 2018], but at heart it is a pureplay. However, even Asos is struggling with its costs, and its margins are going in one direction.
“Unless they can spend a fortune on content, pureplays need to invest in technology. Having a simple ecommerce catalogue website and lots of followers on Instagram is no longer good enough.”
Willmott agrees, adding that the younger consumer’s expectations are high: “Young tech-savvy shoppers expect all the standard things such as fast delivery options, and fulfilment options such as CollectPlus or lockers.”
Most of the fast fashion companies are in single- or low double-digit net profit figures, so that doesn’t leave massive room for error
Mike Branney, managing director of womenswear etailer Oh Polly
One source close to the situation says MissPap also struggled with the high cost of launching its US business. The etailer unveiled a US website in July 2018 and is understood to have invested in a new warehouse to fulfil the orders.
The source says: “[Ali] tried taking his brand over to America, but the costs are too high. Next-day delivery is more expensive in the US. He thought it would be cheaper to put a warehouse there, but it all backfired.”
Ahead of the game
Despite the challenges, Oh Polly’s Branney argues that fast fashion etailers are still outperforming the high street.
“Online fast fashion is definitely bucking the trend, compared with general retail. Almost every company I know of is growing, and doing so profitably.”
However, he adds: “Most of the fast fashion companies are in single- or low double-digit net profit figures, so that doesn’t leave massive room for error. MissPap could have simply had six or nine months of poor buying decisions, which could wipe the profit out. If you make a bad decision, you have that sitting in the inventory, and you have to sell at a loss to keep your business going.”
While Boohoo has rescued the MissPap brand, the collapse of the underlying business highlights how difficult it is to operate in this competitive field today.
The Drapers Verdict
The swoop for MissPap makes business sense for Boohoo Group, consolidating its position as a leading fast fashion business. Boohoo can reshape the MissPap brand as it likes, and take advantage of its customer database and social media following.
As the fast fashion market matures, it is inevitable that some of the bigger players will snap up some of the smaller, newer businesses when they run into trouble. The challenge for those remaining will be to carve out a point of difference, and maintain cashflow when times get tougher.