Finance Lead Flux
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Boohoo.com acquires Debenhams for £55m: Will it all end in tears?

It might strike as a strange acquisition, but the details of it make sense. Boohoo is moving from an “online fashion retailer” to a “tech company that operates in fashion” - a subtle, but important change.

27th Jan 2021
Finance Lead Flux
Columnist
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Debenhams
istock_debenhams_JasonBatterham

On the face of it, this acquisition seems quite strange. Sitting at one side of the table we’ve got Boohoo, an online fashion retailer with no physical presence and a target consumer of 16-24 years old. Across the table is troubled department store and ex-high street juggernaut, Debenhams, with a large physical presence and target consumer of 45-55 years old.

At first glance, you might think Boohoo has gone a bit crazy. Why buy a company where there are very few crossovers? It’s a good question, but there seems to be a method in Boohoo’s madness. Let’s take a look and see why they’re doing this.

They’re buying the virtual, not the physical

Boohoo is buying the intangible assets rather than the tangible ones. This is a key point - the acquisition includes intellectual property such as the website, brand and customer lists. No physical property or stock is included in the deal. If a buyer can’t be found for the physical segment of Debenhams, then it’s likely tovanish from our high streets forever.

If we delve deeper into the Debenhams online business model, we can start to see where Boohoo is going with its thinking.

The marketplace business model

Debenhams currently generates approximately 25% of its online revenue through what it calls a marketplace. A marketplace is a platform that allows third parties to sell to consumers without first having to sell to the retailer - like how individuals can sell through eBay or small businesses can sell through Amazon.

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