How BHS failed: a tale of greed, deception and poor branding

The name “BHS” feels like a distant memory for UK shoppers nowadays.

The now-defunct department store closed its doors for good in 2016 after going into administration. Its former owners were criticised for mismanaging the chain and failing to protect the company’s pension scheme.

Eight years on, two ex-BHS directors have been ordered to pay £110 million for breaching their corporate responsibilities after not placing the company under insolvency when required.

As we look back on the scandal and the wave of bad press at the time, we explore what went wrong for BHS and what small businesses and SMEs can learn from it.

Mismanagement and corporate greed

A UK parliamentary committee report released in July 2016 associated the company’s downfall with “personal greed” and “leadership failures”, stating that its fate was sealed when its former owner Philip Green sold the company to Dominic Chappell – a bankrupt former racing driver – for just £1.

The collapse of BHS cost 11,000 employees their jobs and left a pension deficit of more than £570 million. It was also reported that Green and his family had collected around £580 million in dividends, rental payments and interest on loans during their 15-year ownership of the company.

Green sold the chain to Chappell in 2015, who reportedly had no experience in retail. In May, the court found Chappell and his business partner Lennart Henningson liable for wrongful trading and misfeasance over their management of the company.

It was ruled that Chappell and Henningson had breached their corporate duties by continuing to trade despite insolvency being inevitable by the time he took over. They were ordered to pay £110 million to creditors earlier this week, just two months after Chappell was previously ordered to pay £50 million in June. Mr Justice Leech determined that Chappell, who was imprisoned for tax evasion in 2020, sought to “plunder” BHS and had no realistic plan to secure capital when he acquired the retailer.

Losing touch with customers

Even before the scandal came to light, BHS was already struggling to attract and retain its customers.

With the likes of Primark, H&M and New Look resonating with a new target market of fast fashionistas, the slow-moving chain just couldn’t compete.

Losing touch with shoppers – who described it as “old-fashioned and out-of-date” – sales began to dwindle. Moreover, its financial troubles only intensified due to mounting debts and lack of investment in adapting to the evolving market and digital age – losing around £70 million each year between 2008 and 2014.

BHS had around 13.4% of shoppers in 2000, but by 2016, this had stagnated at 8.2%.

Lack of brand clarity

Before its downfall, BHS was perceived as a discount brand, a Debenhams wannabe with no real personality. Its generic clothing and household products failed to attract customers compared to its competitors, particularly those that offered next-day delivery through online shopping, such as Amazon, Very and ASOS.

Its high rental costs for brick-and-mortar stores combined with decreased customer traffic lead to a loop of financial losses. While it largely ignored online shopping, it also failed to properly utilise experiential marketing techniques to draw customers to stores or invest in improving its in-store experience. Successful examples of this include John’s Lewis’s megastore where customers can explore and book different services or H&M’s smart mirrors that recognise products and offers shoppers personalised recommendations, or alternative sizes and colours.

With outdated trading offers, dated-looking stores and no proper marketing investment, BHS ended up with little brand awareness or purpose, thus inevitably falling off the face of the high street.

While BHS is available as an online store – having been taken over by Litecraft Group Limited in 2019 – its tragic tale of personal greed, financial troubles and not keeping up with the times serves as a grim reminder of how easily business can go wrong if not managed or adapted properly. Additionally, with customer needs constantly changing, brands must adapt their operations while staying true to their core values.

In the end, ex-directors are paying the price and despite BHS now trading online, the dark cloud of corporate voracity and deceit still hangs over its reputation.