Boohoo US strategy change widens offer via UK-based fulfilment

Now this is interesting. Boohoo Group is reversing the widely adopted strategy of increasingly localising distribution services and will now be serving the US market from its high-tech UK hub.

On Wednesday, the company announced changes to its operations in the US market “as it seeks to broaden its product offering for US customers and expand its routes to market” as part of its “strategy to reposition the group for sustainable, profitable growth”.

Coming just a day after the group announced the return of PrettyLittleThing’s founder to that brand’s CEO role and the reinstatement of free returns for loyalty customers, it suggests the group is prepared to think radically as it targets a return to sales growth and profitability.

So what’s happening now? Under the changes, Boohoo “is to cease supplying US customers from its US distribution centre in Pennsylvania and will now fulfil all US orders from its state-of-the-art automated UK distribution centre in Sheffield”. 

The move comes after a recent trial of increasing the product range offered to US consumers by also fulfilling from the UK, which has led to “encouraging results”. Before this trial, US consumers were being offered only around 60% of the styles on sale in the UK.

The group’s US distribution centre is a 1.1 million sq ft facility in Elizabethtown that only started operating a year ago. It’s run by a third party and is a property lease that Boohoo will now sublet. The firm’s presence at the site will end by 11 November.

The trend towards localising distribution has been mainly about cutting costs and boosting speed for customers in key markets. But Boohoo is clearly prioritising a wider choice here for the all-important US shopper and believes that the advanced tech at its UK hub will help to speed up non-UK deliveries.

It said it “remains excited about the opportunity in the US and has been developing wider routes-to-market strategies, the first of which is the recent launch of Nasty Gal in Nordstrom stores. The group is also in advanced talks with major US brands with regard to new routes to market for other brands within the group”.

Such tie-ups with companies like Nordstrom should address the needs of customers who want the speediest local deliveries.

Of course, any major developments such as Wednesday’s announcement come with a cost and Boohoo said it will see a writedown on the group’s balance sheet against the investments and costs associated with the US operation as well as certain one-off exceptional cash costs. 

But importantly, “these changes will result in a significant reduction in ongoing costs over the medium term”. We’ll get further details when the company delivers its half-year results. The date of that release hasn’t been confirmed but last year it was delivered in early October.