What can Boohoo do to improve its brand reputation and avoid the contagion of brand damage in the wake of the latest supply chain allegations?
Business at Boohoo is anything but usual at the moment. Thanks to recent allegations of potential slavery and worker health risks in its Leicester supply chain relationships, it has a massive challenge ahead. It must not just stem the damage today, but then work to improve its brand reputation once more.
The story is unfolding through July 2020 in the classic and inevitable ways of all crises. It provides lessons for all leaders and brand owners about just how vital it is to avoid this happening at all, not just dealing with it afterwards.
Passion for fashion isn’t enough any more
Boohoo built its brand around the passion for fast and furious fashion. Many of the most dangerous risks to its reputation are hardwired into its very brand. As Boohoo looks to rebuild its brand reputation it needs to better recognise that the tide is turning against the environmental impact of disposable fashion. Ethical consumer activism is growing, and the number of ethical fashion influencers are increasing. Brighter lights are shining on what goes on behind the scenes to source and treat materials and make up goods. The dynamics of produce and sell fast and in volume place huge stresses on any supply and production chain.
When a major national newspaper decides to take a hard look at this, it can quickly become a crisis.
One unwelcome headline can create real costs
“Boohoo: fashion giant faces ‘slavery’ investigation” in The Sunday Times of 5th July is a headline to give any leader nightmares. Whether these allegations relating to Leicester factory worker pay prove true or false, Boohoo immediately faced damaging fallout.
When crisis hits finance, it is felt hard – and when trust disappears, so do investors. At its worst, Boohoo’s share price plummeted a massive 50%*. Partnerships are never far behind as fear of contagion spreads. Zalando, Next and Asos have announced that they will pull Boohoo from their offerings.
Although its institutional investors have continued to give a vote of support to stabilise the financial fallout, Boohoo is far from out of the woods. It must keep a careful eye on contagion among its brand labels. As owner of Warehouse, Oasis, Karen Millen and Coast it has a lot of retail value to lose if the continued scrutiny of its ethics damages the trust of its customers too.
*from 415 GBP 17th June 2020 to its lowest level of 209 GBP on 8th July 2020The risks of denial and avoidance
First instincts are often to deny and avoid the topic, hoping it will go away, rather than acknowledging and taking action fast. It is a mistake that comes back to bite brands later, as their inaction can compound perceived ‘crimes’. Boohoo’s modern slavery statement is not enough. Being caught out in contravention may be viewed as worse than having no statement at all.
Boohoo appears to have been in a state of deliberate denial for some time. Allegations about unsafe working conditions and low pay surfaced in an FT investigation into Britain’s ‘Dark Factories’ in 2018. Channel 4 Dispatches highlighted Boohoo’s connection to issues in the Leicester garment sector as far back as 2017. This report by the University of Leicester suggests that UK sourcing strategy profit margins are so tight as to lead to ‘severe violations of work and employment rights.’
Boohoo seemed quite happy with the status quo until that became impossible. This persisted even as the Leicester coronavirus cluster crisis began to loom. The Guardian noted that “Boohoo booms as Leicester garment factories are linked to lockdown” just one day ahead of the slavery storm headline . Its article says: Announcing pretax profits of £92.2m for 2019-20, the chief executive, John Lyttle, noted that the crisis had highlighted the company’s “ability to be agile and flexible”.
Senior executives must step up and show up
When cracks begin to show, one of the most vital and early steps to protect a brand in crisis is for its senior executive to show up, front and centre. Demonstrating that the leader of a business has humanity, and fully appreciates and cares about its impact on people, is a mainstay of crisis management and essential to improve brand reputation afterwards. We could cite a litany of senior people who have fallen from grace by dismissing this step (Tony Hayward of BP is the usual example, but there are many others).
Boohoo issued a strong and clear action statement to investigate its supply chain, three days after the Sunday Times report. There has been little to be seen of CEO John Lyttle in person, other than his name on this statement. This may well prove to be a mistake in dealing with a crisis that has very human factors to consider: the alleged pressure on garment workers to work in unsafe conditions during the Covid-19 crisis among them.
Improve brand reputation management – the lessons
The process for dealing with crises after they have happened is hard, and often horrid for all involved. There are experts to call on, and well-established best practices. Yet all crises are unique, and there will always be bumps on the road to re-stabilise and re-establish trust.
Boohoo is early on this journey.
Avoiding crises like this from emerging in the first place is better, cheaper, and less risky. Good reputation management is about embracing awareness of the role reputation plays and how it is influenced. It means understanding how it relates to how they operate and communicate with every stakeholder.
A comprehensive review of operations and activities can reveal, triage and enable mitigation of a range of potential reputation risks that can otherwise lurk unseen. Contrary to assumptions, reputation risk management is rarely central to the mission or attention of most marketing teams.
It is impossible to avoid reputation risk altogether. Some risks can always originate outside of your business and your control.
It is irresponsible leadership not to identify and take action to reduce the risks that are inside it, and within your ability to act.
Are you really aware of your reputation risks? If not, get in touch today about reputation governance help. We help clients ensure they are aware of risk, set up for proactive reputation management, and ready for any risks they may encounter.