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December 11, 2019updated 12 Dec 2019 11:14am

Ted Baker needs to beef up its sustainable and ethical credentials

Shares at Ted Baker have fallen sharply, especially after the fashion retailer alerted investors to an inventory blunder of up to £25m ($32m) relating to the value of the stock of goods on the balance sheet. 

By GlobalData Consumer

Two key figures at the fashion chain Ted Baker have resigned against a backdrop of profit warnings and a fall in the company’s share price.

The brand’s chairman David Bernstein and its CEO Lindsay Page, who was only appointed in April 2019, both resigned this week. The news comes as shares have fallen sharply, especially after the retailer alerted investors to an inventory blunder of up to £25m ($32m) relating to the value of the stock of goods on the balance sheet. 

In October, shares initially tumbled 15% on the news but later cut the loss to 8.5%. The error relates to previous years and is not expected to affect its financial position this year. Ted Baker has asked a London law firm Freshfields Bruckhaus Deringer to investigate further. 

Ted Baker’s business model to blame

In its retail outlets, Ted Baker has sought to engage consumers with a plethora of promotions and sales. However, given the underlying conditions of the economy and the ubiquity of sales on the high street, consumers are delaying their spending until there is a sale on.

Additionally, heavy discounting can dilute brand image and frequent discounting can lower the value of the brand: this appears to be the case with Ted Baker.

The closure of Debenhams and House of Fraser in the UK, as well as Nordstrom and Bloomingdale’s in the US, has also been damaging as Ted Baker’s presence was significant within these department stores. It took a hit of £600,000 ($800,000) from the collapse of House of Fraser. 

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Sustainable fashion and ethical clothing

Consumers are becoming increasingly interested in the environmental effects of the textile and the apparel industry, and only the brands that adapt to the changing competitive environment will survive. 

Ted Baker needs to establish its position in this growing market by looking at ways to introduced sustainable features to its products. 

Unfortunately, in this area, the company is falling short compared to its rivals. Leading players, such as sustainable fashion brand Reformation, are stepping up and fiercely entering the same market as Ted Baker. 

As a 100% carbon, water and waste neutral company, Reformation has become a firm favourite among sustainable shoppers keen to reduce their impact on the apparel industry. The company has found a niche and its growth is being driven by its ethical and sustainable positioning in the market. 

By comparison, Ted Baker appears to have lost its way as competition has increased. But to survive and thrive in 2020, and beyond, the firm will need to reposition itself as a British brand offering a ‘made in Britain’ range with a sustainable message; currently, many of its products are made in China.