Matchesfashion, a UK-based online luxury retailer known for designer brands such as Gucci and PRADA, has entered administration less than three months after being acquired by Frasers Group.
The company, facing financial difficulties and a decline in demand, will cut more than half of its workforce.
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Founded in 1987 as a boutique by Tom and Ruth Chapman, Matchesfashion grew into a pioneering online luxury retailer.
Failed turnaround efforts
Frasers Group, owned by retail entrepreneur Mike Ashley, acquired Matchesfashion in December 2023 for £52m ($66.8m) with the intention of reviving the business.
However, Matchesfashion reportedly missed business targets and continued to make losses.
An additional cash injection by Frasers failed to improve the situation, leading to the administration decision.
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By GlobalDataAlice Price, apparel analyst at GlobalData, a leading data and analytics company, said: “Frasers Group’s decision to shutter Matches so shortly after it acquired the business suggests it underestimated the scale of investment and time required to oversee a turnaround.”
“Although Frasers Group successfully steered luxury retailer Flannels back to profit after acquiring it in 2017, Matches’ online specialism would have presented Frasers with unfamiliar challenges that it would have lacked the expertise or capacity to easily resolve, due to most of its portfolio being multichannel,” added Price.
Job cuts and uncertain future
The administration process will see the company make significant redundancies.
With a preadministration workforce of 533, more than 273 employees, primarily from the head office and London stores, are losing their jobs.
Administrators are currently assessing the business structure and exploring potential sales, leaving Matchesfashion’s future uncertain.
Luxury market slowdown and online challenges
Matchesfashion’s struggles reflect a broader slowdown in the luxury goods market. Rising inflation and interest rates are impacting consumer spending, particularly on discretionary items such as luxury fashion.
“Luxury marketplaces also remain affected by the wider slowdown in luxury demand, especially in Europe and the US, as aspirational shoppers continue to reign in spend amid ongoing inflationary pressures. Designer brands have also begun reducing their reliance on wholesale partners, instead investing in their direct-to-consumer (DTC) businesses to garner greater control over their brand images and uphold their exclusive allure,” said Price.
“This has caused marketplaces to suffer dwindling customer acquisition, with Matches resorting to discounting to entice sales, which in turn impacted its margins as well as consumer perceptions.”
Online retailers in the sector have been especially affected, with Matchesfashion joining Farfetch, another online luxury platform, in facing recent difficulties.
Price added: “Selling luxury online is particularly tough, given shoppers generally prefer to try on and see expensive products in person before purchasing. Supplier relations had also begun to sour under Frasers’ ownership, with the fashion giant reportedly seeking sizeable discounts, while some brands reported overdue payments, resorting to termination of contracts.”
