Walk through Birmingham New Street railway station right now, and you will walk past what remains of the Paperchase concession.
This was once an integral fixture for tens of thousands of commuters striding through the sunlit atrium of the station’s Grand Central complex. Today, New Street’s Paperchase resembles a stall clearing down at the end of a not-especially-successful car boot sale.
This is because Paperchase, purveyors of high-end, design-led greeting cards and stationery since 1968, fell into administration in January and is now closing all of its 106 retail outlets with the loss of 900 jobs.
While retail closures are not a unique recent phenomenon (the sector has already shed 15,000 jobs since January 1st) it is instructive to reflect on three crucial decisions that ultimately led to a hugely successful company – one which had posted record results only 7 years ago – being driven into the ground.
1. Over-reach
2016 was a bumper year for profit and turnover at Paperchase. On the back of these results and bouncing from £50m of fresh investment, Paperchase opted to increase its UK retail estate significantly and then expand its operations into the United States.
These would already have been risky moves at any time when retail footfall was trending steadily downward in the UK, but to do so in the same year as the EU Referendum and then to open an American operation during a bitter Presidential election was, to put it mildly, incautious.
In the aftermath of both those public votes, the subsequent economic uncertainty on both sides of the Atlantic led to a fall of over 16% in Paperchase’s EBITDA for 2017. The following year, profits plummeted by nearly 50% and never recovered.
2. Failure to prepare
Economies run in cycles. These cycles are irregular, their duration is unpredictable and their day-to-day effects difficult to forecast, but one thing usually holds true – no economy keeps on rising for ever.
In times of plenty when customers are spending, clever businesses prepare contingency defences for the fall that will inevitably follow. Paperchase completely failed to do this, blithely assuming – even as household energy bills were tripling – that people would always find the money to own the most expensive spiral-bound notebooks available, an assumption that proved to be incorrect.
3. Lack of innovation
Paperchase’s failure to embrace an online model is arguably the most significant factor in its demise. Despite clear evidence demonstrated by the likes of Moonpig and Thortful that a bespoke online greeting card offering was not just sustainable, but wildly popular, Paperchase failed to act.
Imagine the Head Office meeting at which it was decided that instead of being able to send a greeting card online in 5 minutes, Paperchase’s clientele preferred to go into store, browse for a suitable card, write a message in the card, write the address on the envelope, find somewhere to purchase a stamp and then hunt for a postbox.
There are undoubtedly those who prefer to send greeting cards the traditional way, but that demographic is unquestionably dwindling and Paperchase offered nothing to attract new ones.
The lack of a credible online model was to prove catastrophic from March 2020, when a unique obstacle arrived in the shape of lockdown.
The tragedy for Paperchase is that during lockdown, many of its customer base had money to spend. Luxury items saw a significant rise in online sales as employees who could no longer eat out, visit a gym or travel abroad looked for other places to spend their disposable income.
Paperchase products would have represented attractive, treat-yourself, feel-good purchases for the millions working from home, but by that point the retailer was too far behind the curve.
Still hope…
The interesting epilogue to this story is that while every Paperchase store will close for good in the coming months, someone clearly still believes the name still carries retail cachet.
And that someone is Tesco, which has now acquired the Paperchase name and intellectual property for what is widely understood to be a bargain-basement price.
So one of the High Street’s most enduring stationery names will still have a presence – but only within the stores of another retailer. It really could have been so much different.
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