boohoo-business-model

The Boohoo Business Model In A Nutshell

Boohoo – sometimes referred to as Boohoo.com – is an English online fashion retailer founded in 2006 by Mahmud Kamani and Carol Kane in the historic textile district of Manchester. Boohoo makes money by selling fashion items for more than the cost of manufacturing, advertising, marketing, and distributing them. 

History of Boohoo

Boohoo – sometimes referred to as Boohoo.com – is an English online fashion retailer.

The company was founded in 2006 by Mahmud Kamani and Carol Kane in the historic textile district of Manchester. Kamani originally worked as a delivery driver for his father Abdullah, owner of wholesale garment business Pinstripe. Kane was also an employee for Pinstripe, having taken a position as a senior designer in 1993.

With eCommerce still a relatively new concept, the pair set out to create a platform selling direct to shoppers by removing the retail middleman. From the beginning, the Boohoo business model was focused on offering ultra-fast and ultra-cheap clothing. Unlike competitors such as Asos, all Boohoo clothes are own-brand giving the company more control over profit margins. 

With the vast majority of its clothes manufactured in the United Kingdom, the company is also able to adapt to social media-fuelled fashion trends quickly. In fact, company chief executive John Lyttle once noted a new design could be on the Boohoo website in as little as 48 hours from conception. In any case, over 3,000 new styles are added weekly with an average price of just $17.

In 2014, Boohoo completed an IPO valuing the business at £560 million. Revenue in 2020 amounted to £1.235 billion.

Boohoo revenue generation

Boohoo makes money by selling fashion items for more than the cost of manufacturing, advertising, marketing, and distributing them. 

However, its profit strategy is somewhat unique and has been enabled the company to increase revenue while others had experienced negative growth.

Test and repeat model

The company is well known for adding many new fashion items to its website daily. To maintain turnover, Boohoo uses a “test and repeat” model. This involves producing small batches of new styles to assess saleability before deciding to move into mass production. Batches may number in the tens of items while some others may include as many as 300. Production of popular items is then ramped up immediately to maximize profits.

It is thought the business model is an adaptation of a strategy used by Inditex. Indeed, the Spanish retail giant has used a similar strategy to adapt to new tastes and trends while managing a network of over 7,300 stores.

As a so-called fast-fashion retailer, Boohoo arguably makes more money than some competitors by staying abreast of current trends. But this business model has attracted criticism because of poor working conditions in factories. Many clothing items are also destined for landfill, either because of poor quality or fluctuating fashion trends.

Targeted demographic

Profits are also maximized when one considers the Boohoo target audience of consumers aged 16 to 24 years.

While most in this age group have less disposable income, Boohoo products are so affordable that the consequences of making a bad purchase are reduced significantly. The company’s tendency to produce on-trend items also taps into the younger generation’s preference for newness and social acceptance. These values are unlikely to change, so the Boohoo business model is likely to be one that could carry it well into the future.

Key takeaways:

  • Boohoo is an English online fast-fashion retailer. It was founded by Mahmud Kamani and Carol Kane, both with prior experience working for Manchester textile business Pinstripe.
  • Boohoo makes money by selling clothing items for a profit. Profits are maximized by using the test and repeat model to assess whether an item is likely to sell in large volumes before mass production.
  • Boohoo also maximizes profits by selling to a target demographic that craves consistently new and on-trend clothing that is also affordable.

Read Next: A Quick Glance At Zara Business Model, How Amazon Makes Money.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"