Boohoo's US strategy shift sees it expand its offering through a UK-based distribution centre

This is interesting. Boohoo Group is reversing the widely adopted strategy of increasingly localising distribution services and will now serve the US market from its high-tech hub in the UK.

On Wednesday, the company announced changes to its operations in the U.S. market “as it seeks to broaden its product offering for U.S. customers and expand its routes to market” as part of its “strategy to reposition the group for sustainable and profitable growth.”

The announcement, which comes just a day after the group announced the return of PrettyLittleThing's founder to the role of CEO of that brand and the reinstatement of free returns for loyal customers, suggests the group is prepared to think radically as it seeks to return to sales growth and profitability.

What’s happening now? Under the changes, Boohoo “will stop supplying US customers from its US distribution centre in Pennsylvania and will now fulfil all US orders from its state-of-the-art automated UK distribution centre in Sheffield.”

The move comes after a recent trial to expand the range of products on offer to US consumers, including distribution from the UK, has yielded “encouraging results”. Prior to this trial, US consumers were offered only around 60% of the styles sold in the UK.

The group's US distribution centre is a 1.1 million square foot facility in Elizabethtown that began operating just over a year ago. It is managed by a third party and is a leased property that Boohoo will now sublease. The company's presence at the site will end on 11 November.

The trend towards localisation of distribution has been largely about cutting costs and speeding up deliveries to customers in key markets. But Boohoo is clearly prioritising a wider range of products for the major US shopper and believes the advanced technology at its UK distribution centre will help speed up deliveries outside the country.

The group says it “remains excited by the US opportunity and has been developing broader routes to market strategies, the first of which is the recent launch of Nasty Gal in Nordstrom stores. The group is also in advanced discussions with major US brands regarding new routes to market for other brands within the group.”

Such partnerships with companies like Nordstrom should address the needs of customers who want the fastest local deliveries.

Of course, any major development like Wednesday's announcement comes at a cost and Boohoo said it will see a reduction in the group's balance sheet from investments and costs associated with the US operation, as well as certain one-off exceptional cash costs.

But most importantly, “these changes will result in a significant reduction in running costs in the medium term.” We will have more details when the company presents its half-year results. The date of that publication has not been confirmed, but it was made public last year at the beginning of October.