Fast-fashion firm Boohoo has broken promises to make its clothes fairly and ethically, a BBC Panorama investigation has found.
An undercover reporter at the company's Manchester HQ saw evidence of staff pressuring suppliers to drive prices down, even after deals had been agreed. It comes after the company pledged to overhaul its practices in 2020.
Boohoo said it hasn't shied away from the problems of the past and has driven positive changes in its business. The retailer is a market leader in getting its customers the latest styles as cheaply and quickly as possible. Last year, Boohoo Group had 18 million customers and £1.7bn worth of sales.
Three years ago, Boohoo promised to overhaul the way it did business and launched its “Agenda for Change” programme. The move was sparked by reports that staff at a factory making Boohoo clothes in Leicester were earning less than the minimum wage and in unsafe working conditions.
Boohoo then asked a senior barrister to review its supply chain. Alison Levitt KC found the allegations to be “substantially true”. The company then introduced Agenda for Change – which includes promising to pay its suppliers a fair price for garments, with realistic timescales.
But BBC reporter Emma Lowther saw those promises being consistently undermined during her 10 weeks undercover at Boohoo's head office in Manchester, where she worked as an admin assistant. Between April and June this year she worked in the busy dresses department alongside buyers – the staff who negotiate prices and place orders with suppliers.
“Working at Boohoo is intense,” she says, and saw staff under “constant pressure to drive prices lower and lower”.
‘I just lie'
During her time at Boohoo, the reporter was told about one tactic to secure cheap deals with suppliers who won't budge on price.
“Go in low and if you're not getting anywhere then just say that you can get it cheaper elsewhere,” a colleague told her. “I'm just lying. I just lie.” In 2020, Boohoo's group director of responsible sourcing said the company was serious about making sure its suppliers could make a profit.
Buyers now have a set of “responsible purchasing” principles to follow.
Relentless price-cut demands
The BBC investigation revealed that Boohoo put pressure on suppliers to drive prices down – even after orders had been agreed.
On one day alone, the reporter was told to process a 5% cut on more than 400 orders that had already been agreed, saving Boohoo thousands of pounds. Sometimes price cuts were demanded for orders which had already been made and were ready for delivery.
Lowther saw how the drive for price cuts came right from the top of the company. In a staff meeting, she was told Boohoo's executive chairman, Mahmud Kamani, wouldn't allow buyers to confirm any brand-new orders until he approved them.
Staff around her fielded fraught emails from suppliers grappling with Boohoo's price cut demands.
One supplier was furious about a 10% discount being applied which it said it hadn't agreed to. It said it would lose money because it would be working under cost and asked for the discount to be removed urgently. The undercover reporter doesn't know how the dispute was resolved.
Boohoo told the BBC it had experienced significant cost inflation over the past year, which it had absorbed in order to maintain affordable prices for customers.
As costs started to come down, Boohoo said it asked its suppliers to reflect this in their pricing through discounts of between 1% and 10%. It said these savings have been passed on to customers.
Boohoo's lawyers said these price reductions were not decided unilaterally by Mr Kamani. Boohoo said most of its suppliers have worked with the company for many years and “that would not be possible if the work was not profitable”.
Lead times under pressure
Boohoo has also committed to agreeing realistic timescales with suppliers for its orders. Boohoo's target customers are typically under 30s who want to buy rapidly changing fashion trends as quickly as possible.
During the time the reporter was undercover, there was an average of 10 weeks between Boohoo making an order in the dresses department and receiving it – known as the lead time. But then, while she was there, a lead time of six weeks or under was imposed as a new policy for all garments across the brand, with suppliers in China and India given a week longer.
One of Lowther's managers admitted this would be “a real challenge” for suppliers.
“Even with the UK, we've definitely not been seeing that sort of lead time from them… It's going to be really hard,” the manager said.
After a week's grace, Boohoo introduced a 5% price cut for every week the supplier's order was late. Commenting on the BBC's footage, Peter McAllister, executive director of the Ethical Trading Initiative said, the shorter the lead times the more pressure there is on the workforce and on working conditions.
“If you are always putting that pressure on your supply chain, what we typically then see are problems,” he added. Boohoo's lawyers said the company's lead times are not unrealistic or unfair, and it is standard practice to have late delivery penalties which are discussed with suppliers.
The cost of a dress
Boohoo paid a UK supplier £4.25 for the dress. Mr Grayer estimated it would cost £7.23 to make. He made some assumptions on the fabric cost and built a 10% profit margin for the supplier into his calculations.
“If I had a factory that was making that [dress] for that price in the UK, I wouldn't have a business,” said Mr Grayer – who spent more than 10 years as head of supplier ethical compliance at high street retailer Next. Boohoo's lawyers say the supplier of the dress told the company it made a profit on it.
Boohoo said its suppliers pay at least minimum wage wherever they operate and that it carries out audits and regular unannounced checks. The National Minimum Wage in the UK for people over 23 is £10.42.
Thurmaston Lane
In January last year, Boohoo opened a flagship factory of its own in Leicester called Thurmaston Lane. This was part of its Agenda for Change programme and designed to showcase its new ethical practices. It was promoted as a UK manufacturing centre of excellence offering end-to-end garment production in the UK.
But, while Lowther worked at Boohoo's head office, she discovered those public statements about Thurmaston Lane didn't always match what was happening. Hundreds of orders placed with Thurmaston Lane were actually being made by seven factories in Morocco and four in Leicester.
Boohoo's lawyers say Thurmaston Lane only makes 1% of all Boohoo's garments. The factory was opened to “support the group in several ways, including manufacturing, printing and training,” a Boohoo statement said.
“As in any retail business, the role of our sites continue to evolve over time.”
‘No-one is leaving'
Boohoo and other fast fashion retailers use factories in Leicester to make their clothes.
Secret filming by Panorama at one of Boohoo's suppliers – a factory called MM Leicester Clothing Ltd – revealed staff being told they may need to work late into the night with just hours' notice to get Boohoo's orders completed.
The factory took orders for more than 70,000 Boohoo garments between January and June this year. In the footage, workers tell managers they need to go home to feed their families. A supervisor later told them: “No-one is leaving at eight, or 10, or later.”
Boohoo suppliers have to sign up to a code of conduct which says overtime should be voluntary. When contacted by the BBC, MM Leicester said its normal hours are 08:00 to 18:00 and it never forces workers to stay late.
Boohoo said MM Leicester Clothing Ltd was “subject to regular audits and unannounced checks” as is the case with all its factories.
“We take any breach of our supplier Code of Conduct extremely seriously and are currently investigating Panorama's claims.” The company said it has invested “significant time, effort and resource into driving positive change” across “every aspect” of its business and supply chain.
It added that it has implemented “every one” of the recommendations Alison Levitt KC made in her 2020 review, including “improving corporate governance” and “strengthening the ethical and compliance obligations on those wishing to supply Boohoo”.
“The action we've taken has already delivered significant change and we will continue to deliver on the commitments we've made.” After 10 weeks of working at Boohoo, Lowther was called into a meeting and told she had made mistakes which had cost the company money. The reporter was sacked.
— CutC by bbc.com
