Wholesaler Pacific Brands announced several new business strategies at its half year results meeting. Ragtrader approached three industry experts immediately after the announcement for their take on some key points.
Closing the majority of its onshore clothing manufacturing operations.
This is a devastating blow to these workers, their families, this industry and Australia. We are not talking just the 1850 jobs losses [associated with the closures] - the likely spin off effect on suppliers and other companies in the industry could well see thousands more jobs lost.
The union does not accept that the complete closure of these sites is necessary. A number of the brands and divisions of this business continue to be profitable whilst manufacturing in Australia. This company has received millions of dollars of federal government assistance over many years. This includes $9 million in 07/08 and $8.6 million in 05/06 of taxpayers money. How can a company take from the Australian government and the Australian community for years without a mutual obligation to keep jobs in Australia?
The majority of the workers employed by this company are migrant women who have long years of service, their prospects of finding alternative work in the current economic crisis are grim.
Discontinuing small labels and brands to reduce complexity and cost and better target core market/consumers.
If Pacific Brands can attract the 'middle market' consumer, they may, to an extent, counter the falling sales volumes that higher prices in a declining economy are expected to bring. The 2008/09 and 2009/10 years will be a tough trading environment for retailers. Less than a year ago, most retailers and brands either tried to secure the luxury market or aimed for the high volume, low cost market.
IBISWorld expects that the 'mid-market', which accounts for approximately half of the $11.55 billion Australian retail clothing market, will grow by 9 per cent this year. This is greater than the expected growth at the 'lower end' of the market, which is still expected to rise by 6.7 per cent.
IBISWorld projects that because a significant portion of discount apparel shoppers, more nervous about economic circumstance, will tighten spending habits and trade up from high volume, low quality purchases to middle market or better quality.
There will be much lower volumes of purchases. On the other hand, the luxury market is expected to decline by 19 per cent. The change in spending patterns may mitigate some of the decline caused by the lower volumes Pacific Brands should be expecting.