The companies that are in trouble are trying to target everybody – young, old, fat, skinny. But the problem there, is that you become totally vanilla. You don't anger anybody, but you don't excite anybody either. In an oligopoly, vanilla is a successful player. In a globally competitive market, nobody hates vanilla, but nobody craves it either.
“Rocky road, mint choc-chip and fish-food flavour are on the way and it is time for Australian retailers to decide, not just who they want, but who they don't want. If they don't they'll end up with nothing, as the big players who know what they're doing come in to divide and conquer.”
This is the ominous warning that set the scene at this year's L'Oreal Melbourne Fashion Festival Retail Detail seminar, as Mark Ritson, marketing professor at Melbourne University and LVMH brand consultant, took to the stage during the first presentation.
His main point is that Australian retailers are too used to what he calls idyllic trading conditions in this country, which he describes as an oligopoly. He says those retailers are now in a very vulnerable position and are ill prepared for the coming invasion of international brands.
These international brands, including Zara, Gap and Abercrombie & Fitch, are flocking to Australia, with plenty more poised to follow suit. And according to Ritson, Australian retailers must tailor their approach to business and prepare for the battle ahead or suffer the consequences. The first step is accepting that these foreign invaders will change the face of retail in Australia, Ritson says.
“The biggest challenge for Australian retailers is to accept that these players are indeed real threats and real competitors. It might sound obvious, but I've been in Australia long enough to see the response of the big four banks and the big two supermarkets to the arrival of HSBC and Aldi.
“They dismissed them, saying 'it'll be hard for them to make money in Australia, this is a different kind of market, and they will struggle'. Of course, that was nonsense. Australia is a small but easy market and they flourished. So accept that these boys are coming and that they will make life hard for our national retailers.”
The next move is to identify the strengths of these international brands and what they hold over Australian retailers. One of these strengths is the volume of inventory and the instinctive nuance they possess. They are accustomed to a much more competitive market, many of them pioneers in the fashion realm, and have learnt the hard lessons of the retail sphere.
“These big boys come with much bigger scale, with much bigger capabilities and with a pace and a force that many Australian retailers have not had to perform to.”
Ritson uses luxury leather goods brand Coach as a perfect case study to illustrate the point. The company employs over 10,000 people, is one of the most recognised fashion labels in the world and its revenue is in the billions.
“You cannot understand the phenomenon of modern luxury with out understanding Coach. What [current Coach president and executive creative director Reed] Krakoff, his team and Chinese production facilities did 10 years ago, changed the very rules of fashion. No longer was it good enough to produce two or three or even four distinct leather goods collections – Krakoff produced 12 – plus one for Christmas.
“The consumer was actually the driving force behind the creativity, and the effect of Coach producing 13 amazing leather collections each year was two-fold. First, it made Coach very successful. But second, it made all the European luxury brands look old and slow and 20th century.”
History is about to repeat itself, Ritson says, and Australian retailers will bear the brunt of this aggressive approach to business. Far from fighting fire with fire, the presenters at the Retail Detail seminar suggest a more savvy way to tackle the impending competition. First, by clearly identifying and researching a set target market, and second, through differentiation. According to Ritson, identifying a target market is less about segmentation of the market and more about exclusion.
“The thing that separates our true brands in fashion is the ability to know that targeting is the key step. And that means two things – who do I want and who do I not want? We use the word exclusive in fashion, but we forget what it means. Exclusive means I exclude you from my brand – and I do it because I make more money by excluding you from it. [U]nfortunately in Australia ... we specifically don't meet the global standard.”
Riston says iconic American fashion label Abercrombie & Fitch is one brand that has mastered the art of exclusion. Asked about his most memorable store experience, Riston points to its New York store. From the photo campaign of the man with a six-pack that can be seen outside the store before entering, to the dimly lit interior and the loud music playing in-store, everything about the establishment speak to its target market – the young, cool contingent.
The response of Abercrombie & Fitch chairman and chief executive Mike Jefferies during an interview by GQ in the US illustrates the brand’s philosophy.
“In every school there are the cool and popular kids, then there are the not-so-cool kids – we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don't belong in our clothes and they can't belong. Are we exclusionary? Absolutely.”
Once the target market is locked in, market research comes into play. The importance of this step cannot be stressed enough by Ritson, because it's knowledge of the consumer, which can then be used to deliver exactly what the customer wants. Coach is a prime example. “The reason Coach is awesome is because it's creative, and because its creativity is driven by a knowledge of the client,” Ritson says.
Coach spends $5 million a year on market research, conducts 40,000 one-on-one telephone interviews, recruits 500 customers per month for focus research and invests in prototype testing with constant focus groups. In addition, it mines its database of 10 million consumers in America with constant customer orientation.
Differentiation is also a must to set Australian retailers apart from international brands flooding the market. While differentiation can be achieved in many ways, attention to detail and constant innovation are key, according to Peter Harris, president of footwear and accessories distributor Pedder Group and sister company Lane Crawford.
A Hong Kong-based company, Lane Crawford was first established in 1850 and has now been trading successfully for 160 years, despite operating in a highly competitive market with a population which is spoiled for choice.
“Survival, profit and eventually growth in Hong Kong are dependant upon the delivery and the management of extra detail and this has been a core focus for our group,” Harris says. “The first detail is having great store design and service. Working with international architects, artists and external visual teams to create stores which provide customers with an experience. Spaces are designed to browse, relax, tempt and, of course, sell.”
For Lane Crawford stores, this has meant the introduction of personalised shopping suites, allowing clients time and allowing sales agents a place to work with customers on a one-to-one basis. The company has also invested in concierge desks, allowing customers to book a restaurant, access local knowledge or confirm a flight.
Private consultation points, where the best product or service for a client's needs can be recommended and service teams to greet customers on arrival, have also added an extra edge to the Lane Crawford offering.
“All these boxes must be ticked – sites, environment, presentation, service – although clearly there are many, many more,” he says.
Innovation and an ability to think outside the square has also enabled the retailer to attract new customers and engage existing ones.
“In 2008, through our joint venture company with Christian Louboutin, we reached out to stage an exhibition titled “Fetish”, a collaboration with the legendary film-maker David Lynch,” Harris says.
“Using a major art space in Hong Kong, our objective was to celebrate the power of design and its cross-over into the world of art. In October 2010, we followed this with a visit from Christian, a store opening and a Hong Kong dinner which included international and local guests.
“The two evenings were a journey into the world of the designer, with the detail supplied expressing the spirit of the brand.
“A performance from the “Louby's Angels”, Christian's cabaret dancers from France, concluded the three-day event. A film has been made which has gone online, capturing this moment in Hong Kong. [To] this point, online this film has had over 250,00 viewers.”
The Lane Crawford flagship store in Hong Kong also recently hosted an exhibition titled “The Great Wall of Clergerie”. The company commissioned a photographer to travel to the south of France to archive the artwork of the iconic footwear designer Robert Clergerie, and the project has travelled from Hong Kong to its Beijing stores.
The event also included a workshop, conducted by Clergerie with design students in Beijing. As Harris says, whether it is the engagement, innovation, the art, or the unexpected, the detail becomes part of the retailer's message and part of what sets it apart from the competition.
“Details do matter,” Harris says. “They provide a link to our customers and they are designed to drive and deliver the financial result of our business. In terms of the teams that I lead, the quality of the implementation of the detail is also what provides my group with our core DNA – who we are.”
Ritson adds a parting comment and a final alert to Australian retailers:
“I see nothing here to compare to what the global players are doing, by challenging and breaking of the rules. Our retail is boring, boring, boring. You must break things in order to be a true fashion brand and there isn't enough breaking going on.”