As fashion businesses race towards the lucrative Christmas trading period, Assia Benmedjdoub asks one retail and one e-tail expert to reflect on how both sectors fared in 2010, compared to last year.
When household budgets are stretched, like they are now, a weekend spot of clothes shopping becomes a luxury that takes a back seat to putting food on the kitchen table or keeping up with mortgage repayments. Sales for fashion and footwear retailers started to drop in mid- 2008 and since then trade has been nothing to shout about.
When we look at year-on-year growth for retail trade in general, August trade was up 3.8 per cent from the same time in 2009. But a closer look at this yearly growth shows that it is propped up by cafés, restaurants and takeaway sales, up 15.1 per cent from the same time last year.
On the other end of the scale is retail fashion, with sales for clothing, footwear and personal accessories showing no growth whatsoever and department stores (that are major stockists of fashion goods) are actually in decline from last year at -0.4 per cent.
Even the 2010 stock take sales didn’t excite shoppers into the usual mid-year spending frenzies, which usually bode well for both fashion retailers and department stores. June sales for clothing, footwear and personal accessory retailing were down 0.8 per cent compared to 2009 and department store sales fell (-1.6 per cent) compared to the year before.
Of course, retailing works in cycles and even in past years of softer retail trade, the mid-year stock take sales still create somewhat of a buzz for consumers. What was different in 2010? Nothing. And that’s the whole point. Consumers have been bombarded with constant sales and discounts from fashion retailers for most of the year, so the usually exciting mid-year sales were nothing different.
The discounting war fashion retailers have been locked in for most of the year is creating a new consumer who isn’t impressed by a 10 per cent discount when just last week there were offers of up to 70 per cent off.
According to the ARA State of the Independent Retail Sector Report, 45 per cent of independent fashion retailers said this continuous discounting war is the most significant challenge they are facing at the moment. A further 40 per cent said it is a major challenge.
The late winter in 2010 added to this continuous discounting cycle and also highlighted an issue that 68 per cent of independent fashion retailers have reported as a major concern: stock cycles and cash flow.
Winter stock for fashion retailers arrives in February and March, which are invariably the hottest months of the year and the same is true in reverse for summer. This means that retailers need to sell stock to pay suppliers and ensure that their cash flow is positive. If the retailer receives stock in March, then by April 30 the supplier will need to be paid.
However, if winter is late and jackets and boots aren’t moving from the shop floor, it puts pressure on the retailers’ cash flow.
The 2010 Australian Independent Retailer of the Year, Sydney Street Casual, has addressed the issue of stock flow by concentrating on a key product – Not Your Daughters Jeans (NYDJ) – that is a proven winner with its clientele.
What we are also seeing are savvy retailers like Zara putting in new very small ranges every two to three weeks, giving a whole new dynamic to the fashion retailers. As more retailers move to putting new, smaller ranges into stores the dynamics of retail will change with other retailers following suit.
Of course, there is still a lot of opportunity in fashion retailing – consumers will always love to shop and sooner or later they will emerge ready to spend without guilt.
The good news is, for the moment the Reserve Bank seems to be listening to retailer pleas to hold interest rates in the lead up to Christmas. The festive season is the best time for a bit of retail therapy and this year’s holidays just might signal a turning point for fashion retailers.
Apparel retailers in Australia have really embraced the online channel in the past few years, reflected by significant year on year growth of 49 per cent in visits during August 2010.
One interesting trend that has emerged from Christmas last year is the rise of online private shopping clubs – ozsale.com.au, brandsExclusive and buyinvite held the top three spots in the apparel category between March 2010 and August 2010.
These online clubs function differently from other member-based shopping websites as they offer limited time, members-only private sales, offering up to 80 per cent off recommended retail price on selected items. Brands that have staged sales through this avenue include One Teaspoon, Ksubi, Alex Perry, Diesel and Paul Frank.
One of the contributing factors to the tremendous growth of the exclusive member websites is the frequency of emails promoting new sales and offers, sometimes three or more times a week. This drives their visitation and has a corresponding impact on competitors such as EziBuy and Witchery, whose traffic hasn’t necessarily declined in real terms.
Private shopping clubs allow members to buy highly discounted products from a range of brands at quick-fire sales events. They are an interesting e-commerce concept because we know that online communities and time-sensitive aggregators thrive on the internet.
Because they could work very well for a number of other retail categories, I looked at the downstream traffic from my apparel shopping clubs’ custom category to gauge what other sectors might gain traction with consumers:
House and Garden, Health and Beauty and Sport and Fitness websites appear to get strong referrals from apparel shopping clubs, which makes sense given they all have a skew in visits from female internet users.
There is potential opportunity for retailers or ‘retail aggregators’ to develop online private shopping clubs for dedicated age and lifestyle segments. It’s a space worth watching for all retail players.