Spinning the retail globe
In his whistle stop tour of the global and local fashion retail sector Australian Centre for Retail Studies executive director Jeff Rogut argues that despite buoyant consumer demand, retailers must contend with numerous pressures including an increasingly saturated market and demand for fast fashion.
Fashion retailing forms a significant part of the colourful and ever-changing retail scene. With total retail spending at record highs in Australia this year, the fashion sector has been benefiting from increased consumer interest and demand. Globally, the fashion industry has performed well despite some pricing pressure from cheaper imports and discount mass merchandisers. In total global sales of clothing grew by 22 per cent between 2001 and 2006, reaching a value of $US359.2 billion ($A386.8 billion).
In Australia retail spending is predicted to travel at a fast pace with the surge set to peak during 2007/08, after finally slowing in 2008/09. According to the Australian Bureau of Statistics, Australian retailers of clothing and soft goods have been experiencing positive growth over recent years (see graph below) and turned over $14 billion in 2005/06. The number of clothing and footwear retail outlets in Australia grew by 1 per cent (110 outlets) during the same period.
Looking ahead, the Australian clothing retailing industry is forecast to achieve sales revenue of $11.17 billion in 2007/08, which will be 4.6 per cent higher than in 2006/07. The industry is expected to contribute approximately $2.55 billion to the Australian economy during this period.
Despite the positive trading conditions, a globally challenge is the expanding ranges of fashion on offer by mass merchants and supermarkets. As a result, many fashion retailers across the globe are being forced into competing solely on price. Locally, widespread discounting by department stores Myer and David Jones has placed such pressure on fashion retailers particularly in the mid-price segment, although both of these chains are now pursuing different paths.
Internationally, supermarket chains such as Asda and Tesco have dramatically improved their women's clothing ranges, introducing more upmarket designs (e.g. Tesco's Florence and Fred) and competing fiercely with specialty retailers. The online channel is also proving to be a competitive consideration for fashion retailers with sites such as eBay and Net-a-Porter selling luxury goods at heavily discounted prices.
In the UK, as an example, budget fashion sales are tipped to grow to UKpounds 8.5 billion, and account for around 25 per cent of all clothes bought in that market. 'Primark', reportedly number one in the UK value clothing retail market, is reported to be set to overtake 'George' at Asda as the UK's most popular cheap fashion chain.
Along with supermarkets expanding their fashion ranges, Target in Australia has been a leading international and local retailer capitalising on the 'fast fashion' trend. With consumers demanding the latest fashion trends, quickly and at bargain prices, Target has introduced a limited range of exclusive designer clothing.
Despite concerns over product returns and on-selling, the popular Stella McCartney range exceeded expectations when released in Australia earlier this year. The overall success of the McCartney range spawned a 'Designer for Target' program which now available at Target stores throughout Australia. It will be interesting to watch further developments with this retailer as the proposed acquisition by Wesfarmers approaches.
Discount fashion retailers are also mimicking the speed to market that the likes of international retailers Zara and H&M made famous years ago by replenishing stock weekly, even daily, with catwalk imitations. The rationale for retailers adopting this strategy is that consumers want instant gratification, in which disposability is a major element.
Consumers are happy to buy new fashion pieces regularly if they are cheap enough to dispose of as soon as the fashion trend has passed. Fast fashion creates a scarcity value that consumers perceive 'if they don't buy now, they will miss out', which is holding true for highly successful Australia fast fashion retailer Supre.
It is clear, then, that fashion is and will continue to form a large part of the global and local retail landscape. Despite the changing nature of the sector and vulnerability to consumer trends, fashion retailers continue to adapt in response the various challenges and opportunities that such trends present, as well as offer outlets for the innovative and creative elements that abound within the industry.
By Jeff Rogut