Retailers to give the middle man the chop?
NATIONAL: Growth in the Australian fashion wholesale sector will be constrained by the trend for larger retailers to source directly from manufacturers, a leading industry expert has predicted.
IBISWorld industry analyst Raghu Rajakumar said a surge in clothing imports, coupled with a steady rise in companies outsourcing their manufacturing operations, would see wholesale industry revenue increase by three per cent in 2007/08 to $5.6 billion. However, future growth for independent players in this sector would be limited by the trend for major manufacturers to internalise the wholesale function.
"Many manufacturers supplement local production with garments produced from their own overseas factories," Rajakumar said. "Retailers such as Coles-Myer [which operates discount department stores Target and Kmart], David Jones and Woolworths purchase imported clothing by direct negotiation with overseas manufacturers, thus bypassing the traditional wholesaler."
The centralisation of shopping centres had also "considerably" lowered cost and time requirements for distribution, allowing some manufacturers to carry out deliveries to groups of retailers. The days when wholesale suppliers could add value by repackaging products and delivering them to retail outlets throughout the country - typically small shops in strip centres - were all but outnumbered, Rajakumar said.
The increasing integration of wholesale and retail functions would also pose a threat to smaller players, he added.
"This basically means large retailers are becoming more involved with both wholesale and retailing, which absorbs some of the services conducted by independent wholesalers. This is expected to intensify over the next few years."
However, PAS Group CEO Eric Morris argued wholesalers across the board would continue to thrive as demand for branded, design-led apparel remained strong among Australian retailers.
"Retailers which buy directly from the manufacturer don't necessarily have the infrastructure of design and product development that a wholesaler provides to them," he said. "Those businesses are losing out on significant value adds such as strong branding, fashion-orientated product and benefits such as advertising subsidies."
Morris retailers were better placed to source "basics" directly such as singlets, tees and chinos. "There's no shortcut for success in this business - you can't possibly do what a whole group or sector of people are employed to do." The PAS Group operates brands such as Review, Metalicus, Yarra Trail, Marco Polo and Jag and produces private label brands for Target and department store Myer.
By Assia Benmedjdoub