The Australia fashion retail scene has been dogged by poor consumer spending, lower prices, higher rents and the global financial crisis. Is there hope in 2013?
Ragtrader's January 2013 edition will feature a six-page special on trade predictions from researches, industry groups and analysts.
In the meantime, research firm IBISWorld offers its predictions:
The clothing industry in Australia has faced several tough years with cautious consumer spending, lower prices, higher rents and the global financial crisis driving down revenue.
Over the five years through 2012/13, industry revenue is expected to contract at a compound annual rate of 2.3 per cent.
Revenue is anticipated to contract by 1.4 per cent in 2012/13, to total $11.6 billion.
Until late 2008, Australians flocked to shopping centres around the country and spent freely on all types of items, including clothing.
However, since the economic downturn, consumer spending behaviour has changed and clothing retailers have suffered.
According to IBISWorld industry analyst, Ricky Willianto, “consumers are now more informed about spending and Australia's private savings rate has grown to its highest point since 1984”.
Retail figures suggest consumers remain somewhat nervous about the climate of the global economy.
On top of this, the increasing popularity of online shopping has posed additional challenge to traditional bricks-and-mortar retailers that do not enjoy cost flexibility.
Growth in revenue for the clothing retail industry in Australia has also been undermined by a decline in prices. Prices have been driven lower by fierce competition and the surging Australian dollar.
“The high value of the Australian dollar means that for many retailers, especially the larger operators, stock can be purchased at significant discounts”, Willianto said.
However, consumers have scaled back spending, inciting price reductions that effectively null any gains from lower cost of goods. The industry is highly fragmented and therefore concentration is low.
Some merger and acquisition activities have taken place as major players seek to capture a greater share of the market and improve economies of scale.
Several players have also attempted to reinforce their market positions by acquiring smaller companies that target similar markets.
Competition is expected to strengthen as industry participants fight for the consumer dollar.
The entrance of a number of international players and increased acceptance of online shopping, supported by the strong Australian dollar, will change the industry's landscape.
Industry participants will need to position themselves in niche markets to flourish in this increasingly competitive environment.
The clothing retailing industry is fragmented and diverse with a large number of small, independent operators.
In 2012/13, the three largest participants are Premier Investments, Country Road and Specialty Fashion Group.
Despite an increase in merger and acquisition activity in the past five years, market share concentration has not changed materially and remains low.
This has mainly been because most major acquisitions have involved private equity or players outside the industry.