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Australian Fashion Retailers

Why Australian fashion retailers are off trend

The age of the customer

This blog will highlight how the age of the customer has impacted on Australian fashion retailers. The key message here is that the age of the customer has arrived and businesses must change to survive.

Jim Blasingame, in his book Age Of The Customer, explains how the dynamic between business and customers has changed. The shift is the consumer now controlling the product information and UGC (user generated content) during the decision-making process. Historically, the product information was controlled by the brand / company and UGC was not widely available. Jim explains that:

‘This paradigm shift is largely caused by online platforms that are:
1) Increasing the access customers have to information about Sellers and their products
2) Allowing customers to express and share what they’ve learned about and experienced with a business’

Due to the change in the dynamic between businesses and their customers Forrester suggest that:

‘In this era, digitally-savvy customers would change the rules of business, creating extraordinary opportunities for companies that could adapt, and creating existential threat to those that could not.”

Australian Fashion Retailers

Laura Ashley

December 2018, Laura Ashley’s Australian business has gone into administration for the second time in 2 years. The liquidators, KordaMentha, are looking for a buyer. Tony Shephard, KordaMetha, believes that:

”The business has been hurt by the same factors affecting many other fashion retailers – a becalmed retail environment, rising fixed costs and fierce competition from online retailers”

Other fashion retailers to go into administration during the last few years include:

David Lawrence and Marcs

Lauren Magner, IbisWord retail analyst, believes the issue was consumers now wanted fast fashion.

“It’s something in Australia we didn’t really have access to before. People still want to buy clothing that is on trend and in fashion, but they can now do so at a much lower cost.”

“A lot of clothing retailers have had difficulty adjusting to this massive shift in consumer spending behaviour.”

Myer bought the David Lawrence and Marcs brands (AFR).

Herringbone and Rhodes & Beckett

Bruno Secatore, from the administrator, Cor Corbis, stated the issue was:

“It just comes back to overheads, some unfavourable leases, changes in tastes, online – that just seems to be the common thread.”

Herringbone and Rhodes & Beckett were bought out by Black Bear Holdings, supported by AO Capital (Australian).

Roger David

Craig Shepard, from the administrator, KordaMentha, stated the issue was:

“Roger David, like many other fashion retailers, has been buffeted by global competition, stagnant sales and rising fixed costs.”

Topshop / Topman

Hilton Seskin, who bought Topshop to the Australian market, highlighted the issue was:

Products that were made in Asia were shipped to the UK, put through a recycling plant, as you call it, a warehouse facility in the UK, converted from US dollars to GBP, flying it out to Australia. So, the model was just broken.”

There are many other fashion retailers that could be listed, such as Payless Shoes and Pumpkin Patch, that have been placed into administration during recent years.

Australian fashion customer demands have changed

The common theme for all these businesses was that they did not meet changing customer demands. Today, customers are in control and can easily find what they want, at a price they are willing to pay. Unfortunately, these businesses have struggled to meet those customer demands.

Retail Sales grew

A common issue for these businesses was flat sales or sales decline. This may suggest the industry was in decline. ABS figures for Clothing, footwear and personal accessory retailing highlight that retail sales have grown during this period. As detailed below the industry has achieved low growth during the period. So, the real issue facing these retailers was that there were not offering the right product at the right price to entice customers to buy from their stores.

Australian Fashion Retail Sales

Retail Sales $M, Clothing Footwear and personal accessory retailing

Source: ABS

What had changed is that customers want fast fashion. They now expect new ranges to be instore quickly after being on the catwalks. Unfortunately, most of the businesses did not have a business model to deliver fast fashion. To prosper these businesses should have re-engineered their supply chain to respond faster to changes in fashion trends / styles.

Online sales grew

Another issue for these businesses was CODB (cost of doing business). Many businesses had flat or declining sales with increasing costs, such as rent and in store labour costs. According to Statista e-commerce sales in Australia will be US $18,628M in 2018, +22.0%. Importantly, Statista also estimates that the largest segment is Fashion, $6,595m in 2018. Similarly, NAB NORSI index (July 2018) estimates annual e-commerce sales in Australia to be AUD $26.88 billion, +17.9%. Australia Post estimates that:

‘Purchases from pure Fashion retailers represent 26.5% of all online orders. If we include fashion-related products from the Variety Stores category, the overall category share increases to 35.6%.’

What these statistics highlight is that Australian fashion customers shopping behaviour has changed. The traditional store was been replaced by pureplay e-commerce retailers, e.g. The Iconic, and other retailers offer omnichannel (in store and online sales). Unfortunately, many of these retailers had not embraced change and created an engaging online store.

Summation

It is always disappointing when a business fails. Importantly people need to understand what went wrong to ensure other businesses prosper. Many Australian fashion retailers have struggled in recent years. The key reason why is that customers are now empowered and are shopping differently. Customers now expect fast fashion and an engaging online store. To survive, traditional fashion retailers need to change their business model to meet the demands of the Australian fashion customer.

 

The information provided in this blog post was general in nature. If you require more information I offer a free initial consultation by completing a contact us form.