Australia’s apparel industry gets re-fit

April 21, 2017 / By  

Do traditional domestic clothing brands have a position in Australia’s new retail landscape?

Some would argue no, and most would argue they will need to adapt to stay relevant. There is no doubt that since 2014, the market share of traditional clothing retailers in Australia has been diluted, partially onset by the opening of multiple international fast fashion brands.  The impact has not been isolated to specialty stores, but has also extended challenges to department stores, once considered to be the industry anchors. The implications have not only squeezed some retailers out of the market, but also created divergence among the surviving retailers.

Thirty years ago department stores (within the traditional clothing retailer category) accounted for approximately 13.3 per cent of total retail spending in Australia, but that has steadily declined to 6.1 per cent today (Australian Bureau of Statistics).

Myer and David Jones have continued to alter their sale strategies and improve their retail offering in order to remain relevant to today’s Australian consumers. But subdued sales growth for department stores has caused Myer, one of the two major department store chains, to close three stores in the year to June 2016. The imminent arrival of UK department store Debenhams in Melbourne in September 2017 is anticipated to bring further challenges to the industry.

Discount department stores have also been affected, reflected in the weak sales growth at Target and Big W, both reporting negative comparable sales growth of close to six per cent per annum. A question that is intermittently raised is whether there is a space for three discount department stores in Australia, particularly given that Target and Kmart share the same parent company (Wesfarmers).

But how successful have the international fast fashion retailers been at expanding in the tight Australian market?

The results are mixed. H&M has grown to be a significant player since opening its first Australian store in Melbourne’s CBD in April 2014. By November 2014, according to H&M company reports, the retailer had three Australian stores generating over US$ 61.5 million in total (four per cent share). By November 2016, the retailer had 22 stores generating US$ 220.9 million.

H&M alone has carved out a 14.4 per cent market share of Australia’s apparel industry in a short period of time. H&M expects to open 430 new stores worldwide in 2017. In 2016 182 of the 427 (4.7 per cent) of new stores opened globally were concentrated in the Asia Pacific/Oceania region.

H&M is just one of the multiple international ‘mini-majors’ to enter the Australian market recently.  Zara entered Australia in 2012 and has a store network of 21 stores. Uniqlo entered in 2014, rolling out 12 stores.

Who have these new players replaced?

Some traditional clothing retailers have entered into voluntary administration, while others have chosen to rationalise their store networks in an attempt to improve profitability. Payless Shoes, Pumpkin Patch, Herringbone, Rhodes & Beckett, Marcs and David Lawrence have all recently entered into voluntary administration which could see a combined 297 stores progressively close.

Australia’s retail landscape is clearly in a state of flux. The attractive economic, demographic and regulatory fundamentals of Australia make it a target market for global retailers. The recent success of new international brands is encouraging others to consider Australia. The trend suggests there are a lot more still to come.

For more information on the Australian retail outlook for 2017, download the Australian Shopping Centre Investment Review Outlook here.

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