That’s the prognosis for moderate sportswear in France, where executives have spied a major shift away from basics versus five years ago, when department stores, mom-and-pop boutiques and hypermarkets like Carrefour were vying for shoppers’ budgets.
But with the arrival of the fast-fashion behemoths — Zara of Spain and Sweden’s Hennes & Mauritz — the scale in France tilted irrevocably toward fashion — and fast. The moderate market in France generates annual retail sales of $4.32 billion.
"Zara and H&M revolutionized the market here," said Bruno Villeneuve, general manager of the department store Samaritaine, owned by luxury giant LVMH Moët Hennessy Louis Vuitton. "Before they landed, the market was atomized between a lot of smaller retailers who did a lot of business in basics. They created havoc for them, as well as for the hypermarkets. They also hit hard at mail-order business, which was very strong in the moderate sector.
"Zara and H&M change their collections every six weeks. How could anyone compete? Mail-order catalogs renew their collections every six months."
The question became how to deal with the change. Many French moderate firms fell under direct pressure. Chains such as Etam, for instance, moved to modernize by opening larger flagship stores and notching up the fashion content of its clothes. Another French retailer, Naf Naf, with 150 units in France, revisited its entire infrastructure.
"We changed everything from beginning to end," said Gerard Pariente, Naf Naf president. "After six weeks, a collection is no longer relevant in terms of fashion. Now we’re updating our offer with new collections every six weeks. Before [H&M and Zara came to France] shoppers came in for a sweater. Fifty percent of our business was in basics. Now they come in for ‘the’ sweater. Basics are no longer relevant to business."
Naf Naf had sales last year of $256.8 million.
Retail consultant Beatrice Bongibault, who also heads the Claude Montana fashion house, pointed out that some of H&M and Zara’s best sales were generated in France. Zara operates 67 units in the country, while H&M has 43.H&M operates more than 800 stores in 14 countries. Roughly 90 new doors bowed during the last year, mostly in Germany, France, Spain, the U.K. and the U.S. The company is expected to open at least as many units in 2003. In 2002, H&M’s profits leapt 49 percent to $670 million. Sales advanced 14.6 percent to $6.28 billion from $5.48 billion.
H&M’s sales in France were $351.7 million, up 11 percent. France is its third fastest growing market after Germany and the U.S.
"By moving into fashion zones at affordable prices, they’ve turned everything upside down," Bongibault said. "Basic stores, such as the Gap, were hurt. French women love fashion and when they could get it cheap they jumped right on the boat."
But Bongibault said it was not only the middle market that suffered. "The fast-fashion phenomenon has polarized the market. It destroyed everything between the top luxury houses and the moderate range. It may have pulled the carpet out from under the basic business, but it also hurt some better-priced fashion houses."
Naf Naf’s Pariente added, "Before, women were ashamed about wearing brands like ours or H&M. But now they like to brag about wearing a pair of Zara trousers with a Chanel top."
Jonas Guldstrand, president of H&M France, said, "The stereotypes have been broken. Cheap chic has become very popular."
Meanwhile, France’s moderate sector is one of the most vibrant in Europe, executives claimed.
"France is key to our development," said H&M’s Guldstrand. "We think we can open as many as 100 stores here over the next few years."
On the other hand, France is one of the most competitive moderate markets on the Continent, with a profusion of chains operating stores, including Promod, Etam, C&A, Kookai and Mango.
As all of the chains rush to catch up with Zara and H&M, the moderate market has consolidated. Once powerful in the segment, Marks & Spencer pulled out of France as part of a program to salvage profits. Although the British chain closed stores across Europe, France was one of its key overseas money makers.Yet, as the dust settles, other competitors are moving in on the territory they abandoned. For example, Monoprix, the supermarket chain co-owned by Galeries Lafayette and Casino, has vastly improved its moderate-priced collections.
"Monoprix has filled the gap for basics when everyone went more toward fashion," said Villeneuve. "They’ve done a remarkable job with very good collections of ‘improved’ basics. They have a touch of fashion, but are not only about fashion."
Hypermarkets, such as Carrefour, also have made headway by finding new avenues to increase business in areas such as denim.
Department stores also have moved into the category. Printemps, Galeries Lafayette and Samaritaine, among others, have made strides to update their private label collections.
Laurent Danon, president of Printemps department store, said with the moderate market moving more toward fashion, the store has reduced its in-house basics collection.
"We’ve been substituting it with more fashionable moderate brands," Danon said. "But it’s not only the H&M’s and Zara’s that are shaking up the segment. Sports brands like Nike, Adidas and Puma, who have been concentrating on developing their women’s lines, have also made a big splash."
Samaritaine’s Villeneuve said, "We can’t compete with the fast-fashion chains. We just don’t do the same volume with our private label business. But we’re starting to consider moderate-priced basics as a service to our client. If they want a fashionable skirt, they can come to us. It’s not at the vanguard of fashion. But our private-label collections are now informed by what’s going on in fashion."
Department stores also have found it important to concentrate on fashion.
"The fast-fashion chains have forced us to become more niche," Villeneuve added. "We’ve had to become more creative and more trendy. We believe that’s the best strategy to compete."
Malls are also an important element in the moderate segment in France, distinguishing its landscape from many other European markets.
"There are a growing number of high-quality malls in France," said Guldstrand, who added that about 50 percent of H&M’s stores in the country were in malls. "It’s a very interesting point about France. It’s one of the reasons that we believe we still have a lot of room left to develop here."
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