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PARIS — Despite surviving the economic downturn better than luxury brands, fast-fashion retailers aren’t resting on their laurels.
As customers’ spending patterns become unpredictable despite the receding recession, fast-fashion giants are turning to concepts that until now had been untapped or were considered marginal to their main businesses.
“These companies are looking at defense mechanisms in markets that have been heavily exposed to the recession,” said Greg Hodge, research director at retail intelligence firm Planet Retail.
Despite the recession, Inditex SA, H&M and Japan’s Fast Retailing Co. Ltd. managed to grow total sales in 2009, helped by new store openings, particularly in emerging markets in Asia.
But the rise of competition, especially from low-cost and online retailers, combined with fickle consumer confidence, has persuaded fast-fashion retailers to sharpen their product offerings.
Fast Retailing’s flagship chain Uniqlo — with the stated goal of becoming the world’s largest fashion retailer by 2020 — is both shifting upscale with its premium Jil Sander-designed collection, +J, and expanding into thrifty apparel retailing with the low-cost g.u. chain in Japan. H&M has expanded its successful one-off designer collaborations beyond apparel, with a footwear collection by red-carpet shoemaker Jimmy Choo and a lingerie collaboration with Parisian designer Sonia Rykiel. And Inditex is finally catching up with competitors by bringing its main label, Zara, online for the first time.
The decision to make Zara, which accounted for 64.2 percent of Inditex’ sales in the first half, available online has been praised as a logical step for the Spanish company, given the rising competition from pure-play European clothing e-tailers like Asos as well as the growing online operations of rivals such as H&M and New Look.
“The strategic move online is a welcome development for its core Zara fascia that will help boost group sales, making Inditex less reliant on new space to drive sales growth,” according to retail intelligence firm Verdict Research.
After an initial test of online retailing via the Zara Home Web site yielded satisfactory results, Zara will start operating online for fall 2010 in mature markets like Spain, France, Italy, Germany, the U.K. and Portugal, followed by a progressive rollout in other countries.
Although most Western economies have turned the corner on the downturn, a key market like the U.K. remains in recession. And while France and Germany, Europe’s largest economies, are growing again, consumer confidence remains low as unemployment rates continue to creep up.
As a result, consumers remain wary of spending their cash, and spending habits appear to have changed permanently in many developed countries.
“Customers are shopping around more and looking for bargains before making a purchase, but they still expect style as well as value for money when buying fashion,” said Alyson Walsh, fashion and retail lecturer at the University for the Creative Arts in the U.K.
“If you look at places like Topshop, it isn’t cheap anymore. There are coats retailing for 150 pounds to 200 pounds [$247 to $330 at current exchange rates]. You could almost buy designer for these prices,“ she added.
This is one of the reasons H&M’s successful one-off designer collaborations are gathering momentum.
The Swedish chain’s Jimmy Choo shoe collection sold out within four hours last month, after shoppers began lining up outside H&M stores in the middle of the night. And the retailer saw a similar enthusiastic reaction to the launch earlier this month of its one-off lingerie collection designed by Sonia Rykiel.
“We are going to continue with these collaborations as long as we can find a new angle and not repeat ourselves,” said H&M’s creative advisor Margareta van den Bosch. “It’s nice to break off with this kind of collaborations,” she said, referring to the decision to offer limited shoe and lingerie collections in addition to apparel.
H&M also is looking to expand its higher-priced COS concept, which now has 23 stores. In September, it expanded into home furnishings, introducing the collection at one of its Stockholm stores, and in late November opened the first freestanding store, in Copenhagen, for the trendy jeanswear brand Cheap Monday. In 2008, H&M acquired a controlling stake in Cheap Monday’s parent Fabric Scandinavian AB, which also operates contemporary fashion chains Weekday and Monki.
But even with all these moves, Karl-Johan Person, H&M’s new chief executive officer, stresses the main growth vehicle will be the core chain, with expansion in Europe as well as North America and recently entered markets like Russia, Japan and China.
Like its European competitors, Fast Retailing continues to report buoyant sales, boosted by the ongoing international expansion of its Uniqlo chain. But the firm has also seen strong same-store sales growth in its core Japanese market, with increases of over 30 percent in September and October and of almost 8 percent in November.
To underpin the rollout of new stores overseas, including a new flagship in Paris, Uniqlo launched +J, the premium-priced line designed by Jil Sander, in October. The brand’s second collection went on sale in select stores in Japan and other Asian countries last week and will be rolled out further in mid-March and in April. The collection includes about 60 pieces for women and 60 for men, and a large percentage of the line is made of tech-satin, a soft blend of cotton and a synthetic fiber, such as polyester. The spring line differs from Sander’s first +J collection in its wide use of color, such as pastel blue and lilac, olive, and warm ivory.
But +J isn’t Fast Retailing’s only focus. In a move to blunt the cut-price competition from supermarkets in its home market, which was threatening its already competitively priced basic apparel, the company has sped up the rollout of low-cost clothing brand g.u.
The cut-rate chain, first introduced in Japan in 2006, sells items for half the price or less of apparel on sale at Uniqlo stores, charging 990 yen, or $11.95 at current exchange rates, for jeans and 490 yen, or $5.70, for T-shirts.
“When salaries don’t rise, it’s a human inclination to want to buy things as cheaply as possible,” said Tadashi Yanai, ceo of Fast Retailing.
The company said it plans to increase the number of g.u. stores to 200 by August 2013 from the current 56, and aims for 50 billion yen, or $506 million, in sales from the chain for the year ending in August 2013.
Yanai hasn’t ruled out an eventual overseas rollout of the g.u. concept. “We are thinking about doing all, from low price to high price,” he added.
Nor is Fast Retailing alone. The lure of low cost apparel hasn’t escaped Mango, Inditex’s smaller Spanish rival that recently signed a deal to roll out shops-in-stores in J.C. Penney units in the U.S. Mango launched the cheaper ThinkUp brand at the end of August. The new line, sold in Mango stores along with the main collection, consists of around 90 competitively priced items and is supported by a blog.
“This new low-cost fashion campaign is Mango’s solution to the difficult economic climate affecting shoppers around the globe,” said Mango public relations manager Ninona Villa. “To tackle this situation, the company has decreased the margins of certain garments to make them more affordable.”
Tammy Smulders, managing director of London-based trend and branding agency SCB Partners, reckons the bet on low-priced fast fashion could pay dividends for retailers that choose this avenue.
“Ranges like Mango’s ThinkUp will return young consumers to the high street, offering trend-led ranges at low-prices. Ultimately, that will grow the market, appealing to fashion-forward consumers who have resisted the high street during the recession,” she said.