The wake up call for Australian fashion

For independent fashion labels and retailers in the Australian fashion industry who have been banking on the high turn over and lower priced sales strategy, it’s quite possible this strategy may be over.Whilst turnover is an integral part of retail, in the last 18 months many fashion players are finding the slow down in retail is affecting their profitability. The volume card they once relied on with lower price points, faster turnover, lower margins to obtain high sell through is simply not working as effectively anymore. Why? Quite simply, the volume sales they once enjoyed have gone.Since 2011 when Zara first landed in Australia, we have seen the influx of the overseas chain stores and overseas online players aggressively target Australian shores. However it’s really been the last two years we have seen the impact of the big players. With their arrival, they have taken millions away from Australia, lining the pockets of the global players overseas.So how has this changed sales for Australian independents retailers? In terms of volume, retailers are simply unable to sell any more products at a lower price rather than a higher price could. Coupled with an oversaturated market, this has become a headache for many brands and retailers wondering what strategy to take.Interestingly however, it seems the overseas global retailers are also not immune to their margins being cut with the lower price strategy.In an article in the Sydney Morning Herald, it was reported, Global fast fashion brands Uniqlo, Zara and H&M snared more than $600 million in sales from Australia, but cited “Weird weather and the soft Australian dollar weighed on profitability”.According to Macquarie Wealth Management even these big players have found their margins have been under pressure, with warm weather for Winter 2016 affecting Japanese fast fashion brand Uniqlo."Uniqlo's margins have now stepped down well below the lowest among the major internationals at just 53.4 per cent, a slide from 58.9 per cent in 2015. We expect margin management to remain difficult for the apparel retailers over 2017." Stated analysts from Macquarie Wealth Management.While no one is going to be exactly feeling sorry for these global players, it does beg to question how can our smaller fashion operators even compete on the lower price sales anymore? Is this a category best left to the chain stores?Independently owned, Australian Fashion Labels, founded by Dean and Melanie Flintoft in Adelaide, which encompasses labels (C/meo Collective, BNKR stores, Finders, Jaggar Footwear, Keepsake, Keepsake Intimates & Fifth Label, is a company which has changed strategies since they started in 2007.Starting in their lounge room, Australian Fashion Labels is now a global company which is currently turning over 60 million annually. They export to 22 countries with wholesale and target 60 countries with online retail. With 140 employees in 3 countries, they initially started with their first label, Finders Keepers with retail price points under $99.00, which were reflective of the GFC and the demand for price pointed merchandise at that time.Fast forward ten years later, and they are finding the market different to when they first started and maintain having strong brands and quality product is key to their success with more varied price points. “Our retail landscape has changed with the arrival in Australia of Zara, H&M and Uniqlo which has redirected hundreds of millions of dollars of retail spend to these retailers. They are world class and they have global purchasing power never seen before in our industry. Competing on price is difficult and for many Australian brands and retailers it is impossible. Branding, selling a story customers buy into, having superior quality and exclusive design are ways to compete for the retail dollar and maintain market share and possibly grow. “ Dean Flintoft, CEO of Australian Fashion Labels states.Seasoned fashion and retail consultant, David Bush of DBC Consulting (formerly, ex-head of Womenswear at David Jones), also maintains value for money of product is key, and cites many retailers and brands have not properly planned for the incoming of these chain stores.“Too many brands have failed to plan for these new market entries. They have not developed business strategies to combat their arrival, utilising what should and could have been their success; local market knowledge, customer relationships & existing loyalty, product differentiation, service, experience or quality”. David Bush is adamant competing just on price is never the answer in retail, and focusing on key product with a strong understanding of the customer is paramount. He also maintains many retailers and brands just ignored the impact the global chain stores would have on their business.“They had stuck their head in the sand hoping these entries would just blow over. Now the big guys have arrived many domestic retailers / brands are left to fight a tactical fight, on price. Price is never a fight you can win as it inevitably turns into a race to the bottom of the pond.”He also says keeping brands aspirational is important to sales. “To quote Oscar Wilde, “Be yourself, everyone else is taken”. Focus on your own success, focus on your customer, and focus on providing aspirational product regardless of price.He also stresses brands to look inwards and ask themselves the hard questions about their own product.“Customers have choice, why would they choose your brand? This is the question. Those brands in this market with a clear strategy & value proposition rooted in great product and a clear customer and respect for some are doing amazingly well. Well deserved success I say.”TV Shopping channel, TVSN Merchandise & Programming Manager, Judy Deuchar weighs in on the TVSN buying strategy.With a background stemming from the UK, formerly with TV Shopping Channel mammoth, QVC, Judy brings extensive experience to understanding the unique selling proposition, which is required to make TV Shopping so effective. And like David Bush, she maintains it’s not just about price but value.“I have learnt that playing the long-term game is more profitable from a financial and customer loyalty point of view. Staying true to your retail brand strategy of offer needs to always be front of mind. My team are very aware of me always mentioning, “Short term gain is long term pain”. Our strategy within TVSN is to offer brands, which tell a strong story, with a unique point of difference, which is not easily available. Our customers love the thrill of the find. This is the number one motivator for purchase, not price”, says Judy Deuchar.She also points out you can’t just create expensive product if it’s not a reflection of value or a reflection of the brands core DNA.“One cannot just up the price if it’s incongruent with your brand. Your story, offer, quality and service needs to justify the price. I have found, both here and in the UK, where I was in retail before. This formula stands the test of time and really results in the higher dollars and long term gain.”Judy also maintains staying true to the brand is always key.“Dependant on the scale you wish to reach, - whether a market trader, small web business or a large retailer, its best to stay true to your brand story. Truly talk to your customers and seek honest answers from them, and those within your business, as to what your point of difference / story is. Often brands are desperate to be the answer to high volume fashion, or the Millennials, yet forget to focus on why they have got to the success they had in the first place. Find your niche, develop your own handwriting and own it.”In this retailing climate, there is also a question of brands and buyers playing it too safe in terms of design for fear of missing out on every sale. Many apparel brands fail to do enough competitive analysis to determine a point of difference and end up producing monotonous product which can be quite often found across the board in many fashion labels.While there are some beautiful high-end and advanced contemporary designers who nail the aspirational designer story, it’s the middle market, which has to be careful. This is the category, which is most vulnerable to these overseas players. There is a strong demand for fashion brands retailing at under $250 with beautiful fabrics and quality with aspiration and great branding. Unless the middle market category starts offering better value to the consumer they are most likely to perish. The consumer is inundated with rehashed faceless product that fails to get them excited. You only have to look at what happens when a designer brand sells to a major apparel company to see that happen. It turns into an over-priced chain store brand when there is no ‘designer ‘at the helm.From a designer or fashion label’s point of view, keeping the buyer and customer excited is paramount to consistent sales in this fickle retailing climate. This extends from social media, images, to the look book, to merchandising to the actual designs and styles.It’s important brands stay hungry for success with aspirational product otherwise they can be left behind very quickly. From a buying perspective, just because a retailer enjoyed a good sell through last season of a brand, if they come in to see your brand next season and don’t love it, brands can experience an instant decrease in sales regardless of sell through. It can be swift, painful and can render a business null and void very quickly.We had a big buyer in this season that had enjoyed a great season of sell through saying “If I don’t love something this season, I am not buying it.”At the risk of sounding like a broken record, our fashion agency motto will always be “It doesn’t have to be cheap but it does have to be value for money and something that they love, regardless of it is of $40.00 or $400 or they simply won’t buy it”.About the Author, Phoebes GarlandPhoebes Garland is the Co-founder & Co-owner of Garland & Garland Fashion, a fashion & consultancy agency based in Sydney, and founder of Fashion Initiative.  Between the two of them, Phoebes & Robert Garland have over 60 years’ sales experience in fashion, publishing and advertising. Phoebes is an industry mentor to designers with Australian fashion industry body, Australian Fashion Chamber and is on the Advisory Board for Fashion Design Studio (TAFE NSW). Phoebes Garland is also an ambassador to Shake it up Australia Foundation and contributes articles to Australian Fashion industry magazine, Ragtrader.