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A changing playground for uniforms

Supermarkets have led a race to the bottom for low-cost school uniform offers, but what are the ramifications of this on the market and are shoppers the only winners?

Speak to any of the large supermarkets about their back to school offers and you might be forgiven for thinking that we are midway through one of the most benign markets for years. All of them are recording sales and volume increases, and ranges have been expanded to accommodate the rush.

However, scratch beneath the surface and it becomes apparent that a number of factors are at play in this particular gold rush and that for some of the smaller players the category has been at best average and at worst the administrators have come calling.

Two factors have probably contributed to the supermarkets’ current back to school enthusiasm: the shrinking in absolute terms of the number of players operating in the sector and a belief that this is an area of the market that will always be in demand. The theory goes that parents will put new school clothing ahead of other items in their shopping priorities.

Anthony Thompson, managing director of George at Asda, the UK market leader in schoolwear, is bullish: “We’re pretty pleased with our numbers overall. Back to school has come in pretty big, pretty late.” He adds that the timing of the August bank holiday concentrated the back to school selling period for parents. “Last year the bank holiday took place 10 days before the schools went back. This year, there was the holiday and then it was straight back. For those looking for back to school, it was a case of buying during the bank holiday or the day after.”

Thompson’s words also reflect another reality for retailers – parents left buying back to school clothing until more or less the last possible moment, presumably in the hope that prices would be slashed. But with prices already so low – Tesco offered a uniform for £3.75 this summer – further price cuts were just not an option.

Yet curiously, this year’s price wars have been combined with a perceived insistence on the part of the consumer for better quality – George offered a 100-day money back guarantee on its uniforms this season.

Sainsbury’s business unit director for clothing Adrian Mountford says: “There’s a sense that perhaps we [Sainsbury’s] were a bit too expensive last year. So we’ve tried to do two things – improve the quality of the product and lower the prices.” Like Thompson, Mountford is upbeat about the performance of schoolwear this year. “It’s been brilliant. We’re 45% up against last year on school uniform and 49% if you include hosiery.”

The obvious question about all of this is how do you maintain margins when prices are lowered, quality is raised and the size of the available cake is pretty much fixed – there are only so many children of school-attending age at any particular moment.

For Sainsbury’s, Mountford says that this has been achieved by “consolidating” the supplier base in order to give greater volumes to individual manufacturers. He says the outcome of this has been better prices and that this has mitigated the impact on margins of using better fabrics and selling at lower unit prices. Mountford adds that back to school prices at Sainsbury’s were lowered by about 15% this year.

At Tesco, where schoolwear sales have risen 20% this year, price has also been key. The £3.75 Value range school uniform, consisting of a polo shirt, sweatshirt and a pair of trousers or a skirt, has shifted more than 120,000 units since the range launched in June.

It is worth noting that the supermarkets have not been on their own in offering cut-price school uniforms. Matalan has been selling its own £4 value range, which chief executive Alistair McGeorge says has been a strong performer. However, he adds that while the discount range has been successful, it was only a small part of the retailer’s total schoolwear offer.

This sentiment is mirrored at the supermarkets, where the cheapest back to school ranges form the tip of the iceberg. At Tesco, for instance, it is the standard school uniform ranges that have garnered the real money. To date, the supermarket has sold more than 500,000 pairs of black back to school kid’s shoes, up from 230,000 last year, and 630,000 three-packs of white picqué polos have also left the shelves. Both sit above its value range.

All of which is interesting, but it’s hard not to wonder where all the extra volume that has yielded these gilt-edged results has come from. Mountford says that back to school is now a “year-round” business, and while this may be the case, there can be little doubt that there are still substantial peaks and troughs. Retail Knowledge Bank senior partner Robert Clark says that the disappearance of Woolworths from high streets, which owned the Ladybird kidswear brand, has undoubtedly contributed to bigger sales for fewer players.

“Woolworths represented something in the mass market for back to school and it won’t just be a matter of standard school uniforms, because stationary sales will also have gone elsewhere as well,” he says.

He adds that for families in work, new school uniforms are now being purchased for all children, rather than some items being passed down to siblings. This sounds like good news for all those still operating in the sector. But the cut-throat nature of the 2009 schoolwear market has led to smaller players heading for the door with last month’s descent into administration of school uniform specialist JB Ward (Drapersonline.com, August 25) being typical of market trends.

Ultimately, for the time being there is probably no bottom to the price that retailers are prepared to offer, probably to the point of loss-leading value school uniforms, and it may well be a case of seeing who blinks first. Nevertheless, it is significant the total market is shrinking, with research house Mintel saying that this year’s cake, at £2.7bn, will be about 1% smaller than last year’s, as shoppers take advantage of generally lower prices.

Mintel senior fashion analyst Katrin Magnussen says: “People may not actually be buying less, but they are probably buying cheaper. Value ranges have exploded over the past two years, although we are expecting a slow return to growth in 2010.”

The field may be marginally smaller this year then, but so too are the number of operators. At Sainsbury’s, which was a late starter in the back to school race, Mountford comments:
“We want to keep growing. A lot of our competitors have much bigger market shares than us in back to school, which makes where we are a great place to be because we can keep growing by taking bits of their market.”

It seems then that when the back to school “top-up” purchases, as Thompson refers to them, have been completed within a week or so, for those left standing the back to school outlook will appear positive. However, there has to be a question mark over whether prices are sustainable at these levels for the foreseeable future and will paying an extra pound or two prove to be the difference between sale or no sale? 

Equally, to judge by some of the comments being made, growth may be on the cards – for some – but this can only become a reality if there are further casualties. Next year may see a gentle recovery, but the back to school market is likely to remain one of the most competitive clothing arenas in which a retailer can operate. While winning the war helps lift overall kidswear sales, only the very biggest, with the most substantial supplier bargaining power, will thrive.

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