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Brand market report: Changing tracks

Fashion brands are fast catching up with retailers when it comes to multichannel sales strategies.

There’s little doubt that the branded fashion sector is going through a period of change. Large swathes of brands, like their retailer counterparts, are focused on delivering a multichannel proposition. This represents a big change for the sector, which has traditionally operated on a predominantly wholesale model. In the past few years, brands have increasingly been opening directly owned stores or selling through their own transactional websites.

This was echoed by our survey findings - 93.5% of brands sell via wholesale, 71% through their own website, 41.9% through directly operated stores, and 38.7% through franchise stores. However, when we asked how this sales split would change over the next five years, respondents said they expect their sales to be split nearly equally between wholesale and directly operated stores, at about 42% each.

This trend will continue, says Honor Westnedge, senior retail analyst at market research firm Verdict Research. “We’ve seen lots of the larger players buy back their wholesale operations. Wholesale is still
a great way of expanding your brand fairly quickly, and fairly risk free because it doesn’t require lots of investment. However, now I think people are starting to want more control over their brand. And the margins they get through wholesale are that much smaller than when they are doing it themselves and operating through standalone stores. It allows them to protect their brand as well,” she says.

Women’s footwear brand French Sole’s sales are split 60% wholesale and 40% retail, with four stores in London and one in Malaysia. It plans to open a second in Southeast Asia, along with a further two directly owned under sister brand London Sole in the US. Sales and marketing director Russell Downing explains the decision to open franchise stores in Southeast Asia: “Obviously you make more money out of the stuff that you sell in your own shops because the margin is so much better. Whereas what I’m selling at wholesale obviously I’m making a lot less.”

He adds: “We would like to expand domestically too and there is an opportunity to grow outside of London.”

Menswear brand Pretty Green has rapidly grown its bricks-and-mortar presence in the UK, and already has 14 stores, as well as a directly operated shop in Tokyo. Pretty Green head of wholesale and international
Dean West stops short of revealing the brand’s sales split by channel, but says it is roughly equal, and that he would like them to both grow. Having shops, however, has been a benefit. He says: “I think a wholesale division makes you a brand rather than just a retailer, but I think having your own retail helps you understand the market a lot better. I think we’re able to respond more to what our customers want, and we like to think we
know what they are looking for.”

Premium womenswear brand Basler has gone from being a 100% wholesale business in 2006, to 50% wholesale and 50% retail today. Paul Lorraine, the German brand’s managing director for the UK, says while this could fluctuate between 5% and 6%, wholesale will remain an important revenue stream. “It’s hard to say over the next five years but we will always have a strong wholesale business, whether that fluctuates to 40% or about 50% of our business. But I couldn’t see us having a wholesale business less than 40% of our turnover, because of how we’re competing with competitors, and also because of where we started from. We want
to grow both,” he says.

Of course, it’s not all about wholesale and bricks and mortar, with online sales a major component in both a brand’s bottom line and sales strategy. Our survey found that 74% of fashion brands see themselves as either truly or partly multichannel, compared with just 26% that either don’t see them as multichannel or that don’t feel the need to embrace digital.

Westnedge describes online as a “huge opportunity” for brands. “Surprisingly, a lot of brands still aren’t online.

They tend to trade through wholesale most of the time, unless they have their own standalone stores. So that
is something we expect to see more of over the next year or two as they become used to using the online channel,” she says, adding that the large investment required has probably deterred many, but that it will become “imperative” to their strategies.

She also advises brands to invest in mobile-optimised websites: “Consumers are getting ever more demanding and if they expect that of the larger retailer then they expect it of the brands too. So they have to play a bit of catch-up over the next 18 months to make sure they are satisfying demand and maximising sales potential.”

And playing catch-up is exactly what they’re doing, if the results of our survey are anything to go by. We found that 38.5% of brands are planning to invest in a mobile-optimised transactional website, with a further 34.6% aiming to launch a mobile app.

Occasionwear brand Bernshaw has yet to launch its own transactional website, but director Alex Bernstein says it is on the cards. “We can’t be blind to it, it’s here to stay and it’s getting more popular. If you look at your Net-a-Porters that are selling £2,000 to £3,000 dresses online, I think people are so much morecomfortable buying online at our price level than they have been in the past few years.”

However, any form of expansion requires brands to have the right IT solutions in place to facilitate growth. One survey respondent said “IT is key to our competitive advantage”, while another commented that it is “at the forefront of the strategy of the brand”. When we asked brands what part of their IT operation would play the most important role this year and next, multichannel, ecommerce and customer relationship management were
all top at 25%.

Social media has also become a key component in the strategies of fashion brands across sectors. “We’re big fans of Facebook and Twitter,” says Bernstein. “And it does help the minute we get publicity. A celebrity will wear something, we’ll tweet it and then they’ll retweet it and the roll on is huge, it’s incredible.”

The wholesale model will remain an important sales channel, but expect to see more fashion brands opening up their own retail operations in the UK and overseas in the form of both stores and their own websites.

More from the Brand Market report

Industry View

‘A joined-up thinking approach will ensure a winning sales strategy’

Tony Bryant

Tony Bryant

Everything anywhere, anytime, any place has never been more pertinent. Retail has evolved from merely tendering for goods and services to exchanging a wealth of information pre and post purchase. Whether you like it or not you are now tied to a longer-lasting relationship that is more personal than ever before.

Information is the new secret to success. Knowing your customers’ shopping habits, preferences and interests will lead to successful engagement at a personal level and increased sales and customer loyalty. With time being a valued commodity for both retailers and customers, simplifying information, services and shopping experiences all lend themselves to a ‘joined-up thinking’ approach that will ensure a winning sales strategy. It is vital that retailers ‘open’ their stores 24/7 and give customers the opportunity and access to their products at all times, and the ability to pay for them in the most convenient way, be that via mobile, online or the traditional pay in store options. Even in store, mobile devices such as tablets are making it more convenient and accessible for customers to purchase products and services.

Making sense of all of this information and the ability to interpret it will allow retailers to make informed decisions that will drive their business forward and continue to strengthen those valued relationships.

  • Tony Bryant, Head of business development, K3 Retail


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