The value end of the fashion market is saturated, so why are new entrants still trying to muscle in?
The British public loves a bargain like never before, and the collapse of BHS has left a hole at the lower-priced end of the high street. While in theory this presents an opportunity for value fashion retailers to expand in the UK, the reality is not so simple.
The UK’s value clothing market is saturated, dominated by retailers such as Primark, Pep&Co and the supermarket fashion brands. And competition is increasing: fast fashion brand Missguided, where dresses start at £8, opened its first physical store last month in Westfield Stratford City, and plans more next year. Meanwhile, established players such as Bonmarché are struggling to keep up with their rivals and fast-changing shopper behaviours.
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But not all retailers are put off. Italian lingerie brand Tezenis has invested in revamping its UK flagship store in London, on the corner of Oxford Street and Regent Street. It will reopen on 13 December.
Kate Ormrod, analyst at Verdict Retail, says: “Since the recession, it has largely been about having the lowest price. Now you have to look at design, quality, customer service. At the value end of the market, there’s price or there’s fashion. If you’re not the go-to retailer for either, you’ll really suffer.”
Customers are also becoming more demanding, particularly younger generations, says Anusha Couttigane, senior analyst at Kantar Retail: “Consumers want the latest trends at cut-price rates, especially younger generations who have immediate access to trends via social media and other digital outlets. They see new trends fastest and want them the most, yet have the smallest budgets.”
For these markets in particular, Couttigane stresses the importance of communication and savvy consumer targeting: “Success is not just about getting the clothes right, especially if you want to attract that younger, trendy shopper – you have to make sure you speak their language.”
At the opposite age end of the market, Bonmarché announced a 62.8% drop in operating profit to £2m for the 26 weeks to 24 September. However, Ormrod says it could capture the mature customer who formerly shopped at BHS – if it focuses its offer.
“While Bonmarché is introducing more fashion, it is still a classic offering,” she explains. “The problem for Bonmarché is that the core customer is 50 to 65, but they look and feel younger. It needs to weed out more traditional lines and get a bit more fashionable, getting the design and quality right, and really focussing on what its customer really wants to buy.”
Meanwhile, British retailer Pep&Co, which sells homeware alongside value fashion, plans to have 85 stores in the UK by the end of 2017.
Taking a cue from the success of food retailers such as Aldi and Lidl, Pep&Co aims to harness the power of low prices without compromising on quality.
“Despite the fact people spend a little, they get a lot for what they buy,” says Nick Agarwal, director at Dixon Hill Consulting, which works with Pep&Co.
Pep&Co’s focus on value for money, rather than purely on price, represents a shift for value retailers and Agarwal explains that it has been targeting customers left uncatered-for after the collapse of retailers such as BHS: “Adams Kids has gone, Woolworths has gone – those retailers have disappeared. It is increasingly hard to find that kind of offer, and that’s the strategic opportunity we saw.”
Retailers from outside the UK see this potential, too. Last month, Dutch value brand Hema opened its seventh UK store, in London’s Euston station.
“We expanded to the UK in 2014, because
we saw a significant opportunity after Woolworths – and now BHS – left the market,” explains chief executive Tjeerd Jegen. “We can offer products for great prices and we have seen there is a strong demand for it in the UK.”
Hema euston store 5
However, despite being the second-largest clothing retailer in the Netherlands (after H&M), Hema has decided not to sell apparel in its UK stores – preferring instead just to sell it online.
Jegen says this is because the UK market is dominated by Primark: “It’s a very fierce, competitive market, and we don’t really play in the fashion area. Over time, once we are established in this market, we could add more apparel into the mix.”
Whether targeting younger or more mature customers, success comes from creating products and brand communications that precisely pin down the value niche they seek. While the market may be busy, Pep&Co’s rapid growth, Hema’s UK expansion, and store investment from Tezenis and Missguided indicates there is still opportunity for low-cost retailers on the UK high street.