Drapers’ surveys of indies and brands reveal a surprising level of optimism about their prospects for 2013.
Fashion indies and brands are resolutely positive about the coming year after the majority delivered growth in 2012 - despite the fragile economy leading to a spike in some of the bigger high street names going bust.
According to Drapers’ end-of-year indie survey, more than two thirds of independent retailers grew profits or remained in line with 2011.
This is cause for encouragement for indies when set against a backdrop of one of the worst years for retailers collapsing into administration since the start of the recession - nearly double those seen in 2010 and 2011. JJB Sports, Allders, La Senza, Peacocks and Aquascutum were all casualties - and although some were subsequently saved from oblivion, others were not so fortunate.
Deputy chief executive of the British Independent Retailers Association (Bira) Michael Weedon says declining unemployment figures offer hope for a stronger 2013, but notes indies have particular reason to be optimistic: “They are slightly more nimble and in a better position to manoeuvre, unlike larger multiples which have to get their bets right on a larger scale.”
Indeed, figures from the Local Data Company show that while multiples were scaling back their presence on
the high street, the indie footprint grew to a record high of 66% in October.
But not everyone had a solid year, with 26.9% reporting a dip in bottom line growth. Below the headline figures of those apparently reporting growth, much has come from cost-cutting rather than a successful year of trading.
Global strategic client director at Experian FootFall Mark King explains: “A lot of the retailers out there are very risk averse, and most of this is focused on reducing costs and tightening their belts while still trying to offer their customers something different.”
Perhaps unsurprisingly, it is the economy that has been weighing most heavily on people’s minds, with 46.5% of indies saying it had been the biggest issue of 2012. Discounting on the high street was another challenge for indies, with 23.9% describing it as the biggest issue, closely followed by the 22.5% who said grappling with digital challenges.
But retailers are now “reasonably upbeat” about 2013, says King. “They have got themselves in a strong position where they know what they need to do to keep their customers happy. We’re not out of the woods by a long way. People are still risk averse and retailers will still have to keep tightening their belts.”
However, just under half the indies filling out Drapers’ survey were optimistic about the coming year, with 49.5% saying they think their business will grow in 2013. A quarter said they plan to develop their etail offering, with 10.4% saying they would debut online.
Verdict Research analyst Honor Westnedge believes there is “huge potential” for indies within ecommerce. “Many are not online at all,” she notes. “We expect them to expand online as it will help them to grow their consumer presence.”
The second of our two surveys found the branded sector was even more bullish, with 51.9% saying they had seen growth in 2012, and an impressive 70.4% increasing their number of stockists over the year.
Distribution was the biggest challenge for brands (35%). However, there was an even spread of issues, with 30% saying the weather was the biggest challenge and 20% saying it was the cost of manufacturing.
Westnedge thinks margins could get squeezed further in 2013: “While some pressures have eased, manufacturing costs will continue to rise because of wage inflation, which could be tough for some.” But Westnedge dismisses fears of a triple-dip recession.
“It will be a tough year,” she acknowledges. “There will be weak wage growth again, and people remain cautious on discretionary spending, but consumers will be looking to spend money on better quality investment pieces, rather than lots of cheap-priced products in places like Primark.”
Brands equally shrugged off concerns about 2013, with more than half (56%) of those surveyed predicting growth, compared with 8% forecasting declines.
They also plan to adapt to changing demands from retailers, with a third of indies saying they had bought on short order for the first time for autumn 12, and plan to continue doing so. Almost 15% of indies will start buying short order for spring 13 and 10.5% say they will think about doing it in future.
As a result, 52% of brands plan to increase the amount of product available for short-order fulfilment.
Neither brands nor indies will rest on their laurels in their quest for growth in 2013, with international a prime focus.
“Export is the new black,” says Simon Poole, managing director of menswear brand Luke. “We are in final negotiations for a series of new UK and international franchise stores; if all goes to plan we will double our stores in 18 months.”
Women’s young fashion brand Little Mistress will also look to foreign shores for growth. Managing director Mark Ashton says the brand will expand online into 11 countries in 2013.
With brands casting their nets further afield, despite the UK economy remaining downbeat, 2013 could be a growth year for the fashion industry.
Story in Numbers
51.9% of brands grew profits in 2012
38.5% of indies said 2012 was more profitable
35% of brands said distribution was the biggest challenge
46.5% of indies said the economy was the biggest challenge
56% of brands predict growth in 2013
49.4% of indies said 2013 sales will be flat