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Fashion industry at ‘crisis’ point

Retailers are being urged to focus on product, innovation and full-price sales to combat the current “crisis” facing the fashion industry.

Carnaby Street

Carnaby Street

The rising costs of doing business, such as the new living wage, teamed with a slowing economy, unseasonable weather, concerns over a possible Brexit, increasing levels of discounting and changing consumer behaviour have led to an unprecedented squeeze on fashion, say retailers and suppliers.

Fat Face chief executive Anthony Thompson told Drapers the market is the “toughest it has ever been”. His comments echoed those of Next chief executive Lord Wolfson, who last month said this year “may well be the toughest we have faced since 2008”.

Others have spoken this week of eroded margins, and told Drapers it was becoming increasingly difficult to stay upbeat. 

Thompson said retailers need to “take responsibility” for the role they play: “Some factors are out of our control – like the economy or the weather – but our response as retailers has not been the right one. We are responsible for the level of discounting, and the lack of innovation and newness in the market, not the customer.”

Wolfson warned clothing retailers will be hit hard as shoppers spend their cash on entertainment and eating out rather than fashion. In March UK shoppers spent 7.1% more year on year on leisure activities such as going to restaurants and bars, while spend on clothing and footwear dropped 4.8%, Visa Europe’s UK Expenditure Index shows.

“We have to ask why they aren’t buying clothes,” said Thompson. “The quality isn’t consistent and there is too much ‘me too’ out there – we are accountable for that.”

He added: “Retailers need to wake up to the need for newness, better-quality product and the corrosive impact of discounting. It’s getting very serious and there will be a lot more casualties on the high street. We need to be brave and sort it out.”

The chief executive of one menswear business agreed: “In my entire working life I’ve never known people to say it’s a great time to be a retailer, although obviously there are tougher years than others. Brexit could be unsettling, but it’s out of our hands and we have to manage these things – that’s what we’re paid to do.”

Derrick Hoyle, buying controller at footwear multiple Sole Trader, bemoaned the “constant erosion of margin”.

”If retailers are to be successful through 2016 they need to have a solid strategy that allows them to wean themselves off the discounting drug,” he argued. 

One supplier to high street multiples said quality product was key to mitigating the current “nightmare” market: “In my 35 years in the business I have never seen the market so concerned about margin and price, and product is struggling as a result. Buyers used to buy from the heart and worry about margin later to make sure the product wasn’t watered down – now it’s all about price.

”The high street is suffering and the industry is in crisis. We have to get back to the product so customers go shopping.”

“Retailers need to bring some newness into the market and they will do that through a balance of direct and indirect sourcing – going direct to factories for everything can give you a blinkered vision on design.”

“It’s not easy on the high street so the focus has to be on the product,” agreed the managing director of one footwear brand and private label supplier.

“Product and what your business stands for are paramount. If they aren’t in the right place you will get swallowed up. The future of growth in the UK is looking uncertain so we are looking abroad for expansion.”

Next has revised down its expected growth for 2016 to between -1% and 4%. It had previously expected growth of between 1% and 6%.

 

Readers' comments (8)

  • darren hoggett

    Stores only have themselves to blame for margin. People will pay higher prices, but they are not going to if you keep slashing prices for what is basically managerial incompetence in badly run industry. The money is out there, if you want it...

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  • Maybe one should consider the rents constant increase. There is nothing little or nothing left to spent in fashion, which let's not forget is a luxury, not a need.

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  • Many brands now are wanting to deal direct with the end consumer via their websites , brands and etaillers are constantly offering deals and inducements to buy cheap online which makes the rest of us look like we are expensive , where will it end , like the sports trade with one or two discount Giants ?

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  • darren hoggett

    I mentioned in a recent Drapers feature on our store that brands are taking the fully integrated route, though brands are generally not good retailers. However, their will always be good brands to work with and it will be those that will prosper.

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  • We are in a prime location and run a highly unique product and retail strategy. Prices are surprisingly low for the quality we offer (according to our customers!) but our margins are healthy. Discounts are given only for end of winter and end of summer stock. Regular unprompted customer feedback confirms the popularity of our concept ... and yet, none of this matters if the high street is deserted for days, weeks and months! Looks like customers prefer buying online where they find a shop floor that stocks more than will ever be needed or bought ... not even for a massive bargain. Really not sure where to go from here!

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  • Margin is key to profitability . Retailers rely on branded product to bring customers in and then margin is dictated by the brands with RRP.
    RRP means everyone sells at the same price however to remain competitive retailers offer discounts or incentives to be competitive and so starts the vicious circle of premature seasonal markdown which totally compromises margins and profitability.
    Finding brands that maintain quality and design with a good buy in margin is becoming increasingly difficult. With operating costs rising year on year, a minimum of x3 markup is needed for most Independent businesses to remain profitable after seasonal markdowns.
    Customers will pay for good quality fabrics and great design but fabric qualities are being compromised by the brands to maintain their internal margins within their marketplace pricing and this is now having a knock on effect with the end consumer. It isn't that the customer won't buy the product without a discount it is that they don't feel the product is worth the RRP.

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  • Fab Frocks

    At last the High Street chains have realised the customer they have created who is obsessed with discount rather than value. Trying to out-do each other with the lowest prices and constant sales combined with overstocking and bad buying decisions have eroded the margins of these chains. You only need to look at the plight of Beales to see that. Once there previous CEO took them down that path the troubles started and a consequent lack of investment has only made it worse.

    Time to start 'retailing' again and concentrate on the core values of a great product, innovation and awesome customer service.

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  • Awful headline. It's about focus on customers that's the future. Not product. If you don't have loyalty, what use is product? Not to say product is not important, of course it is. But the customer is everything.

    The winners will be those that suss it first. Amazon is already winning in this regard.

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