The risk of deflation together with increased competition in the market may spell trouble for value fashion retailers, industry observers have warned.
The Consumer Price Index fell 0.1% in the year to April 2015, according to the Office for National Statistics. It is the first time the UK’s inflation has turned negative since 1960, and it has led to fears the country will slip into deflation.
Retail consultant Richard Hyman said this could lead to a squeeze on the value market, hitting retailers such as Peacocks, M&Co, Primark, Bonmarché and new chain Pep&Co.
“A few years ago, value fashion had meteoric success, but the price architecture is becoming more compressed as players in the middle are being forced to reduce their prices more and more. There are too many mouths to feed,” he told Drapers.
Retail veteran and former House of Fraser executive chairman Don McCarthy agreed, arguing that increased competition in the sector is making trade more difficult.
“More and more people are going into the value end of the market and a lot of players are fighting it out there. It’s very competitive. The middle market was under enormous pressure; that’s starting to come back now.”
Newcomer Pep&Co, the value chain from former Asda boss Andy Bond and former Tu at Sainsbury’s boss Adrian Mountford, will open an initial 50 stores in a six-week burst starting in July.
Conlumino retail analyst Anusha Couttigane said: “So many more supermarkets are focusing on clothing at that value level and that is definitely having an impact on value specialists. Retailers like Pep&Co need to target a specific market so it is not competing directly with the likes of Primark.”