Zara Home opens in Melbourne as fast fashion giants put big homewares retailers under pressure

Zara Home opens in Melbourne as fast fashion giants put big homewares retailers under pressure

International fast fashion retailers such as H&M and Zara are quickly expanding into the Australian homewares market, but industry experts say it will be the established larger players such as Harvey Norman and IKEA, and not smaller independent competitors, who will face the pressure long term.

Zara Home will open its first Australian bricks-and-mortar store in Melbourne’s Highpoint Shopping Centre today, the first of an anticipated rush of international homeware retailers into the Australian space.

An IBISWorld report released yesterday has forecast fast fashion brands will enjoy double-digit annualised growth as they flood into the Australian homewares and furniture market over the next five years.

Read more: Five major retail trends that will shape 2015

Furniture retailing is forecast to grow by 1.7% over the next five years to hit $8.4 billion by 2020, while fast fashion homewares is expected to balloon by 11% to hit $2.1 billion over the same period.

Lauren Magner, IBISWorld senior industry analyst, told SmartCompany established players such as Harvey Norman, IKEA and Freedom will feel the biggest impact of the aggressive expansion of the international entrants.

“As Zara and H&M expand into the furniture and homewares market, there will be an exit or consolidation of some local operators that are unable to offer regularly changing collections at appealing prices,” says Magner.

Magner says companies operating mainly in the Australian market will suffer due to a lack of scale, particularly in design and procurement, and because they are often slower to take up trends than their international counterparts.

She says IKEA, which is largely seen as a destination experience for shoppers, may further suffer because consumers will choose to shop on their lunch breaks, rather than dedicate a full day to shopping.

But Magner says smaller, niche homewares retailers, such as online retailers Temple & Webster and Milan Direct, will be at much smaller risk of being swallowed up by fast fashion players.

“Those retailers that target niche markets and have specialised product ranges will continue to appeal to their customer bases,” she says.

Temple & Webster co-founder and chief executive Brian Shanahan told SmartCompany larger homewares retailers may lose out to fast fashion players because they are failing to keep up with what consumers want.

“Consumers are getting tired, people want variety,” says Shanahan.

“Those that have a fresh variety will win the day long term.”

Temple & Webster’s online homewares business has grown into a $28 million business since launching in 2011 and Shanahan hopes to reach $50 million in revenue in 2015.

While Shanahan says the addition of fast fashion players will add another element to the highly competitive homewares market, he believes smaller retailers who are able to offer a good range of quality products will prevail.

“The long-term winners will be the ones who consistently provide wonderful products and wonderful service,” he says.

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