What went wrong? Three takeaways from the collapse of David Lawrence and Marcs

The collapse of Australian fashion stalwarts David Lawrence and Marcs on Wednesday adds to the growing list of retailers that have faced tough times over the past 12 months.

From Pumpkin Patch to Payless Shoes, retail experts have been tracking the significant effects of customers’ hunger for global brands on some of the country’s most established chains.

Sole director of the companies that operate the David Lawrence and Marcs brands, Malcolm Webster, told administrators this week that “deteriorating sales conditions” and poor cash flow had caused big problems for the brands—but what lessons are apparent in the days after the collapse?

Here are three to consider.

1. The difficult of facing fast fashion head on

The entry of international giants Zara, H&M, Uniqlo and Top Shop into Australia in has put significant pressure on the middle fashion market, say experts, and this has been more than a couple of years in the making.

“I’d probably go back as five years ago—we really started to see a ramping up of global fast fashion into the market, then they expanded out to Chadstone [in Melbourne], or in Queensland [shopping centres] like Garden City,” says Dr Gary Mortimer, associate professor at QUT Business School.

When considering David Lawrence and Marcs, it’s important to understand the difficulty traditional retailers have had finding their place in this new landscape, says Retail Oasis strategist Pippa Kulmar.

“Marcs was such a cool brand growing up—it really didn’t maintain that as it grew,” she tells SmartCompany.

“They’re a good brand, but they failed to move with their customer and potentially bring a new customer into the brand.”

2. The effects of location on cash flow

The expansion of new global retailers away from city centres has also been a significant challenge for David Lawrence, according to Mortimer.

As the likes of Uniqlo and H&M have started to set their sights on suburban shopping centres, the traditional domain of quality, middle market fashion has been disrupted by lower cost alternatives, which will have had an impact on the cash flow of those retailers.

“Now it’s not uncommon to see a Zara or Uniqlo in a shopping centre,” he says.

“If we look at those mid-tier fashion retailers, they’re not cheap, they’re sitting in the middle, but they’d normally put themselves in suburban shopping centres. When a shopper goes shopping for fashion in a shopping centre, they go, ‘well, now I’ve also got a very big H&M’.”

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3. The focus on one type of customer

There are ways retailers can continue to engage with mid-tier shopping audiences in the current climate, but Kulmar believes retailers like Marcs and David Lawrence have too often been wary about scaring away their core customer base, says Kulmar.

“A lot of businesses I think freak out [in this climate],” she says.

“There’s a lot of brands that have not been able to work out where they belong.”

The Cotton On Group is one local operation that has been praised for pivoting towards new audiences, with Retail Doctor Group chief executive Brian Walker telling SmartCompany last month that it has a very clear model for delivering customers affordable, well-designed products.

“They’re on trend, they have speed to market, and the ability to build a replicable model. Everything’s done at a speed that’s faster than their competitors,” he told SmartCompany.

This speed is not so apparent in the David Lawrence brand, says Kulmar, who believes more should have been done earlier to target a younger generation of shoppers.

“In fashion, you’re required to reinvent yourself constantly. You look at the best fashion brands like Dior, they’ve been able to maintain relevance,” she says.

While Australian retailers continue to grapple with exactly how to keep their cohort of older shoppers happy while also making their brands attractive to younger shoppers, department stores overseas are using some interesting approaches.

“A good international example is looking at Nordstrom in the US—they’re a more traditional retailer, and their approach is that they bought a bunch of [retail] startups. They’re pivoting into a new part of the market without killing their core,” Kulmar says.

However, making significant changes to a strategy is not a simple process.

“You have to have the balls and the capital to do it,” Kulmar says.

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