Location key for retail start-ups amid foreign fashion wave
Wednesday, September 5, 2012/
A retail expert says small independent retailers won’t be too badly hurt by the wave of global fast fashion retailers entering Australia, but has highlighted the growing importance of location.
Bill Rooney, a director of 6one5 Retail Consulting, has made some predictions about the arrival of five international fast fashion retailers: H&M, Zara, Forever 21, Uniqlo and Topshop.
According to IBISWorld, the Australian fashion industry is estimated to be worth $12 billion, and will have an average annualised growth rate of just 1.2% over the next five years.
Rooney estimates that within five years, the aforementioned retailers will potentially generate $1.3 billion of sales in Australia, with Swedish retailer H&M leading the charge.
H&M is yet to enter the Australian market, but Rooney estimates its potential market size in Australia could reach $500 million within five years.
Spanish retailer Zara, which has already established a strong foothold in the Australian market, is expected to generate $300 million in sales within five years, according to Rooney.
Rooney says the arrival of these retailers – coupled with low expected growth over the next five years and a consumer shift towards lower and medium-priced clothing – makes for a “perfect storm” in the fashion industry.
According to Rooney, there will be several casualties among Australian fashion retailers, particularly those in the fast fashion lower price-point segment.
Encouragingly, Rooney isn’t too concerned about small independent retailers, but says they still need to be wary of how they approach the market.
“I wouldn’t be afraid if I was a small retailer with one or two small stores,” Rooney says.
“Where they have got a brand that has created a point of difference, I think they’d do quite well… It’s more the larger chains that will get impacted.”
Having said that, Rooney says boutique retailers need to think carefully about their location.
“I think strip malls are going to suffer, unless they’re destination strip malls with some point of difference,” he says.
“The first thing to do is look at what you’re pitching and what demographic is interested in that, and locate on that basis.”
“It’s best practice, even for small fashion retailers, to compile customer profiles [by] doing some analysis of their current customers – through a loyalty program or a survey in-store – and working out the profiles of three or four customer types.”
Rooney says he expects to see the rise of retail hubs, whereby small retailers gather together to rejuvenate old, underutilised areas.
“If you can create that zone with other like-minded stores, then that’s a great way to compete,” he says.
Rooney says small retailers should also look to larger brands for inspiration.
“You need to look at your presentation, and then go and look at a H&M website or visit a Zara store [to help you determine] how you position yourself,” he says.