Focus: Apparel retail specialists at risk from e-commerce
Specialist apparel retailers are being squeezed by online fashion sales
For specialist retailers in Europe and North America, times are tough. The unstable economic climate is a critical factor, but no less a problem for thousands of struggling businesses is the transfer of power from bricks-and-mortar to the internet.
In the UK, big high street names specialising in cameras, consumer electronics and music have all hit the rails in recent months, and e-commerce is identified as the engine of their demise.
On the other side of the Atlantic, ask retailers how they are coping and many will tell you that competition from e-commerce, and increasingly m-commerce, is accelerating so rapidly that it is not a question of whether they will cut sales space, but by how much; or worse still, not whether they will go under, but when.
The bricks-and-mortar footprint of apparel retail specialists is as vulnerable as any other sector. By the end of this year, Gap Inc, the fourth biggest apparel specialist in the world by retail sales, will have cut the square footage of its Gap brand in the US by around a third compared to 2007 levels.
It is a huge cull, yet it is helping turn the company's US business around. Firstly, it has led to more effective investment behind the value chain Old Navy; secondly, it has encouraged stronger emerging market positions to dilute dependence on Western markets; and thirdly - and perhaps most important of all - it has accelerated the development of a powerful online sales platform.
Gap Inc's recovery shows that less is sometimes more in the new world order of fashion retail, and its growth strategy is a useful model for other large-scale Western retailers that are struggling.
Economies of scale
It offers little in the way of solace for smaller apparel specialists, however, as most simply lack the economy-of-scale to put a comparable rescue package in place.
The reality is that small and mid-size players are getting squeezed by discount fashion chains on one side and by online fashion sales on the other.
In the UK, for example, Primark and online behemoth Asos were two of the best performing brands in the country last year. Margins are already too tight for most small independent players to compete with the likes of Primark (or Old Navy in the US), while Internet retailing has evolved so much it is now almost impossible for anything but the most sophisticated platforms to be successful. The scale-up for most retail specialists is too costly.
Last year, the number of specialist apparel outlets in the UK shrank by almost 4,000. That was 10% of the total, and by far the biggest contraction in more than a decade.
Consecutive year-on-year contractions are projected to 2017, according to the latest retailing data from Euromonitor International. This is systematic of a recessionary climate and a rapidly growing Internet consumption culture.
There are arguments circulating in the media that 'survival of the fittest' will ultimately help the macro economy get back on its feet (by weeding out under-performing businesses and replacing them with more successful ones).
Bad news for fashion
The demise of small-scale apparel specialists has to be bad for the fashion industry, however.
For one thing, independent boutiques are often the only route to market for up-and-coming new designers, and it is grass roots fashion that feeds ultimately into trends on the catwalks, and subsequently the high street. How might UK fashion have evolved without the independent apparel stores on London's King's Road and Carnaby Street, for example?
In the wider macro-picture, the heterogeneity of big chain stores operating alongside mid and small size independents is also in the best interests of the consumer.
Not that most teenagers or 20-somethings see it that way. This is the first generation ever to have lived all their lives with the internet. They browse and shop with their mobile phones and tablets - and they will pass on this consumption culture to their own children.
They are the thrust of the long-term opportunity for online specialists such as Asos - and for fast fashion chains such as Gap that have tapped successfully into e-commerce platforms.
It is true that Primark has been successful without selling online. But when Primark does build an e-commerce footprint (which will happen as sure as night turns to day), it will have the economy of scale to make it work.
Not so for small and mid-size players. For them, the writing is on the wall.
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