Cin7

cin7 logo

Blog

5 Tales From the Wild Frontier of Apparel Retail

by simon
5-tales-from-the-wild-frontier-of-apparel-retail-jpg
How are companies cutting trails in apparel retail in 2017?

Some are adapting to the omnichannel, after a commitment to brick-and-mortar. Others are dying on the online-only vine.

Our news feed is stuffed with articles that make 2017 look like the wild, wild west of apparel retail.

Too dramatic?

In the last week, a high-fashion company succumbed to fast-fashion. A fast-fashion chain turned to eCommerce for future growth. A promising online-only shoe provider went belly up, while another one doubled-down on brick-and-mortar.

And it’s only February.

Whatever else happens this year, 2017 is already proving to be pretty interesting for apparel retail.

A High-Fashion Loss to Fast-Fashion

The parent company of David Lawrence and Marcs, two high-end fashion labels in Australia, has gone into voluntary administration. Its financial woes (including $30 million of debt) stemming from poor sales and cash flow have thrown the brands and 1100 staff into a state of limbo. Administrators are likely to close down the least profitable of the company’s 52 stores, while they find buyers for the brands. Steep competition from fast-fashion chains including H&M and Forever 21 has gradually eroded company sales since a $100 million peak in 2011, according to Australia-based Financial Review. The newspaper noted retailer David Jones’s inventory management strategy as one factor. The company removed underperforming brands from its floor space, devoting more space to its own and third-party private labels.

A Fast-Fashion Shift to eCommerce

Speaking of H&M, the Swedish chain has reached brick-and-mortar saturation, according to Forbes. The company went into 2017 with 4,351 stores worldwide. But after seeing an 11% decrease in net income, attributed to low-turnover inventory markdowns. Consequently, H&M will not only abandon its 10% to 15% annual brick-and-mortar expansion beyond 2017, but also quickly shut down underperforming locations. Instead of relying on physical channels, H&M has set a goal of a 10% to 15% annual increase in combined online and in-store sales. Forbes writes that the new strategy is an acknowledgement of stiff global competition from the likes of Amazon and Alibaba.

A Fashion Segment With Legs

Analysts are enthusiastic about off-price fashion in 2017, predicting 6% to 8% sales growth this year, according to Retail Dive. This is a good rate, at a time when department store fashion is on the decline. Off-price retail enjoys several advantages: it hasn’t reached the saturation point of, say, fast-fashion. Companies like TJX have an expansive vendor base and efficient supply chain operations, which translates into high-turnover inventory, competitive pricing, and happy surprises for bargain hunters. Customers see off-price shopping as a “treasure hunt”.

An Omnichannel Balance

Foot Locker may seem like it is doubling-down on brick-and-mortar. It just opened a 17,000 square-foot megastore at the heart of New York City. Its mall stores are “destination shopping,” says CEO Dick Johnson, with foot traffic on the rise. But the athletic footwear and sports gear provider isn’t fanatical about stores. It’s “channel agnostic,” Johnson said, meaning Foot Locker wants to accommodate the customer however they want to buy.

And An Online-Only Collapse

Any channel a business chooses is only as a sound as its foundation. Canada-based retailer Shoes.com used to be a rising star in online-only retail. At the end of January, it shut down all three of its websites. Few people saw it coming. Shoes.com had garnered $45 million in private investment in 2015 fueling an expansion the following year. By the last quarter of 2016, though, its sites saw significant consecutive drops in traffic compared to the year before. An analyst attributed the failure to inadequate customer service and a staff with more tech-expertise than retail nous.