Australia / Analyst Insights
Esprit fashion retailer set to close its Australian stores
by Bao Vuong
May 22 2018

Fashion retailer Esprit is set to close 67 stores, concessions and factory outlets in Australia and New Zealand. This decision follows a plunge in sales between 2013 and 2017, from $86 million to $50 million. The company will close its stores by the end of 2018, with more than 350 jobs lost.

Esprit has been operating in Australia since 1980. The company succeeded due to its product range, brand positioning, and how well it managed to relate to the average Australian. However, the Clothing Retail industry has evolved, and current consumers are shifting towards fashion companies such as Zara, which offer on-trend clothing at prices that seem to resonate better with Australian consumers.

High rent, wage, transport and distribution costs have made it expensive to operate in Australia. Esprit’s exit from Australia and New Zealand is largely due to the company’s intention to focus more on other markets, predominantly in Asia. Esprit is not the first overseas fashion retailer to close its business in Australia recently. In 2017, Oroton started closing its GAP franchised stores, and Topshop closed more than half its Australian stores after the company’s local franchisee went into administration.

The Clothing Retailing industry has faced several challenging years, with cautious consumer spending and intense competition. However, industry revenue is expected to grow at an annualized 3.7% over the five years through 2017-18, largely due to bricks-and-mortar retailers expanding their online sales channels. In the wake of strong competition from the online space, industry firms have adopted various strategies to enhance the consumer experience. In line with this trend, Zara has tried to adopt various avenues to enhance its instore experience for customers. Just recently the company rolled out an augmented reality app for a two-week period, which allowed customers to see clothing on a digital model when using their smartphones.

Innovative strategies sparked by technological developments have had a large impact on sales. The bricks-and-mortar shopping experience is forecast to become more automated over the next five years, with virtual stores and adaptive storefronts becoming more common.

These innovative strategies have helped brands with their consumer interaction, and has led to increased sales. Zara’s performance has improved largely due to its innovative engagement with its customers. In contrast with Esprit’s exit of the Australian market, Zara has opened nine new stores in the country since 2013. Between 2013 and 2017, Zara’s revenue has grown from $107 million to $256 million, an increase of 139%. Zara’s Australian revenue is expected to rise further in 2017-18, due to the company’s new dedicated Australian online store. Previously, Australian shoppers were redirected to Zara’s international sites and had to pay hefty shipping fees.

 

Related Companies:
Group Zara Australia Pty Limited
Esprit (Retail) Pty Limited