Australia / Analyst Insights
Fierce competition has forced prominent retail brands to fold

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by Lauren Magner
Jul 04 2017

Weak retail conditions, high wage and rent costs, and fierce competition have been weighing on the clothing retail sector in recent years. This has forced many prominent brands across several retailing industries into administration. Over the past year alone, David Lawrence, Marcs, Payless Shoes, Pumpkin Patch, Rhodes & Beckett, Herringbone, Seduce, Laura Ashley, Josh Goot and Kit & Ace have all entered administration.

Challenging economic conditions and numerous new competitors, including online retailers and international fast fashion brands, have changed the way consumers spend on retail purchases. Consumers have become accustomed to buying items on sale, as retailers have undertaken heavy discounting in recent years to clear excess stock and attract demand. At the same time, weak consumer sentiment has encouraged bargain hunting, leading to price becoming an increasingly important aspect of competition.

Online retailers have been well positioned to benefit from these trends. Because online stores generally have lower overheads compared with their bricks-and-mortar counterparts, they can offer more competitive prices. Making purchases online has become normalised as technology has become faster and more secure. This, combined with high penetration of smartphones and tablets, has led to online retailers taking a sizable amount of market share from traditional retailers. Local bricks-and-mortar stores have struggled to compete as consumers can quickly compare instore prices with those offered online, which are often cheaper.

Local retailers have faced further competition from an influx of international retailers such as Zara, H&M, Uniqlo and Topshop. These companies generally have strong economies of scale and vertical integration, giving them a competitive edge. Fast fashion brands can quickly update their ranges to target changing styles and trends, which appeals to many fashion-conscious consumers.

Consumers in Australia have access to an extensive range of retailers, including online retailers, global fast fashion stores and traditional local retailers. The apparel market is becoming increasingly polarised, with cheap fast fashion items on one end and luxury items on the premium end. Middle market retailers have struggled to survive in these competitive conditions as their previous niche of on-trend clothing is being offered by chains such as H&M and Topshop for much lower prices. Clothing brands that cannot compete on price have been forced to find niche markets, such as high quality or unique products, to remain viable.

In these challenging conditions, clothing retailers require strong brand positioning and a clearly defined product offering to compete against online stores and global fast fashion brands. Consumers now expect more from clothing retailers than ever before, which makes it important for local retailers to understand their target market and what drives their purchasing decisions. Providing an enjoyable and convenient shopping experience both online and in physical stores has become vital to maintaining consumer demand.

Related industries:

Clothing retailing

Online shopping