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United States / Analyst Insights
Online competition forcing retailers into administration

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by Felicia Nur
Dec 19 2017

In late November 2017, after almost 80 years of operation, OrotonGroup became the latest fashion retailer to enter voluntary administration, following the likes of Marcs, David Lawrence, Payless Shoes and Pumpkin Patch.

Like many retailers, OrotonGroup has faced falling sales and profit in recent years. Although revenue in the personal accessory retailing industry is expected to grow by 2.9% in 2017-18, intense price-based competition has caused industry profit margins to decline. In 2017, OrotonGroup recorded a loss of over $14 million, a drastic shift from $3.4 million profit the previous year.

As a whole, personal accessory retailers have faced tough conditions over the past five years, due to fierce competition from department stores and online retailers. Apart from the shifts in the industry itself, slow growth in real household discretionary income and weak consumer sentiment have also limited demand for personal accessories.

While some global luxury retailers have been able to maintain sales, largely due to strong demand from Chinese tourists, the growing popularity of online shopping has seen many retailers with bricks-and-mortar stores face insolvency, with others being forced to reduce their physical presence to remain viable. With online shopping giving consumers an alternative, and often more convenient, platform to browse, compare and purchase personal accessories, retailers has been forced to reinvent the way they do business.

However, OrotonGroup did attempt to adapt to the shifting retail landscape. In April 2017, it acquired a 30% stake in The Daily Edited (TDE), an online Australian lifestyle accessories retailer that specialises in monogrammed leather bags. With demand for personalised accessories rising strongly, TDE had grown strongly despite the difficult retail conditions and had turnover of over $15 million. The acquisition was part of OrotonGroup’s diversification strategy, which aimed to give the company access to a new, fast-growing market of younger customers.

While OrotonGroup goes into the hands of administrators, the industry’s largest player, Strandbags Group, is standing strong with 15.2% market share. Strandbags’ revenue has increased over the past five years, but more importantly, the company has been able to defy industry trends and increase its margins. The company’s success stems from its competitive prices, broad product range and bulk buying power.

As retailers enter the final days of trading before Christmas, there’s no doubting the retail landscape is as uncertain as ever. While there is still a line at many counters in store, a lot of people are avoiding the rush and completing their Christmas shopping online. Oroton stores are trading as usual, but it is clear that surviving in this new retail landscape will require retailers to do more than fill their stores with Christmas cheer.

Related Companies:

OrotonGroup Limited

Strandbags Group Pty Ltd