They say the Chinese only buy the cheapest or the best. It’s simplistic, but it is the direction all retail markets seem to be headed in. The British market has been evolving into this for a while, now, and those stuck or stranded in the middle are suffering or dying.
The middle has been squeezed or forced to choose their direction of travel as we all race to the bottom or top.
The cheapest often requires huge volumes and multinationals and the best requires a perception of quality, luxury and good service.
As a brand or retailer, you have two questions to ask yourself, today: are we the cheapest? This can be split into different categories depending on where the brand sits and, are we the best? This is more complex and can mean many different things and is subjective. If you can’t say yes to both or either, they you need to start making some serious changes.
Imagine a Venn diagram: two circles, one the cheapest, one the best and price running up and the down the side axis. Any brand coming into the area where the two circles overlap is in a safer and strong position. Those within one of the circles has a focus, while those floating somewhere out of either need to work out which one they want to be in, and fast.
Let’s look at the cheapest option. This is why Sainsbury’s is getting into bed with Asda. The larger scale promises savings of around 10% to the consumer, and will help them compete with Booker/Tesco and the German food retailers, Aldi and Lidl. It’s an example of mid-market retailers needing to pair up or die.
In fashion, New Look revenue to the year 24th March 2018 was down -7.3% to £1,347.8m. New Look has not only announced store closures, but it’s also just said in its recent financial report and turnaround plan, that ‘Pricing (will be) lowered to offer significantly better value with 80% of product to retail under £20’.
Eighty percent of product under £20 will really put the brand toe-to-toe with Primark and, I think, it’s the right move for them. You have to go down fighting, but they’ll going to have to shift more product at these cheaper prices. Before, New Look wasn’t the cheapest, and it wasn’t the best in terms of being the most fashionable or desirable fast-fashion retailer. It used to be one of the cheapest, but then Primark came along.
It tried to be more fashionable, but at a time Boohoo, ASOS were growing and offering high fashionability at ridiculously low prices.
New Look says it wants to 'return to (a) value-led fast fashion and wardrobe basics offer with full price focus’. The margins will be so small they’ll need all the full price they can get.
H&M, long one of the darlings of fast retail, has seen its shares down nearly 20% this year and the company has said it will need to slash prices to reduce inventories, damaging profit margins. It has an $4.3 Billion in unsold stock and needs to be careful that its size won’t be its downfall.
It also explains its focus on different, ‘best’ sister brands like Arket and COS. H&M isn’t in the same position as New Look, yet, but they need to make sure it’s still seen as one of the best in terms of affordable fashionability and also offering value.
Marks & Spencer is another one trying this new best and cheapest approach. The clothes have arguably got much cheaper and the food is still perceived as the best, but it’s this balance that is hard to achieve within the same brand, especially knowing what consumers come to you for.
House of Fraser’s recent announcement to close 31 stores is a reflection of the growth of John Lewis both offline and online. John Lewis has continued to open in towns, in or near those House of Frasers, and House of Fraser isn’t cheaper or better. It probably explains the closure of the huge Birmingham store as John Lewis opened a shiny new shop at the railway station just a couple of years ago.
House of Fraser will need to pair up with somebody (maybe Debenhams?) or disappear altogether. Sports Direct, Mike Ashley, has shares in both and will no doubt be pushing for it and then they really can compete on price and dominate their local markets.
So, who is getting it right? Zara, for the best in fashionability and speed and John Lewis in customer service and being ‘Never Knowingly Undersold’. But, like a game of musical chairs, it’s changing all the time.
As for the ‘best’, this is what many luxury brands rely upon. This could be quality, use of materials, origin etc. Many ‘luxury’ brands have lost control of these in the race for large quantities and bigger margins. They have to be careful because a few poorly made, overpriced products will ruin the perception of any brand.
But, you can also find the cheapest within this market. For example, Johnstons of Elgin, one of the best Scottish producers of scarves and blankets. It makes for everybody from Hermès to Burberry. While a scarf from them is not cheap, say £100, it’s far cheaper than one with a designer name on. They are also the best at what they do and the reason why these brands use them.
Or, a brand like Paul Smith. When looking at a multi brand website like Mr Porter, it feels like one of the most affordable brands on there. I think its recent troubles has seen it get more competitive and tread that fine line between affordable and exclusivity. They are also the best at colour.
Or, you could can look at the total top, at the most expensive and exclusive. This is the pinnacle of the market and to be true to both would only be made in very limited numbers. This is chasing a very small number of big-fish consumers and, as such, it limits the size of the business. But, this can also to used to sell ranges of cheaper products, such as perfume or sunglasses, but even these categories are harder, now that people aren’t so hung up on brands.
This simplistic approach to the market cuts through some of the wood to see the trees in a highly competitive and changing retail landscape. So, the next time you look at your own brand or somebody else’s, you know which two questions to ask.
When Banana Republic decided to chuck in the towel, leave the UK and move out of the H&M-owned, old Dickins & Jones flagship building on Regent Street, it made sense, to H&M anyway, to fill it with their own house brands, especially at a time when you could struggle to fill such a large, flagship space.
Left - Upstairs at Arket, Womenswear
The space has been split between Weekday, which already has stores across Europe, and Arket, which is brand new and this is the first one in the world.
The big question is: does the world need anymore H&M brands? It makes sense for the companies. Put your eggs in lots of baskets, aimed at lots of different sectors and consumers, and not only do you have all bases covered, you can weather the ups and downs of fickle consumers better: as one brand is going down, another one can be coming up.
What with COS, & Other Stories, Cheap Monday, Monki, as well at the main H&M brand, they are pushing out, much like the Spanish Zara owner Inditex, with many consumers unaware or past caring about who owns what. It’s the fashion equivalent of a one operator food court.
Anyway, let’s talk about Arket. They’ve gone London grey - Scandinavian pink perhaps?! - with the shop fit. It looks a bit like a stage fit of a shop in “1984”. The top half is empty and looks like a cheap wardrobe carcass waiting for the doors. The floor is Valentino-type grey terrazzo and it is lacking, somewhat, in personality. This looked like the template for every future store and you wouldn't know where you were. Are brands still in that mind set of rolling out the same shopfit the world over? I thought we were done with all that.
Right - Café with a shop attached
The product is good. The knitwear feels substantial and of good quality. So good, in fact, I think you’ll have to buy it two sizes bigger just to get into it. The ground floor is split between men’s at the front and back, homeware in the middle and a café to the side at the back. Upstairs is womenswear and childrenswear.
Branding is minimal and it’s all very plain and Scandi - can we ever get enough?! - The women’s has more colour and it does flow.
Arket likes a serial number on things. I think the target customer is the trendy mum, she wants clothes for her, her children, a café to sit down in and some little treats in homeware, plus she’ll be buying the menswear too, which is why there are Breton stripes - every woman loves a man in Breton stripes, don't they?
Left - Using brands such as R.M. Williams & Tricker's to elevate the branding & clothes
When this rolls out to the big shopping centres all over the country, depending on how successful it is in London I guess, then she’ll in there with her stroller, smugly mocking the Cath Kidston nappy bags. (If she’s buying the clothes, she’s probably washing them too. I’d like to see how those knits fare).
As for the hubby, there’s nothing he won’t be happy with, there’s nothing not to like.
Like Weekday, there is a sprinkling of other brands: they are using quality shoes like Tricker’s and R.M. Williams to elevate the clothes. The price points are £80 for a jumper and £45 for a pair of good quality long-johns, which to me feels more like a Swedish customer used to paying for quality and not a London or U.K. customer hooked and satisfied on cheap clothing.
There was a very nice Black Watch tartan mac, which won’t hang about for long, and, like all stores, you cherry pick the best pieces and ignore those that are over-priced or not special enough.
What Arket lacks in personality it makes up for in quality. This feels like a store for Millennial milfs and dilfs, which was perfectly illustrated by two dads proudly feeding their babies on the opening night, probably while their wives were busy shopping.
As simple as it gets. It's either modern or retro modern, but a simple, large elasticated strap is making this shoe style look fresh and contemporary. There's this white, trainer style, from COS, which looks like it just stepped off 2001: A Space Odyssey. It is one part nurse, one part 60s futurism. While this pair from Jimmy Choo's pre-fall 2016 collection, which I spied at their recent press day, is dressy enough for a tuxedo or minimal enough for any business suit. Whether black or white, the future is definitely thick and elasticated!
Left - COS Unisex Sneakers - £89
Below - Jimmy Choo - Prefall 2016