H&M Third Party Branded Goods selling

To be a retailer today you need many fingers in many pies. Think a centipede Paul Hollywood and you’re getting some idea. So, it was with interest to hear the latest announcement from the world’s second largest fashion retailer, H&M. They’ve decided to start a pilot selling products from external brands.

While they have sold third party brands in some of their more premium chains before, it’s a first for the mother brand. H&M’s main, eponymous brand has been neglected and struggled as the company’s strategy was to roll out retail chains such as Arket, Weekday and &Other Stories.

The bottom end of the market is tough with margins continually squeezed. H&M’s huge undersold inventory, an undeveloped online offering and falling profits - for the eighth quarter in a row the Swedish fashion chain reported a decreasing profit, despite having recently achieved turnover growth - has taken its toll on this retail behemoth.

Left - Swedish fast-fashion giant is piloting a new strategy

It needs a new strategy and has clearly been watching the likes of ASOS and Zalando be all things to all people and expand rapidly.

A company spokesman said “The H&M brand will now develop our offer of external brands. The purpose is to complement our offer with external brands to add excitement and energy and we see great opportunities for growth and to find new customers,”.

You can charge more for branded product without the need to hold large amounts of stock. It also widens you target market, especially amongst men who still like branded items. While it’s not clear which brands will be sold, it’s likely to be dominated by sportswear. This is an area that has seen huge growth with the likes of JD Sports smashing their earnings. JD Sports’ last half-year revenues jumped 47% to £2.7 billion on the back of a 10% surge in like-for-like sales. Sportswear has higher margins and appeals to more age demographics.

One of the more traditional high-street retailers to make this third party brand strategy work is Next. Its ‘LABEL’ concept is now turning over £350 million in yearly sales with huge growth seen over the last few years. Brands such as River Island, adidas, Boss, Superdry and Fat Face sit alongside beauty and home. It’s the contemporary department store.

In their latest financial statement, they say they “continue to develop the business through the addition of new brands, increasing the breadth of offer with existing brands and (from early this year) offering items stocked in our partners’ warehouses through Platform Plus"

"‘Platform Plus’ allows our customers to order un-stocked items directly from our partners’ warehouses to be delivered through our network.

“In March this year we started selling items in this way with three of our partner brands. These items are offered to customers on a 48-hour delivery promise. Items are injected into our warehouse and then delivered through our courier and store network. For example, a Platform Plus item ordered on a Monday, is transferred to our warehouse by Tuesday and delivered to the customer on Wednesday.” they say.

“When customers order Platform Plus items with other items stocked in a Next warehouse (available in 24 hours) they can choose to receive one consolidated delivery, offered in 48 hours. Alternatively, customers can choose to split their delivery and have stocked items delivered in 24 hours. There is no additional charge for the split delivery. Currently, 50% are choosing to consolidate their order.”

Next says Platform Plus is more than a marketplace. “Platform Plus differs from many marketplaces because, rather than despatching parcels directly to consumers from third-party warehouses, items are inducted into our distribution network. The advantages of operating in this way are: We can consolidate orders into one delivery which can materially reduce distribution costs. Items can be delivered through stores which currently receive 50% of all our Online orders and we have visibility and control of all orders through our own trusted networks and tracking systems. This allows us to ensure quality of service and in the event of any delivery issues or queries, customers have one point of contact.

It seems to be working for Next with full price LABEL sales in the first half of this year up +26% and total sales (including markdown sales) up +29%. They expect full price sales in the second half top 2019 to be up around +13%, more in line with their original full year estimate of +15%. The expected slowdown in growth in the second half is mainly due to errors and stock shortages in their Lipsy - owned by Next - ranges which they believe will slowly be corrected.

Next Label Branded Goods selling

For the full year, full price LABEL sales are forecast to be up +19%. Total sales (including markdown sales) are forecast to be up +21% with net margins, after central overheads, forecast to be around 15%. 

In this retail environment this is very impressive. Sales are a combination of wholesale and commission, and although they make lower net margins on commission sales, they encourage their partners to adopt this model because they believe it generates higher sales growth. In the first half of this year commission sales grew by +32% compared to wholesale which grew by +18.5%. It's also less risky.

As of August 2019, they have four clothing brands operating on Platform Plus and plan to add at least ten more later this year, with more to follow in 2020. 

Last month they also agreed a licensing deal with Ted Baker to create and sell Ted Baker children’s products. They intend to launch the first collection in Spring 2020.

Right - Next's Label sales over the last four years

Next, thanks to its Directory, has fine-tuned its delivery and database over many years and is trusted by its customers. H&M, on the other hand, doesn’t quite have the online reputation, but, being able to return to store could be a massive positive for consumers.

It will be interesting to see how fast and big they go with this concept and the brands they decide to stock. Third party branded goods allows for a faster turnover of brands and product, less risk, especially under this commission model, and the subsequent cool and elevation that can rub off on a tired umbrella brand.

Consumers are addicted to newness and H&M needs to try something new. This idea has the potential to work, though it is getting increasingly competitive, it just needs to judge when the sportswear trend will finally end, which brands connect with their customer and what the next big trend will be.

Published in Fashion

sportswear dominating fashion kris jenner

sportswear dominating fashion kris jenner

sportswear dominating fashion kris jennerWhen New Look announced, at the beginning of this month, its menswear was going online only, it solidified what we already knew; high-street fashion is struggling, badly. It was only a few years ago, when the ‘dapper’ three-piece skinny suit was at its zenith and pocket squares were furnishing top pockets, that the good times were rolling and Britain’s high-street menswear retailers were expanding.

Left - Momager Kris Jenner loving an adidas tracksuit but with a Gucci bag or Fendi keyring

Back in 2016, New Look was busy rolling out menswear stores in university towns, appealing to those on a budget wanting fast fashion. New Look was fairly late to the menswear party, following in the footsteps of brands like Topman, River Island and Moss Bros, but it had lofty ambitions. They opened 22 menswear stores in places such as Shrewsbury, Exeter, Maidstone, Derby and Nottingham. They are all now closed, wth New Look saying in a recent statement, “New Look is removing menswear from its UK and Ireland stores but will continue to sell the range online and on third party platforms,” such as ASOS and Zalando.  

So, what happened? Sportswear happened. Branded sportswear has been the main fashion story for the past few years. From trainers to tracksuits, sportswear is everywhere and on everybody. 

Recent results from sportswear behemoth, JD Sports, illustrates its growth and dominance. JD Sports, which is now more than three times bigger than arch rival Sports Direct, almost-doubled revenue in its latest results for the 52 weeks to February 2, 2019. Revenue was up an incredible 49.2 percent to £4.7 billion for the period compared to the year before, with profit before tax increasing by 15.4 percent to £339.9 million pounds. 

JD Sports’ results includes its acquisition of the Finish Line business in America. The brand was bought for around £400 million in June 2018, and saw JD Sports take ownership of Finish Line’s 600 stores in the US.

JD Sports executive chairman, Peter Cowgill, said in a statement: "We believe that our acquisition of the Finish Line business in the United States, the largest market for sport lifestyle footwear and apparel and the home to many of the global sportswear brands, will have positive consequences for our long-term brand engagement whilst significantly extending the group's global reach. We maintain our belief that Finish Line is capable of delivering improved levels of profitability.” JD Sports said it stayed clear of reactive discounting while offering a point of difference in the goods it sold. 

This American dominance, particularly of the internet and social media channels, has helped grow this market. When American football is coming to Wembley and there’s even talk of baseball making inroads into this country, then you know the power of the American online world we now live in. When you see Kris Jenner wearing a full adidas tracksuit on multiple episodes of the Kardashians, instead of the luxury labels she used to be wearing, it really illustrates how far this trend has come and it’s global. 

JD Sports is now in 10 countries in mainland Europe with its first store in Austria at Mariahilfer Strasse in Vienna opening in the next few months. The JD fascia saw a net increase of 39 stores in the period with new stores in all of the retailer’s existing territories as well as its first two stores in Finland. In Asia, JD Sports has opened its first stores in Singapore, Thailand and South Korea with its local partner Shoemarker Inc, and now has 16 JD stores, including 14 conversions of the multibrand Hot-T fascia which was acquired in the previous year.

New Look recently closed all of their stores in China, Belgium and Poland, 85 stores in the UK and, potentially, those in France and Portugal too. It has returned to profit after its underlying operating profit came in at £38.5 million to Dec 2018, compared to an underlying operating loss of £5.1 million for the same year-to-date period the year prior, but like-for-like sales are still falling, they’ve just slowed.

These woes aren't just restricted to New Look. The fall in the value of these high-street companies is illustrated by Arcadia recently buying a 25 per cent stake in retailers Topshop and Topman back from US investor Leonard Green for $1 or 76p. It was rumoured the US private equity firm bought the 25 per cent stake from Sir Philip Green’s Arcadia in 2012 for £350 million. That’s some devaluation.

Another British high-street brand suffering from the dominance of sportswear is Moss Bros. The menswear retailer recorded a £4.2 million loss for the 52-week period ending January 26, 2019, compared to a profit of £6.7 million the year prior. Revenues were down 2.1 per cent to £129 million and like-for-like sales dropped 4.3 per cent. Interestingly, full-year figures showed that like-for-like hire sales plummeted by 9.3 per cent. People aren’t even renting formalwear now?! Moss Bros chief executive, Brian Brick, said it was an “extremely challenging” year. “We suffered from a combination of a significant stock shortage and extremes of weather, alongside sporting distraction in the first half, which impacted footfall into our stores,” he said. That “sporting distraction” was the World Cup with people no doubt wearing yet more sportswear.

“Looking forward, in common with many UK retailers, we continue to anticipate an extremely challenging retail landscape, particularly within our physical stores, as a result of reduced footfall and rising costs.” he said.

This sportswear as a fashion trend is slowing, but sportswear is beyond a trend, now, and it’s a lifestyle and ease of dressing that is resonating around the world and to every age group. These once dominant British high-street stars are contracting and they are cutting off limbs (menswear) to save the vital organs. Karl Lagerfeld once said, “Sweatpants are a sign of defeat. You lost control of your life so you bought some sweatpants.” He couldn't be more wrong.

Published in Fashion
Tuesday, 30 August 2016 09:32

#OOTD 88 Olympic Geek 5/5

the chic geek blogger olympic gamesIt's over :( The Rio 2016 Olympic Games is finished and it's time to hit the showers. Post-gymwear requires a simple yet stylish approach to sportswear. Comfort is key and rehydration a priority as you venture home and flop into bed. 

Put those aching muscles into loose tracksuit bottoms with sandals and sports socks and go home to eat your own body weight of food. You deserve it! 

Credits - Tracksuit Bottoms - Duck & Cover, Rucksack - Herschel, Watch - Storm, Sandals - Birkenstock from ASOS, Blue Rain Jacket - Huez, White Olympic Team GB Top - adidas from JD Sports, Socks - adidas from ASOS, Fragrance - ‘Uomo’ by Salvatore Ferragamo, Moisturising Shave Gel - The Real Shaving Co., Superdefense Night - Clinique, Water - SmartWater

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Shot by Robin Forster on Olympus PEN

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Published in Outfit of the Day
Tuesday, 23 August 2016 11:57

#OOTD 87 Olympic Geek 4/5

rowing sports geek ootd blogger

TheChicGeek's fourth Olympic ring sees him take to the machines. Going hard before he goes home, TheChicGeek is showing off those geeky guns in a sleeveless running top and running shorts with gradient details. Add a bright sports shoe and a covering of sweat and you'll be fitter before you can say Tokyo 2020!

Credits - Trainers - Nike from JD Sports, Watch - AVI-8, Socks - adidas from ASOS, Sleeveless Top - Admiral Performance from Sainsbury’s, Shorts - Iffley Road, Tracksuit Top - adidas from JD Sports, Backpack - Herschel, Even Better Dark Spot Corrector & Optimizer - Clinique, All-In-One Progressive SPF - That’s So

Shot by Robin Forster on Olympus PEN

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Published in Outfit of the Day
Monday, 15 August 2016 13:30

#OOTD 86 Olympic Geek 3/5

nike sneakers ootd the chic geek olympicsAs Team GB continues to bring home the gold medals, TheChicGeek's third Olympic Ring OOTD goes bright in bold yellow and orange. In a loose fitting running top, retro-length sports shorts and leggings, TheChicGeek just needs the arms and legs to go with it. Maybe lifting all those winning medals will help! 

Go bright, or go home. Come on #TeamGB

Credits - Yellow Trainers - Nike from JD Sports, Skin Cream - Egyptian Magic, Sunglasses - Oakley, Watch - AVI-8, Mr Mint Daily Face Wash - Soveral, Black Leggings - Bjorn Borg, Yellow Shorts - adidas, Orange Top - Soar, Tracksuit Top - Umbro

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