Between the ‘loungewear’ emails and the ‘we-give-a-shit-please-buy-something’ emails, some brands have been hoping to offset some of the losses of physical retail with online. Online has the potential to be many brands’ life support machines; keeping some form of cash flow ticking over and the lights on.
Left - Net-a-Porter has closed its American website & warehouse
Dixons Carphone has said sales surged by more than 70% as Britons rushed to buy laptops, games consoles and freezers to cope with the coronavirus outbreak. Online sales in the UK and Ireland surged 72% in the three weeks to 21 March.
“There will be some recovery through online operations but overall the loss of sales will adversely impact our full-year profitability and cash position,” it said. The group said as a result it would still miss out on about £400m of sales between now and the end of its financial year in April.
Fashion has a lot less ‘need’ and as such will be harder hit. Fashion brands have huge amounts of stock sitting in stores, not going anywhere anytime soon. These shops have now become in-town warehouses, but they still need manning and this has become a problem for some brands. Many consumers seem to think that online and offline is separated, robotically picked and magically appears on their doorstep.
The family owned department store chain, Fenwicks said in a statement: "Our people, both employees and customers alike, are at the heart of our business... Therefore, we have taken the decision to temporarily close our website as well as our stores, to ensure the safety of our teams and customers.” Fenwicks only went online in 2017 and pick the items from in-store stock.
Schuh, the footwear retailer, too has closed its website. Chief executive Colin Temple said: “At this point in time, the UK government guidelines include that online retail should ‘still open’ and ‘is encouraged’ along with advice that if staff cannot reasonably work from home, they should continue to go into work.
“However, with the Schuh head office and DC operations based in Scotland and Scottish Government advice conflicting with UK government advice, Schuh management have made the decision to close their website, in addition to their stores that already closed from the evening of Sunday 22 March.”
He added: “A number of DC staff continue to indicate that they want to work within the warehouse to support the Schuh online business, along with other departmental employees offering their support also. However, Schuh management have confirmed that the website and stores will remain closed until there is updated UK and Scottish government advice.”
No doubt demand has fallen overall with many people tightening their expenditure and only buying what they need. But, what about the exclusively online retailers? Most surprising is Net-a-Porter/Mr Porter has closed its American business. Customers visiting the US site are now met with a message that reads: “In line with local government guidelines, and for the health and safety of our community, we have temporarily closed our warehouse. We hope you are all staying safe and look forward to welcoming you back soon.”
This is a nightmare for fashion brands selling products with a shelf life. The discounts have already started, and they’re big, Liberty of London went straight in with 50% off. Some retailers are doing okay at online, but even the best figures won’t replace physical retail, representing a 20/80 split between online and offline. To shift all this stock they will need to discount heavy, eating into profit margins, and consumers, used to a never-ending supply of ‘Just In’ will have to adjust to a new shopping landscape with less choice.
Update - Next, River Island & Moss Bros have announced their websites will close.
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Is there ever a perfect time to launch anything? Warehouse, the women’s high street brand founded in 1976 by Jeff Banks, is launching menswear this week. The traditional British men’s high-street has been in the doldrums for quite some time since the skinny suit was replaced by the branded tracksuit. So, the question is, does this ambitious new launch signal the start of a potential menswear renaissance or will it be simply too difficult in a segment that has seen other well known high-street brands crash and burn?
Jonathan Munro, Warehouse Menswear designer says, “We feel strongly that there is a gap for a well-designed sustainable brand at a great price point. We wanted to build on the success of the womenswear line, marking a new chapter in the brand’s history and fulfilling what we believe, is a gap in the market.” he says. It is worth noting that this isn’t the first time Warehouse has done menswear. They had menswear in the early days of Warehouse so they are not promoting this as a first.
Left - Warehouse Menswear SS20
The main focus is, the fashion word du jour, sustainable. The new range will be sold online via the Warehouse webstore www.warehouse.co.uk and through host e-tailers and retailers; The Idle Man, Zalando, JohnLewis.com, Next and the Australian retailer Myer. Price points range from £15 for a 100% organic T-shirt, up to £189 for a recycled polyester content suit and £229 for the chrome-free suede jacket.
“The core of the range is made up of high quality wardrobe staples that should last season-after-season, balanced with breathable cottons and linens in a wearable colour palette.” says Munro. “We have a great range of printed shirts, from monochrome geos to abstract hand painted illustrations which are all designed in-house. Key pieces include our heavy twill overshirts and slim utility trousers.” he says.
“Fashion needs to become more sustainable for the good of the planet.” says Munro. “100% of the range includes sustainable fibres such as organic cottons which use less pesticides and therefore less pollutants, recycled polyesters made up from salvaged plastic bottles and eco viscose which is derived from renewable wood sources.”
What will Warehouse Menswear add to the British men’s high-street market? “Sustainable clothing for the modern man who needs his clothes to last and work for him every day.” says Munro. “We know women buy clothes for men and we also know men buy clothes for themselves - it's aimed at whoever wants to buy it.” he says. “We are holding a pop-up store at Protein Studios in Shoreditch, running from the 2nd – 7th March. This is to allow customers to see the range first hand, interacting with the materials and learning more about the sustainability messaging which runs throughout.”
What does the future look like for Warehouse Menswear? “Our main focus will be to continue to research and develop new ways of working with sustainability in mind, supported by the knowledge of what the Warehouse Menswear customer is looking for in a sustainable clothing collection.” says Munro.
Brands such as Whistles and New Look both struggled in the menswear category. Whistles cancelled its menswear range this time last year and New Look removed menswear from its stores in April 2019, going online-only. The rest of the high-street from Topman to River Island to Jigsaw have struggled to compete with Zara and the sports brands. But, things aren’t all doom and gloom, according to a ‘GlobalData’ report ‘The UK Clothing Market 2018 – 2023’, menswear will be the driving force of the clothing sector, forecast to grow by 12.3% over the next five years as greater trend incorporation and newness drives volumes.
A British Fashion Council and Mintel report estimates that consumer spending menswear has grown 5.1% to reach £15.9 billion in 2018. Menswear now accounts for 26% of the total clothing market, whilst womenswear accounts for 51%. Consumer spending on clothing is forecast to rise 25% to £76 billion in the next five years to 2023.
Warehouse’s parent company, the Oasis and Warehouse Group, clearly sees potential in the menswear market having recently purchased online retailer The Idle Man for an undisclosed sum in Sept. 2019.
Right - Warehouse Menswear SS20
So, what do the experts think Warehouse Menswear’s prospects are?
“When this was announced, I’m not going to lie, I was very surprised, to say the least. I understand a lot of people keep on talking about the growth in men’s fashion & grooming, but when we see retailers from New Look to Whistles dropping their menswear offering, it does beg the question, is now the best time to launch a menswear brand extension?
“Additional to this, we have an awful lot of talk on sustainability and buying less but better quality, plus when well known names like TOPMAN are not performing particularly well at the moment, its hard to see a brand not known for their menswear being a success in these difficult, uncertain times. However, maybe this is what the menswear market needs, maybe Warehouse it going to target the ladies buying for their men, but this is an ever increasingly niche demographic. I do wish Warehouse all the luck in the world and hope their Menswear offering is a success, but I won’t be holding my breathe.” says Anthony McGrath, Founder of Clothes-Make-the-Man.com & leading academic.
“It’s certainly a challenging time to launch, but there’s an opportunity for Warehouse where other major high street names are stalling or retracting on menswear. There are multiple challenges for high street retailers; nimble online competition, prohibitive high business rates, persistent economic uncertainty and the fact that many of us no longer choose shopping as a preferable leisure activity. However, in my opinion the current menswear offer from the high street, with a few exceptions, is failing to offer well-made, well priced and exciting product. There’s a proliferation of dull, cheap clothes.
I’d like to see a certain amount of risk taking. Nobody needs another line of neutral, anonymous ‘wardrobe essentials’. Men shop for themselves. It’s not going to work if the strategy is to rely on existing customers.” says Jessica Punter, Stylist & Grooming Consultant, & former GQ Style & Grooming Editor.
“It'll be a tough fight, and depends on their marketing strategy I think. They have a nice campaign video and a pop up shop but is that enough? We'll see. They have an opportunity now to really nail it, to take the market share from the high street brands that don't do it particularly well, but time will tell! I think others failed because they weren't offering a mix of product for different customer groups, so hopefully Warehouse will.
“There isn't a 'good time' to launch I don't think, there's always going to be peaks and troughs in the industry, and right now we're just coming out of a terrible time for retail, so maybe it's a great time! To wait until fashion week or another event is pointless now as we know men don't really shop to seasons or events, they just shop because they need to. I guess it's a good time in the year though, because now is the time for newness, so makes sense from a business point of view.
“Initially, I think it'll be the aimed at the women for sure, because they are the ones going in store and online to buy Warehouse, but if they have a good marketing plan, and get it out to wider audiences, men will slowly show up. Also, I wonder who they are partnering with, if anyone, to wholesale? That'll be really important in pulling in a new menswear customer. It'll be slow, but maybe they might be able to do what others have failed to do!” says Simon Glazin, freelance fashion writer and blogger.
Left - Will it work? Warehouse Menswear SS20
“I think there's space for an affordable, fashion-forward offer now Topman is tussling with Boohoo over cheap sportswear, but Warehouse aren't going to be the ones to provide it. Well, judging from the images I've seen.” says Lee Clatworthy, Fashion Writer.
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If things weren’t getting hard enough for ‘fast-fashion’ retailers along comes ‘Extinction Rebellion’ (XR). Protests the world over are warning of impending doom and trying to ram home and ostracise those who continue to shop at brands and retailers vilified for producing clothing that is deemed to be disposable.
While the traditional high-street has struggled, both here and in the US, Forever 21 filing for Chapter 11 bankruptcy protection, for example, the winners of the fashion internet, such as ASOS and Zalando, appear to be slowing. Recent profit warnings and falling share prices have put a wobble in this bright spark of retail.
Left - An impromptu anti-fashion show in London's Oxford Circus
While ASOS is expected to show an uplift in revenues this week, could this be the peak for these types of retailers? Is the much publicised message of Extinction Rebellion cutting through to the buying public and will this prove to be a tipping point for ‘Fast-Fashion’?
Morgan Stanley recently said the volume of clothes shoppers buy has plateaued, "we suspect it's primarily because consumers are now buying clothing in such large quantities that they get very little marginal 'utility' from any additional items.” they said.
Retailers such as Primark, H&M and Boohoo rely on large volumes with small profit margins. Is this slowing more a result of saturation rather than the start of a boycott of ‘fast-fashion’ brands for environmental concerns?
“There is some very muddled thinking around the debate on how to make the 21st-century world more environmentally-friendly.” says Eric Musgrave, fashion industry commentator and former editor of Drapers. “I am sure the fashion industry is wasteful, but I’d like to know which large-scale industries are not. Who, for example, ever talks about mass-produced furniture, or pots and pans? I am not an apologist for the fashion business, but it is seen largely as a frivolous unnecessary luxury, not a necessity, hence it is an “easy” (or some would argue “legitimate”) target.” he says.
“I see no desire from the mass of the British public to change their buying habits. It would be wrong to confuse problems that may have risen at individual companies like Quiz and ASOS with overall trends.
“Too often overlooked in all this analysis is that the UK is a very troubled economy, with little sign of it improving any time soon. We have had 11 years of austerity and many people do not have much money. Asking them to forgo the pleasures they derive from cheap fast fashion is the epitome of wishful thinking.” he says. “Fast fashion is here to stay for decades to come – within the sector there will always be winners and losers.
And ask yourself, seriously, what lasting impact on fast fashion did the grim Rana Plaza disaster in Dhaka in 2013 have?”
“The fast fashion firms will not adjust their model. If some disappear, others will appear to take their place.” he says. “Finally, I await the explanation from Extinction Rebellion and the like about what all the many millions of people who earn a living in the fashion supply chain will do if it were to shut down tomorrow.”
Fast-fashion retailer Quiz, a fast growing newcomer to the market, recently announced lower sales in the first half of the year in the face of a “very challenging” high street. The retailer said its stores and concessions had suffered weaker-than-expected sales over the six months to September after a slump in footfall. Quiz reported that total group revenues slipped 5% to £63.3 million during the period, as online growth (7%) failed to offset its high street decline.
The entire fashion industry seems quite content to push all the heat onto these ‘fast-fashion’ retailers. Now public enemy No.1, ‘fast-fashion’ has become a scapegoat for the fashion industry in general. Arguably, all fashion is fast and in its nature it is disposable. People are being forced to question their purchases and asking themselves if they really need it, but is it significantly changing behaviour?
As part of Extinction Rebellion’s #XR52 weeks of direct action, they are urging people to #BOYCOTTFASHION for a whole year, in order to disrupt business-as-usual and send a message to government, industry and public alike that enough is enough.
Olly Rzysko CMO + Retail Advisor, says, “It will take something big for there to be a significant shift, eg the ‘blue planet’ plastic straw moment.”
Kathryn Bishop, Deputy editor - LS:N Global, says, “On Question Time last week, an audience member said David Attenborough spoke to her more than XR activity did. Sadly…”
It appears people are still buying clothes in volume, but we reached a peak a few years back. Kantar data suggests consumers in the UK are buying 50 items of clothing a year, up from 20 items in the 1990s but down from 52 three years ago. In the US the figure is estimated to be as high as 65 items a year, compared with between 40 and 50 in the 1990s and almost 70 in 2005.
"Put simply, consumers would rather spend their marginal dollar on, say, going out for a meal, than on buying a 60th item of clothing in a year,” Morgan Stanley analysts Geoff Ruddell, Kimberly Greenberger and Maki Shinozaki said in their report.
"It is our contention, therefore, that the apparel markets in many developed countries may now be entering a lengthy period of structural decline.” they said. The main catalyst for increased consumption was falling prices. "If clothing volumes are plateauing in developed countries, the only way the apparel markets there can grow is if clothing prices go up," the report said. "But (potential US tariff impacts aside) we think it more likely that they will continue to fall ... as production continues to shift from China to lower-cost countries in the region (such as Vietnam and Bangladesh)," it said.
US clothing prices have fallen by 0.8 per cent a year since 2001, while UK prices fell for 13 consecutive years until 2010. Volumes in the UK have more than doubled since 1998 and US volumes have grown almost 50 per cent since 2001, driving 28 per cent market growth. "Expecting consumers to buy clothing in ever-larger volumes, in response to ever-lower prices, was never likely to be sustained in the very long term," the Morgan Stanley report said. The allure of buying has also gone with consumers already own so many clothes that each new item they purchase doesn't spark happiness the report also said.
Personal stylist Elsa Boutaric with a focus on sustainable fashion and helping people build a sustainable wardrobe, and spend less, says with regards to the #ExtinctionRebellion movement, “I think it is definitely raising awareness of the issues surrounding fast-fashion, and putting it into the minds of the consumer. Publishing reports, stats and figures of the actual effect that the message is having has the potential to be more valuable in driving change.” she says
Is this the tipping point for fast-fashion?
“Consumer behaviour patterns are changing and though we still live in a generation of convenience, consumers are looking for more sustainable and ethical options than a cheap pair of jeans and shoes.” says Boutaric. “People shop on ASOS because it is a viable option compared to other online shops, so when their customer base moves away to look for sustainable alternatives, they don’t have anything to fall back on.
“ASOS is middle market, combined with high street and doesn’t really have a place in the future of fashion unless it learns to adapt, and this is what it is going to have to prove it can to do both its customers and its investors in order to secure its future.” she says.
“The disadvantage they (fast-fashion retailers) have is that they deliver huge volumes on low margins, so would need to change their business model drastically. This isn’t easy to do when you have developed a position in a market place and it would mean working with new designers and increase their prices. This not only has the potential to reflect badly on their own brand, but also the designers that they work with." she says.
Right - Are you ready to boycott fashion for a year? #ExtinctionRebellion
“They would need to introduce charitable angles or work with ethical designers without damaging their reputation or losing their market. Also, they would need to manage their stock and not have so much go to waste sitting in warehouses waiting to be sold. This could mean a change in manufacturers and distributors which could prove costly and time consuming. There are several factors that businesses would need to consider, and not all of them will survive.” she says.
“There has certainly been a shift, and it is being driven by consumers and some brands are struggling to keep up, but others are adapting and thriving.” says Boutaric. “I don’t think it’s a case of reducing their consumption, it’s more consumers buying more ethical options. More people are only buying what they need, or shopping charity shops, or attending clothes swaps. Buying new seems to be a new slur, unless it’s from ethical brands and designers.” she says.
We are constantly told that young people are the most engaged in these types of environmental movements and it’s their future we are ruining, but they are also fast-fashion’s target demographic and consumers. There’s a big disconnect here.
There could be a perfect storm brewing for fast-fashion with XR. If it connects with young people’s behaviour it could be significant. A swing away from this type of consumption could be detrimental to these giants of fashion.
Fast-fashion retailers are starting to make green noises with second hand stores - Read more here - popping up and others like H&M and Next moving into selling other brands to off-set the malaise in their own - Read more here - but investors think long term and will need to feel confident that these retailers will continue to grow and be profitable. One thing is certain, brands and retailers will want to distance themselves from the term 'fast-fashion' and its negative connotations. There needs to be a groundswell from the people passionately protesting at Extinction Rebellion to the average British consumer.
'Fast-Fashion' is the OxyContin of the fashion industry. Going cold turkey could have some serious side effects.
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Just as Boohoo shutters all Karen Millen and Coast stores and relaunches both exclusively online, it could be worth rethinking their strategy. We often think of physical retail going head-to-head with online. It’s one or t’other. The digital upstart appeared, grew quickly and is making the former, and in many cases painfully, contract as we head towards a new balance of consumer retail. But, before you decided to close all your stores in your retail network, there’s something you should know. Ninety per cent of all UK retail spend if influenced by a store and, according to research by CACI Consulting Group, across the UK, online sales are 106% higher within a store’s catchment area. Fashion, in particular, was 127% higher.
CACI Consulting Group provides solutions to make the best possible location planning and customer targeting decisions for brands and this UK wide survey was conducted with over 2,500 consumers across 20 different brands. They are calling it the ‘Halo Effect’ and it describes the uplift in online sales due to the presence of physical stores. “We know that stores facilitate showrooming and click & collect and we can quantify them as well, but what was less known until today is the uplift that stores have on what were considered ‘pure play online sales’ – or what we characterise as the ‘sit on the sofa with an iPad, get it delivered to your house or office shop’. These sales are twice as likely to take place within a store’s catchment than outside it – demonstrating the effect that physical stores have in driving online sales.” says CACI.
The catchment area is defined using drivetimes based on where 80% of customers who spent in store come from according to the survey data. The size of the catchments therefore varies by brand so, for example, John Lewis has a much larger catchment than a Boots.
“The presence of a physical store gives a customer the security of knowing that should something go wrong there is a store you can go to. In addition, seeing the store as they go to work and shopping puts the brand front of mind and builds trust with the shopper, and store led marketing in the catchment area reinforces the brand. All of these secondary effects drive online behaviours up. It is no coincidence that bar a few notable exceptions some of the biggest online brands also have national store networks: Argos, John Lewis, Next. This is also why Amazon are increasingly exploring what a network might look like.” says CACI.
Fashion, in particular, was noticeably higher at 127%, why is this? “We believe that fashion is higher because it is more of a discretionary purchase. This has two impacts – you are more likely to see it, consider it and then purchase later, at home (a subconscious showrooming) and you are also more likely to return it, particularly if you live within a store’s catchment. Therefore, being near a store triggers increased engagement.” says CACI.
For every £1 spent online outside a store’s catchment, £2.06 is spent online inside a store’s catchment. According to CACI, consumers still value a trip to the shops. Although frequency is down, average spend is up per visit and net promoter scores in shopping locations have increased by almost a third. Suggesting we’re more, rather than less, satisfied when we visit. “In this environment the role of the store can be far more nuanced. No longer a place that just shifts stuff, it is simultaneously a marketing hub, fulfilment centre, experiential destination and showroom.” says CACI.
Norfolk Natural Living's founder, Bella Middleton says, "The fact that online sales are 106% higher within a store's catchment is not a surprise. Nor should it be. It is evidence that the internet simply cannot replace the trust and community feel of visiting a physical retail store.
"At Norfolk Natural Living, we have a retail store in Holt, Norfolk, and a website selling our products internationally. Despite some incredible media coverage having grown awareness of our sustainable products internationally, we still see more orders from within the Norfolk area than any other region.
"To me, this is an opportunity for retailers to remember that the internet isn't everything. It is fast, convenient and comparatively easy to manage your business online, but people still cling onto that desire for trust and community. Even if they ultimately put their card details into a website rather than a card reader.” she says.
It appears that people also like local online. “As an online retailer based just outside of Sheffield when we have looked at our regional sales we found it really interesting the sheer volume of sales we have in counties close to home compared to further away and when our website shows us the locations our customers are from there is a spike in cities within a 35 mile radius.” says Lucy Arnold from Lucy Locket Loves, a women’s sportswear brand.
Could these kind of stats be the motivator to see pure play online retailers open physical stores? “We already are and the false distinction between on and offline will only blur further.” says CACI. "If you are a pure online retailer today, you only have 15% of the available spend in the market open to you because 85% of consumer spend touches a store. In addition, your competition online will often already have a store network and operate at a competitive advantage in marketing and brand awareness. In those circumstances why wouldn’t you go play in store?”
Is there any evidence where stores have closed and online sales have gone down? “Mothercare is the clearest one. As they embarked on a store closure program, they have seen online sales fall as well.” says CACI.
Is this information compelling enough to keep stores open is the real question? If rents and rates drop then stores will have a far brighter future and this type of online ‘Halo Effect’ will be another reason to keep stores open or be reopened. Having the shops in the right places to maximise this catchment area theory is key and reducing overlapping stores will be the obvious step for those with a larger retail network. It’s all about finding the perfect balance and looking at physical and online working together rather than against each other.
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.
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.
The simple narrative of big shops are dying, department stores are dinosaurs and physical retail is on its knees just doesn’t ring true. Primark is bucking the trend, and, to really the ram the point home, has just opened not only the world’s biggest Primark in Birmingham, but also officially the largest fashion retail store in the world according to the Guinness World Records. Move over Topshop!
Spread over 5 floors, and 160,100 sq ft in size, the new store boasts womenswear, menswear, kidswear and homeware, plus the largest ever Duck & Dry beauty studio, the first in-store barbers salon from Joe Mills, and 3 dining experiences, including a Disney Café. If it sold washing machines it would be classed as a department store.
Left - Primark's new Birmingham mega-sized store
While nobody seems to know what is going on at Debenhams, and Mike Ashley is hoovering up brands like a hyperactive Dyson - we’re still not sure what he is going to do with all these companies - Primark is an illustration of very large physical stores still opening and doing well.
With no e-tail presence, Primark is where all the other department stores’ physical customers have gone, not to mention Marks & Spencer’s and Next’s. Primark’s Adjusted Operating Profit was £843m in 2018, with revenue of £7.477b, up from £7.053b the year before.
According to local press, Birmingham Mail, “The new Primark megastore Birmingham has been jam packed for four days in a row. Crowds of people flooded into the 160,000 square foot shopopolis when Primark opened its doors 15 minutes early at 9.45am on Thursday, April 11. Ever since our live Primark updates began, the five-floor giant has been packed from the basement to the roof with shoppers - and diners - keen to see what all the fuss is about.”
Primark needs large stores to make its business model of pile-it-high-and-sell-it-cheap work. Only this week, another Primark opens in Milton Keynes. centre:mk see its new 75,000 sq ft store open in the heart of the shopping centre and is the largest new store to open in centre:mk in the last 25 years. Over 3 floors, Primark was the most requested brand by the centre’s 25 million visitors in exit surveys over a number of years.
Kevin Duffy, Centre Director at centre:mk, said “We are thrilled to announce that Primark will be open on the 16th April and joining our fantastic selection of fashion and beauty brands at centre:mk. This is a key moment for us – the new flagship store will be the single biggest store since we introduced Marks & Spencer to centre:mk nearly 25 years ago. Primark is a firm fashion favourite, and so we look forward to attracting more visitors by expanding the centre’s fashion retail mix.”
Primark are expanding into Slovenia, this year, and continuing to grow in America. Primark currently has 9 US stores clustered in the north eastern corner, but plan to open a store in Florida in late 2019. While its expansion has been slow and steady, it was ranked in the top spot on a list of the 100 fastest-growing retailers in America by the National Retail Federation's Stores magazine, which used sales data from Kantar Consulting. In the US, specifically, Primark sales were up 103% year-on-year.
Urban Outfitters is another brand looking to expand with larger stores. Planning to open 15-20 new stores annually for the next five years, the US-based retailer has 50 stores in Europe, including 28 in the UK and Ireland. Emma Wisden, European Managing Director, said the retailer has identified several key markets of interest within Europe that it is underexposed in, which it will be pursuing imminently. Speaking to Drapers, she said, “Urban Outfitters is in the fortunate position of being one of the ‘disruptor’ brands in fashion at the moment. We are opening stores, not closing them, unlike so many of our neighbours on the high street. Ecommerce is, of course, increasingly important, so it is crucial to constantly evolve omnichannel shopping. However, bricks-and-mortar retailing isn’t going anywhere soon.”
Right - Primark's Duck & Dry Beauty Studio in Birmingham
Urban Outfitters has increased its European store portfolio by more than 30% over the past 12 months with new stores in Vienna, Milan, Paris, Eilat and Düsseldorf.
These two retailers illustrate the polarisation of physical retail. Bad, boring retail is dead, and while people are attracted to Primark for the prices, by adding hairdressers and restaurants, they are giving people more reasons to visit and stay longer. Primark’s phenomenal success is allowing them to think beyond cheap clothes and their tie-ups with Harry Potter and Disney at pocket money prices is a guaranteed success.
Urban Outfitters is clearly riding the retro, sportswear trend, but being a shop of discovery and fresh ideas and brands allows a chance for constant change if the buy is right.
Many retailers with large stores are finding it hard to balance business rates, rents and falling footfall, but Primark and Urban Outfitters are proving, clearly, that people still want to leave the house.
Returns cost money, lots of money. Free delivery and no quibble returns are starting to become a strain on online retailers and it seems ASOS has had enough. The British fast-fashion giant recently announced it was cracking down on ‘serial returners’. An extension in its returns policy - items can be returned up to 45 days after purchase with a cash refund up to 28 days and credit thereafter - was also issued with a threat to investigate and ‘take action’ if it notices anything unusual with people returning more items than usual. If it suspects someone is wearing and returning goods, or ordering and returning ‘loads’, it may deactivate the account.
Left - ASOS' returns are costing them dearly
ASOS is one of the world’s largest online retailers, particularly amongst younger demographics, and its ease of ordering and returning is, arguably, part of the their success and growth story.
Becky, 29, says “I think it’s against the whole nature of online shopping. When you go into a shop you can take 10 items into the changing room and not like any of them, e-retailers need to expect the same thing to happen with their sites and customers should be able to return the items they don’t want.
"I buy a lot from ASOS and return a lot simply because it doesn’t fit right or because it doesn’t look how I expected it to when I bought it.” she says. “If it starts impacting how quickly refunds come through – or if I start having refund requests declined – then it definitely would discourage me. I love ASOS though – majority of my wardrobe is from ASOS, now, where they host so many brands – so I’m intrigued to see what happens!”
This issue is experienced by many retailers. Research conducted by resource planning platform Brightpearl, who surveyed 200 retailers across the UK, found more than a third of shops have seen an increase in serial returns over the last year. As a result, 45 per cent of retailers, including ASOS and Harrods, said they were planning to blacklist repeat offenders. It can cost double the amount for a product to be returned into the supply chain as it does to deliver it and in the UK, it can pass through seven pairs of hands before it is listed for resale. This all takes time and money.
Meli, 26, says “I’m glad that this prevents people returning used items as I’ve had something sent to me from ASOS before that was definitely used. However I’d hate to be blacklisted for genuinely returning items that don’t fit/I don’t like!
“I often order in bulk with multiple options and different sizes then do a try on at home to see what I like best, and return the rest. I think the real problem is sizing as ASOS stocks so many different brands, it’s hard to rely on standard sizing to be the same across all.” she says. “If I was blacklisted then it would certainly drive me to other online retailers or just shop directly with the brands that ASOS stocks. For now, it will make me think more carefully about exactly what I’d be likely to keep if it did fit.” says Meli.
Earlier this year, Zalando started a trial in which it would attach very big clothing labels to items to make it more difficult to ‘wear and return’ or post on Instagram. That label reads: “Dear customer, feel free to fit this article and try it, but if this label is removed, it will not to be accepted as a return by Zalando.”
Retailers have somewhat encouraged some of this behaviour with their ‘try-before-you-buy’ options. Consumers can order what they like and then just pay for what they keep. This encourages over ordering and a large number of returns. Amazon currently restricts this service to between 3 and 8 items.
Research from Barclaycard found that almost 1 in 10 UK shoppers have bought clothes online with the intent to wear them for social media and then return them. Surprisingly, it was the older demographic, men and women aged 35 to 44, with 17 per cent, revealing that they are guilty of shopping only for their #OOTD. The research also found that is was men who were more inclined to shop and return as they are more ‘socially self-conscious’ than women - with 12 per cent admitting to posting a clothing or accessory item on social media and returning it to the retailer afterwards.
Right - Zalando taking on the 'Serial Returners'' with their large tags
Lois Spencer-Tracey, fashion blogger, says, “Must confess, I'm a bit annoyed by this. I probably send back 80-100% of an order I receive purely because of their sizing and my body shape. Nothing to do with my Instagram or blog.”
Last year, Next announced it would start to charge customers a £1 fee for returns they make through a courier or through a Hermes Parcel Shop. The collection charge will be applied for each collection, regardless of the number of items collected. Returning items at any of Next’s retail or clearance stores in the UK remains free.
ASOS are playing the fashion police by admitting had resorted to checking people’s social media accounts in a bid to catch out consumers who wear clothes before sending them back, and falsely claim they have not received items bought online.
“I’m a massive online shopper. I find it so much easier to just order clothes in and try them on at home because then you can try on a full outfit, matching with the shoes and accessories you want. It’s so much easier to do in your own home rather than in a squished changing room. And usually returns are easy with things like collect+ which is much better than working out when you’ll next be in town to take clothes back to a store.” says Becky.
This is a difficult line for online brands to tread. On the one hand they don’t want to discourage consumers from ordering or being frightened to return things, and, on the other hand, they need to let excessive returners or people who are wearing things and returning them, know they are being monitored. It's definitely easier to return something into a faceless plastic bag than been quizzed by a sales assistant. This is probably an empty threat from ASOS, but does illustrate how serious this issue is becoming for fashion e-tailers. Rather than look at the volume of returns, maybe look at the conversion percentages of sales from shoppers. You don’t want to alienate active and engaged consumers, but neither do you want to service those costing the company dearly.
Read more ChicGeek expert comments - here
If the headlines were to be believed you’d think the high-street was in terminal decline and everybody was withdrawing at the speed of knots. Store closures across the board and brands shrinking to survive, it’s armageddon on the high-street, they scream!
The retail market has always seen brands or chains crash and burn over the years. It’s part of the retail renewal cycle and allows others to appear and grow.
Left - River Island's new expanded store at Milton Keynes' Centre:MK
"As consumers, we are becoming more and more demanding, each new level of service experienced serves to simply raise the bar even higher. In the UK in February 2018 online accounted for 17.2% of total sales (source ONS). Whilst this is still increasing (15.6% in February 2017) it is still a relatively small proportion of total sales meaning that over 80% is from the high-street. So, it is clear that the high-street is far from dead but it is evolving at a rapid rate - Darwinism on the high-street if you like, where the process of evolution naturally culls the weak whilst the strong prosper and survive,” says Andrew Busby, Founder & CEO Retail Reflections.
Continuing to grow, online retail sales leapt to 18.8% last month - April 2018 - and it won’t be long before it hits 20% and maybe even 30%. For the offline retail optimist, though, it means 80% is left for the taking offline in physical stores.
But, while the focus has been on chains closing stores - M&S announced 100 stores closing by 2022 - there are a few strong and growing brands stealthily tightening their hold and grip on the high-street. The focus is on bigger and better stores in premium locations: less stores but better.
As brands vacate premium sites other brands can cherry-pick and expand into the gaps, but only in the top tier of shopping centres and cities.
For example, both Zara and River Island are carrying out major expansions of their stores at Intu Lakeside. River Island will be doubling the size of its store to 21,000 sq ft while Zara will treble its store size to 35,000 sq ft making the stores among the largest in the retailers’ portfolios. They are the latest retailers to invest in flagship stores at Intu Lakeside since H&M doubled the size of its store to 36,000 sq ft and Next opened an expanded 70,000 sq ft store in Spring 2017.
When Banana Republic vacated Westfield White City, Zara took the opportunity to create the biggest branch in the UK. River Island recently doubled the size of its store in Centre:MK in Milton Keynes. The retailer doubled its existing unit to 20,000 sq ft to accommodate the brand’s full range of womenswear, menswear and children’s fashion ranges.
Nick Tahir, River Island, Head of Menswear Buying says, “We have over 280 stores in the UK. In an increasingly competitive high street, it is important to keep River Island stores looking fresh, relevant and exciting. With 30 years heritage, naturally some stores will require a makeover and in some towns/cities and that has been a key focus for us, we have also been increasing our square footage, to accommodate the needs of our customer and our growing divisions (for example we launched RI Kids and RI Mini only a couple of years back and the demand is consistently growing).”
“Although retailers are seeing an impact on bricks and mortar due to mobile and online, retail is still the biggest mix of sales for us. With our heritage, stores will always play an important role. They are the heartbeat of the River Island. The challenge for us and our peers in the industry, is to keep our customers coming back again and again. We do this by enhancing their shopping experience – whether that’s through pop-ups and exclusive events, or through offering something that our customers can’t find with some of our competitors; take Style Studio for example, our complimentary Personal Shopping service. It is vital for us to keep revamping and improving our store aesthetic to draw footfall, creating theatre through VM and windows and of course constantly refreshing our product offering to stay relevant and exciting.” says Tahir.
As stores grow larger at key shopping hot spots, retailers can give fewer locations more attention and fine tune, update and invest in those locations. But, what this will also mean is many towns will lose their well known names and become secondary as the money is sucked into fewer, bigger places.
“Most retailers with a large store estate have too much space so what we're also seeing (landlord rent restrictions aside) is an expected re-sizing and in some cases re-purposing of space eg. Debenhams considering renting out space to WeWork.” says Busby.
“All this means that the stores which survive will need to be far better than those we currently experience. For example, the poor quality of the Toys R Us stores was a major factor in it collapsing into administration.” he says.
“But the fascinating dynamic is that quality and customer experience in store is largely dependent upon the particular shopping journey ie. if it's a distressed purchase then the customer just wants to get in, find what they need, pay and leave - as seamlessly as possible. However, if it's for say a luxury item they may well welcome, indeed, seek out engagement and advice; being quite happy to spend far longer. Both journeys will be judged by different criteria. The trick for retailers is to recognise what journey we're on and act accordingly. Facial recognition and AI is going a long way to be able to tell what mood we are in when we enter the store.” says Busby.
Right - Zara's new store at Westfield Stratford
The shopping centre companies know this too. The recently abandoned £3.4bn tie-up between Hammerson and Intu failed, I think, because Hammerson were probably only interested in a handful of their top sites like Manchester’s Trafford Centre. Trying to offload or revive the others would be costly and a distraction and knowing where the market is heading, it knows it’ll probably be able to bid on what it wants individually if Intu starts to wobble in the foreseeable future.
In order to survive it’s going to be about fewer players with less but stronger sites. As more close, it strengthens those which are left. If you believed the newspapers you’d think that every retailer had given up on physical stores, but the clever ones are only getting started. When the growth in online slows or plateaus, these proactive retailers will be positioned to take full advantage of the eventual return to the high-street.
Read more expert ChicGeek Comments - here
The results are in and the great British high-street has polarised. On the one side is the tired and cumbersome old guard with its offering still stuck in the past, trying to shift their stock through promotions and discounts and then the younger, faster, cheaper and ultimately, more fun retailers who are reporting record sales and profits, both on and offline.
From Left - ASOS, Boohoo
Boohoo just reported a doubling in annual profit, driven by growth in new customers, and said revenue should rise by about 50 percent in 2017-18 as it benefits from recent acquisitions. Revenue rose 51 percent to £294.6 million as Boohoo increased its active customer base to 5.2 million, up 29 percent, while international growth, particularly in the United States, exceeded management expectations.
ASOS The online fashion retailer said pre-tax profits rose 14 percent to £27.3m in the six months to 28 February, while revenue increased 37 percent to £911.5 million. ASOS has again upgraded its sales guidance for the full year, pencilling in growth in the 30-35 per cent range, up from 25-30 per cent.
This is growth, most brands, at this particularly point in time, can only dream about.
The pioneer of ridiculously cheap clothes, Primark, said total sales jumped 11 percent in the six months to 4 March. Sales at Primark, which has 329 stores globally, jumped by 21pc to £3.2bn on the back of new shops.
The UK also delivered an improved performance with a 2 percent lift in like-for-like sales, which meant the discount chain stole market share from suffering high street rivals.
Even sales of clothing at Sainsbury’s and Argos outperformed the market with growth of more than 4 percent in the year to 11 March, the supermarket reported.
What’s going on? This isn’t purely price driven. While it’s a factor, they’re making product that people want and the bigger they get and more product they make, the more people they can please. Lots and often seems to be the mantra to keep the novelty of fashion ticking over.
Too many old brands do these big annual ‘collections’, but people just want lots of individual items and fast. These fast brands do look to designers and trends, but they seem to play and experiment themselves. They acknowledge what is going on, but come up with their own things too. It's a buy it or it's gone attitude.
While Next and Marks & Spencer’s languish, I think a lot of men are trading down, happy with the product and choice. I’ve never seen so many fun things for guys. ASOS and Boohoo are producing the kind of menswear once reserved for girls and the boys seem to be loving it. Ombre fringed sweaters, lace shirts and sequinned leggings are just a few of the crazy things that are coming out of these retailers, and while they wont sell in the thousands, it keeps the cool guys coming back for more.
The young guy, today, has the confidence to have fun with how he looks and he doesn’t want to invest big money in fun or one-off items that are part of a look, or something he feels he’s taking a risk on. The fact is it’s the cheapness that makes it more fun and less pressure to look like anything in particular. It also is a way of showing off, this only cost me…
I’m going to call it the ‘Harry Styles Effect’ - trying something different yet being cool enough to carry it off. Okay, he’s wearing Gucci dragons, but you get the idea.
Only a few guys can get away with it, but it receives admiration from the rest of their peer group. It’s basically about looking like a ‘cool dick’ and when you turn up in a white, see-through lace shirt and your friends ask you what you’re wearing, you secretly know they think you’re cool and it’s the buzz you get from trying something different or new. They then look to see where you've bought your items and, while maybe not getting the same things, it creates a halo for the brand.
It’s about having a sense of humour and this is why the British are so good at style: we can laugh at ourselves, while still looking cool. We can be experimental while not worrying too much about convention or others. It’s what makes us leaders and, also, why some of our retailers are so good at this too and internationally.
Another reason is young men aren’t so hung up on logos and branding anymore. They also don't have the money to spend and want something fresh and often, if only for their Instagram account. They want to go out and wear new clothes and with limited disposable incomes they have to buy cheaper. It’s FUN with a capital F and in a world that seems to be harder and harder to get by in, it’s an outlet of escapism for the young guy.
My only message is enough ‘super skinny’.
Fashion has been saturated for a while now. The industry has accepted this and is trying to accommodate and change while saving face and putting on a positive new one.
We’ve seen a massive growth in retailers offering people choice, both online and offline, since the beginning of this century. Nearly two decades later, people don't need anymore stuff and the want, that seldom matched with the need, especially in fashion terms, has also waned, especially when you feel like you’re not seeing anything new.
How many things in your wardrobe still have the tags on or are in their boxes? You’re not a shopaholic or a hoarder, you’re an average person who has more than they need and is showing the middle aged spread of affordable clothes and easy availabiity.
We’re facing an obesity crisis in our consumption and it’s starting to make people feel gluttonous and suffocated with stuff: baggage, quite literally.
I think the average person could probably go a whole year (okay, easily 6 months) without buying anything new for their wardrobe and outwardly showing it. A retail detox, if you will, which is a cleanse of overconsumption and quantity over quality.
You’d often see people outside of Primark having their Pretty Woman moment with armfuls of brown paper carrier bags, but even that sight seems to be scarcer.
It’s a great thing that people can buy what they want when they want it. Clothes have never been so cheap, but the novelty is over and people are seeking alternatives.
Next recently revealed bad sales figures, which probably means the same for retailers such as John Lewis, Marks & Spencer and Debenhams. They cited people spending their money on eating out, travel and experiences and not clothes. Debenhams is focussing more of its shop space on food and restaurants and for good reason and I expect other retailers to follow suit.
Over in America large numbers of department stores are being shut and shopping malls are replacing them with a different mix away from retail.
On another note, people’s houses or living accommodation is getting smaller so there is even less space to store even a regular amount of things.
I’m not sure what the solution is to all of this, but I think technology will play a part and make this all look very last century. Maybe it’s a more disposable, but environmentally conscious one? Drones could deliver newly laundered and ironed clothes that we hire rather than own. It seems so Victorian to wash our clothes, dry them, iron them and waste valuable living space storing them. It’s laborious and time hungry and it could easily be replaced with a new service industry along the lines of Uber or Air BnB.
Maybe it’s a brandless future that just focuses on keeping us covered, protected and warm? The majority of people buy clothes and not fashion anyway and many groups aren’t well catered for at the moment.
I think in the new year we’ll see many brands and retailers contracting or going out of business. A survival of the fittest and what capitalism thrives on. The fashion industry that involves us buying more of what we don't need is eating itself and is starting to feel and look stale. Fashion is having an ouroboros moment and it’s turning people off.