THE STATE OF FAST FASHION

THE STATE OF FAST FASHION

Over the past 5 years, the Australian Retail Market has been dominated by Fast Fashion industry and it doesn’t seem to be slowing down. According to IBIS World 2017, Industry revenue is forecast to increase at an annualised 10.7% over the next five years through 2021-22, to $2.9 billion.

In a period of subdued discretionary spending and low consumer sentiment, consumers are now more than ever looking for cheaper clothing alternatives and turning to fast fashion. Major players such as HNM, Cotton On, Zara and Uniqlo are dominating market share with their short production times and vertically integrated supply chains. So it came as a shock to many, that on Wednesday 24th May 2017 Topshop Australia entered voluntary administration.

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Almost six years after opening their first Australian stores in 2011, Topshop have been placed into voluntary administration due to mounting debts and fierce competition. Ferrier Hodgson Administrator James Stewart commented on the case:

“Topshop/Topman is one of the world’s best known fast fashion retailers operating nine stand-alone stores, 17 Myer concessions and an online business in Australia.”

“It will be business as usual as the administrators work closely with Arcadia Group (the UK owners of the Topshop/Topman brand) on supporting and right-sizing the Australian business to a sustainable platform going forward,” he said.

So the questions becomes, if fast fashion continues to achieve phenomenal growth, what went wrong with TopShop?

  1. The fact that the internet is replacing offline
    In the past 5 years, the Australian Retail Market has been turned upside down by the rise in online retailing. It has never been so crucial for retailers to compete with e-commerce platforms because traditionally, whenever a market reaches 20% online, retailers start to drop out. This is called the 20% e-commerce curse. This is what has happened here, as of May 2017, fashion and footwear retailing reached 20.6%.Topshop entered the Australian market in 2011, however, their e-commerce platform didn’t become fully operational until April this year. Arguably, Topshop was too late to the game and are now facing the consequences.This drastic shift in consumer behavior has led to traditional retailers struggling for market share. Customers are now seeking the variety and value they can find online as well as the convenience as postage. This has seen the rise of e-commerce giants such as ASOS, The Iconic, Neta-Porter, Misguided and boohoo who have steadily increased competition within the market for consumer spending. Thus, it has never been so important for traditional bricks and mortar to offer experiential retail with a seamlessly integrated omni-channel experience.
  1. Middle Market is a hard space to play in
    Top shop operate within the middle market, which is a difficult space to play in. With their current positioning and slightly higher price point, Topshop are beaten on price by fast fashion giants such as HNM and on the other end, they are also beaten on quality by high luxury brands. Andrew Malarkey, the author of the “Fashion retailing and wholesaling in Australia” report also states that “small retailers’ ability to turn over stock is a huge asset over medium sized outlets, which are at risk of becoming “stale”.Although Topshop has attempted to own the middle market, 2016 industry numbers show how they struggled to compete:
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  1. High Cost
    Despite Topshop’s success within the UK market, it is apparent that its local iteration was not as successful. This can be accredited to the higher pricing of TopShop Australia. Fashion commentator Rachel Wells comments:“Because of local taxes, higher wages, higher rents — and the fact you had to express freight to Australia to be on trend — they had to raise prices, while the quality didn’t change,” Ms Wells said.

 

The future of Topshop Australia is uncertain. It is likely the chain will be revived and vertically integrated into the brand’s UK parent organisation. For the time being, we presume they will close their underperforming stores in order to focus on pathways for sustainable growth.

 

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