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| Issue date:26/05/2009 |
| ATA Journal for Asia on Textile & Apparel - May 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
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| International garment retail industry, especially mid- to high-end segments, as well as luxury brands, are impacted by the weak world economy. This may help manufacturers discern the globe's garment demand this and next years, Lucia Carpio reports |
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| The lack of liquidity and the shortage of credit from banks has inevitably affected the purchasing power of retailers. (Photo: Giordano) |
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Facing a global credit crunch which has seen even the most well-to-do consumers cutting back on their discretionary spending, fashion businesses are re-engineering their business strategies to help them tackle the new market realities and seeking directions to optimise the balance between cost and value while offering quality to their customers.
While the world's heads of governments have been drawing up economic measures to rescue the global financial system, good news has been thin on the ground for the textile and fashion industry.
In April, in the same week as the London G20 summit announced a US$1 trillion economic booster package for the world's economies, the Italian fashion association - Altagamma - in Milan announced that there is no recovery insight for the luxury market before 2010, and also suggested the US$230 billion fashion and luxury goods industry is set to shrink this year. The Italian fashion association predicts an 8.7% fall in sales for luxury clothing, a 6.2% drop in shoe and accessories sales, a 4.8% decline in perfume and cosmetics sales and a 12.2% fall in jewellery and watch sales.
Altagamma chairman, Leonardo Ferragamo, says there is need for new strategies and reforms, as "the crisis is the deepest and most violent our generations have ever experienced."
Altagamma revealed that the US will be hardest hit with the sales drop estimated at 14.8%. Japan will also suffer with sales predicted to fall 11.7%. In Europe, annual sales of luxury goods are likely to decline by 8.8% this year. Asia and the Middle East, both strongly growing markets are expected to be better off with declines of 2.3% and 2.1%. Clothing sales will fall 10.6% in the first six months this year. The decline will slow to 7.8% in the second half.
Leonardo Ferragamo (Photo: Altagamma) |
As Muriel Zingraff, senior adviser for retail, luxury goods and fashion at investment firm Oaktree Capital Management, had put it, "We are entering times where consumers are either looking for bargain or for investment pieces."
The lack of liquidity and the shortage of credit from banks has inevitably affected the purchasing power of retailers. At the recent key fashion trade events and fashion week shows in Europe, it was noticeable that retailers were sending smaller buying teams, if at all, and buyers were cautious in their selections. As one buyer from Moscow had put it, those brands that have been too expensive and did not spend money on advertising, and those suppliers who are not on time with their delivery would be suffering most. Some like Armand Hadida of the L'Eclaireur stores in Paris, said they were reducing their buys this season.
In Italy, which is heavily dependent on fashion for its economy and international status, lagging sales have been affecting the industry.
Italy's minister of economic development, Claudio Scajola, has announced the "first interventions" are set in place to resuscitate the fashion sector, just as it has done for its motor and home appliance industries. Timely news for companies like IT Holding, where administrators had been appointed for its Ittierre unit that distributes goods for brands like Gianfranco Ferré, Versace and Cavalli.
While the downturn in the world economy has forced businesses to seek new directions, the market is contracting amid tougher competition. Carole Woodhead, chief executive of Hermes home delivery courier company, said that the difficult economic climate has left many fashion businesses to streamline their operations. "With margins squeezed, companies need to seek new ways of creating a competitive advantage and add value for customers," she said.
The challenge is to get the right balance between creativity, perceived value, price and quality.
Versace is reviving its diffusion lower-priced Versus line, while Valentino announced it had bought Vionnet, the historic French fashion house, with plans to grow it as a niche brand.
For many Italian fabric producers, upholding the "Made in Italy" label that stands for quality is important for stopping the sliding sales.
Managing Director of Gruppo Albini, Silvio Albini said that quality and innovation research are the answers.
"We are facing a deep crisis and the end is not in sight. Without being influenced by negative economic situations, we are investing constantly in customer services, product research and innovation," said Mr Albini. The group took the opportunity at the Milano Unica and the Paris Premiere Vision trade fairs respectively to introduce its premium new shirting fabric in two-fold 300s under the brand Cullinan and organic twill fabrics in two-fold 100s. Another Italian mill, Canclini, also emphasised its "ultra-modern technology in innovation" with its sophisticated Egyptian cotton also in two-fold 300s featuring classic weaves.
India's fabric mill, Raymond, has also chosen to highlight its innovative and pioneering capabilities to distinguish themselves from competitors. It strives to be known as the first textile company not only in India, but ahead of Europe and Japan to produce Super 140s worsted fabric for suiting using 11.6 micron wool. The Chairman and Managing Director, Gautam Hari Singhania, said the company is poised to become a global player and has entered into joint ventures with Italian manufacturer Gruppo Zambaiti and with Belgian denim company UCO to create synergies in sourcing, manufacturing and marketing.
While European labels are returning to their core values, department stores have to rework their strategies to win shoppers.
Department stores rework strategies
Luxury clothing facing challenges in current economic toughness (Photo: Harvey Nichols) |
Chief Executive Joseph Wan of Harvey Nichols, the luxury department store group said recently at a retail conference in London that it has suffered a "sudden" and "significant" drop in sales following the banking crash. "A lot of wealth has evaporated and cannot be replaced overnight. The total consumption pool has shrunk since last year. We must adapt," he added.
As the group's commercial profits is expected to fall by 40% this year, and in view of the declining value of the pound, it has launched a new marketing campaign to appeal to shoppers. Commercial director, Patrick Hanly revealed there is a change to how people are spending their money. "The top end of our business is holding up (what we call the top designer end) but it's the lower end – T-shirts, jeans and casualwear that is not doing so well," said Hanly.
Meanwhile, retailers in the middle mass market are losing out as shoppers become more selective in their consuming habits.
Sir Stuart Rose (Photo: M&S) |
In the UK, Marks & Spencer (M&S) executive chairman, Sir Stuart Rose, has warned retailers not to panic and abandon their core brand values in the recession. Speaking at the London retail conference, Sir Rose said that one of the keys to surviving the downturn was to hold market share, although he added that he did not know when the recession would end.
Executive chairman, Phil Wrigley, at UK retail chain New Look said retailers will have to share some of the burden with consumers. For those businesses that struggle to further reduce costs and gain extra market share, it would be "counter-intuitive to charge higher prices when consumers' budgets are stretched."
NEXT chief executive, Simon Wolfson, said his company is negotiating with suppliers to absorb some of the impact of the weak sterling on the second half of the year. His company had bought the dollar at an average price of US$1.50 to the pound versus US$1.98 last year and added that both selling prices and gross margins would be adversely affected.
A new Topshop flagship store opens in New York City this April (Photo: Arcadia) |
However, fashion tycoon Sir Philip Green of the Arcadia group cited speed of the supply chain rather than price as the only way to stay ahead in the current economic climate. Speaking at the recent opening of his new Topshop store in New York, Sir Philip said that customers would be focused on a quick turnaround of stock and newness in product, rather than on price this year.
Value-based and multi-channel
Katrin Magnussen, Senior Fashion Analyst at Mintel, said being competitive is essential but not everyone in a recession sees cheap as being the best value. "Investing in service and knowledgeable staff is also important in pulling in customers," she said, adding that the market for ethical clothing is going from strength to strength.
Verdict Research's retail analyst, Simon Chinn, said the value-based clothing retailers will continue to thrive in the downturn. "Dutch clothing company C&A launched a new concept last year under the banner Avanti, which trades at the discount end of the market. German discount clothing chains such as Takko and Kik are also doing well," said Mr Chinn.
Mr Chinn added that Europe's two largest clothing retailers Spain's Inditex and Sweden's H&M are well positioned to weather the economic storm. Both have expanded abroad extensively and this geographical diversification will help in some way to mitigate declining sales in Europe.
"For the retailers, being multi-channel is also more and more important, as customers are getting more knowledgeable and demanding of being able to browse online and buy in-store, or vice versa," said Ms Magnussen.
Apparel bright spots found in low season
by Staff Reporters
Premium jeans were found growing in the current looming economy (Photo: Trussardi jeans) |
The NPD Group, an international market research company, takes a closer look at the US apparel market and through ongoing economic challenges, is finding some pockets of growth in an otherwise fizzling fashion market.
One area of the apparel market that continues to hold on is the jeans business. According to the NPD Group. Consumer Tracking Service, dollar volume sales for total jeans rose 2.3% for the three months ending with February 2009 (a key period of the economic downturn for the consumer), while total apparel sales declined 6.3% for that same time period.
Additionally, premium jeans sales grew 17% in 2008, and the category is still growing. Premium jeans refer to jeans sold at US$100 or above sold in department and national chain stores, according to the NPD Group. Between December 2008 and February 2009, sales of premium jeans rose 2.3%.
"That is the time period that was the most challenging in terms of consumer spending, so any growth during that time is significant. With the newfound focus on fit by some of the commodity brands coupled with women's never ending quest for the perfect pair of jeans, the passion for denim is alive and well," said Marshal Cohen, chief industry analyst, the NPD Group.
(Source: The NPD Group) |
Mr Cohen explained it is because of pent-up demand. "Previously, outerwear was not an item that made it onto the consumer's priority shopping list. Outerwear purchases were delayed for a year or so, and that created a greater need this past year," he said, adding that technology, comfort, and variety have also helped drive growth in a traditionally stubborn market.
Outerwear sales have been posting significant growth rates and have outpaced all the categories in NPD's Consumer Tracking Service for apparel. (Source: The NPD Group) |
The biggest surprise in the US apparel market is in tights sales. Dollar volume sales of tights were up 11% for the three months ending with February 2009. For annual 2008, overall hosiery sales were up almost 3%.
"Here is an example of where the current economy has actually helped drive growth. For a long time the hosiery industry has been struggling to get consumers connected to the category and think of it as an important 'accessory' to their wardrobes. And now, consumers realize that legwear is an inexpensive wardrobe makeover or enhancement, which has helped the sales of tights flourish," said Mr Cohen.
Among all of the pockets of growth highlighted by NPD, the most impressive category for sustained growth is dresses, the NPD Group says.
The NPD Group's Consumer Tracking service showed that sales of women's dresses during the three months ending February 2009 were up 11%. For the year 2008, dresses posted a 12% growth rate.
Material performance advances help drive outerwear
(Photo: Columbia Sportwear) |
"The dress offers the perfect opportunity to buy a complete outfit. The fact that the dress is trend right and has even been embraced by many high profile magazines, celebrities, and the entertainment industry helped drive its growth," noted Mr Cohen, "Spring is here, and the progressive retailers will recognize the consumer likes this trend. Trends that last and grow don't come around very often, particularly these days."
"There are some glimmers of hope," said Mr Cohen, "Maybe the consumer is showing us that fashion will lead apparel back into a more positive position. And maybe those soft numbers from fall of last year will be just the launching pad retailers and manufacturers need to take a leap forward and invest in what the consumer wants. Not what the industry wants them to want." |
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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