Some hopes for fashion retail in current doldrums

As we sail into the “retailing doldrums” between now and the end of the election period, becalmed by higher than expected interest rates taking the wind out of our retail sales, we should remember that Australia and several of our neighbouring countries remain attractive markets for expansion for successful global retailers.

Media reports detail sound bites from CEOs at the end of AGMs across Europe and the US about the attractiveness of Australia to their businesses.

From Stockholm in Sweden, the home of Hennes & Mauritz, A Coruña in Spain, the home of Zara, and San Francisco, the home of GAP, there have been explicit or implied desires expressed to open stores in Australia.

I sincerely hope they do, for many reasons. Whether our councils and planning laws are business friendly enough will remain to be seen. But this might in fact be a great opportunity for a state, city or town with vision.

There are always serious challenges for retailers expanding into states outside of their home countries, let alone into new countries bounded by water. As a start, they need to find the right sites for new stores to ensure they aren’t opening white elephants with no foot traffic. After that they need to maintain flow of “stuff” into those stores.

As shoppers we just take for granted that the “stuff” we came into stores to buy is going to be there, when we want it, in sufficient quantities and available the next time we drop in too. The reality is that a huge number of steps, processes, factories, farms, warehouses and trucks need to harnessed by IT systems and men and women to make all that happen. Change a country and it gets tougher. Change a hemisphere and it becomes a real challenge.

To put it into perspective, the US is the largest homogeneous market on our little planet and 250 miles is about as far as any grocery retailer wants to build a store from their distribution centre. Beyond that it is too cost prohibitive to back-haul empty or part loaded trucks. In the fashion space, our two hemispheres have different seasons, which further complicates the production, buying and shipping process.

However, those things are the backdrop against which all retailers operate when expanding.

In Oz, ALDI has proven its worth by building from scratch a 200-plus store chain down the eastern seaboard, with supporting logistical structures, and has been able to introduce fresh and dairy produce into stores along the way. This is an impressive feat.

So, back to the expansion of clothing manufacturers…

Sites are the key issue in our market. However, the one thing about really good retailers that own their own brands is that they will draw “destination” shoppers to them. People will make a pilgrimage to a store, are guarantee to spend a large amount of time there and buy a lot of product, because they won’t necessarily be back in a hurry.

Go to a Tiffany’s store and watch how many “small” $750 items are bought as well as larger items. We aren’t awash with Tiffany stores, and it’s not available in any other retail outlet.

So here’s the hypothesis: somewhere in Australia a commercially-minded council somewhere in a more densely populated eastern seaboard town close to an airport and seaport, has an opportunity. It has the ability to accelerate planning permission, waive rates and local taxes and allow a major high-end fashion retailer to enter Australia by basing their head office, warehousing and first 20 or so stores in and around their jurisdiction. By doing so they create jobs and, longer term, a larger tax base.

Do you think it would work? Well, a couple of places have been built on a more aggressive variation of this model over the years. Places like Hong Kong, Dubai and Las Vegas.

It’s just a thought.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.