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Fast-fashion invasion in store for 2014

H&M hopes to attract the price-and-fashion-conscious youth market.

H&M hopes to attract the price-and-fashion-conscious youth market. Photo: Bloomberg

There has been a lot of hype around Saturday's opening of international fast-fashion retailer H&M, much as there was a few years back when Zara opened in Australia or when Topshop entered the market in 2011.

While in Australia we are hit with a barrage of negative commentary about the state of the retail industry, a line-up of international rivals is scouring our markets looking for opportunities to showcase their apparel models. For the most part the only thing holding them back has been the availability of suitable sites.

We have a higher population growth than most other Organisation for Economic Co-operation and Development countries and our household spending per capita also ranks well. So we will continue to attract the global retail operators.

But H&M is worth special mention. Its store formats are large, its prices are low, its fashion is ''on trend'' and it has big aspirations - it is looking to open more than 55 outlets.

This would give it more sites than David Jones and perhaps Myer.

Having just completed a US fact-finding mission on apparel retailers, I believe H&M will take off in Australia more strongly than most of the recent or anticipated entrants; although specialist beauty/cosmetic group Sephora may have a large impact on department store sales in overlapping product categories.

While Zara made a big splash in Australia in 2011 and continues to attract customers in their droves, it hasn't opened many stores in suburban areas. But there are expectations it will grow beyond its current eight stores.

H&M operates at a lower price point and can spread its tentacles wider into more suburban shopping centres.

According to Citigroup, the overseas operators are coming to Australia because they have grown as much as they can expect in the US and Europe and are looking to new frontiers.

Citi makes the point that some of the earlier entrants have not been successful - a sentiment echoed by Premier Investments chief executive Mark McInnes a few weeks back.

But the new batch of entrants may have learnt from the failures of others (GAP and Hollister come to mind).

Certainly some of the newer crop, such as Zara, H&M and Sephora, are retail innovators - both in their supply chain models (getting new product and trends into stores in rapid time) and, in the cases of H&M and Sephora, their very low prices.

While McInnes was dismissive of the international interlopers, he will need to be wary of the impact they could have on some of Premier's brands, such as Just Jeans, Portmans and Dotti. The likes of Topshop and H&M will be looking to this youth price-and-fashion conscious market for its revenue.

The particular irony for McInnes is that his own company is faring better than some of its local competitors because it has a couple of innovative brands (Smiggle and Peter Alexander) that it is expanding to international markets.

Citi also suggests the department stores are potential victims. Myer's market positioning makes it more vulnerable than David Jones, which is perched in a more affluent market space. However, Citi analyst Craig Woolford has a sell on Wesfarmers (which owns Target and Kmart) and David Jones, and says he is cautious about Myer and Premier Investments.

While the discount department stores certainly operate at similar price points as the likes of H&M, they operate in quite distinct markets. These department stores have not traditionally catered to the younger fashion-obsessed females but pitch their apparel at the price-conscious 30-plus customers.

The biggest challenge for the discount departments stores will come in the children's wear categories, in which H&M is strong.

This is not the only challenge for Australia's local apparel retail industry - it's just the latest. For the past three years the focus has been on dealing with online competitors. While this will remain, some of the competitive heat has come off as Myer and David Jones have notched up impressive growth in online sales and are now growing this channel faster than are the online-only operators.

The latest crop of results from Australia's listed retailers provided another platform for them to make noise about the anomaly that allows goods bought internationally online (up to $1000) to be exempt from GST.

2014 may have in store some seismic shifts in the apparel retailing industry. The retail sales trends suggest that the small signs of improvement that started last year have continued but have not picked up much pace.

February retail sales data released this week showed growth, though a little less than the market had expected and a lot less than the January numbers showed. But the trend is positive overall and strong in apparel.

Against this backdrop the chatter about a possible merger between Myer and David Jones continues to rumble on. This is despite the fact that at present prices the economics of this transaction don't stack up well for either set of shareholders.

Myer is reportedly talking about tipping some cash into the offer, which was originally proposed as a nil-premium full-scrip merger. But if the parties are to be believed, nothing will happen soon.

The market will also be keeping a close eye on how the discount department stores are performing. After years of struggling, Target's owner, Wesfarmers, will be looking to see some improvement or face more pressure to justify its position in the retail conglomerate's brand line-up.


  • With the amount of free positive publicity given to H+M by the media, how could they possibly fail??

    Greg Pfeiffer
    Date and time
    April 05, 2014, 2:04PM
    • This country and its ripped off prices need a shake up on EVERYTHING. We need more competition in this country to make things cheaper. It's pathetic. I hope this is a revolution of many to come.

      The Other Guy1
      Date and time
      April 05, 2014, 2:38PM
  • HM is another Swedish success story. You can add IKEA if you like as well. The Swedes are phenomenal conquerors, after all they are the Vikings. Many Swedes have become very rich by investing in HM, which share has had a phenomenal journey. $1,000 invested in HM in the 70's is now worth several million dollars.

    Date and time
    April 05, 2014, 2:31PM
    • Sounds like the Swedes support their homegrown businesses.

      Date and time
      April 05, 2014, 4:31PM
  • HM will challenge not only DJs and Meyer, but also Target, Kmart, as well as Top Shop, Zara and others. HM grows like a bush fire and many competitors if not up to the challenge will lose lots of sale and several go bust. To say that the markets in Europe and the USA are saturated is not correct. HM have over 150 stores just in Sweden with a population of 9 million.

    Value for money
    Date and time
    April 05, 2014, 2:37PM
    • So do H&M pay their sweatshop slaves a lower wage so they have lower prices or do they just reduce their margins then the other outlets who have bigger margins on their sweatshop slave products?

      Date and time
      April 05, 2014, 3:34PM
      • A legitimate question, to be sure. Sorry to say, it seems most people couldn't care less, as long as they get their low low prices.

        Two Cents
        Date and time
        April 05, 2014, 5:21PM
    • H&M is good value for money. It's much cheaper in Kuala Lumpur than in Singapore, and will make more inroads in Australia than Zara. There is enough space for international high street fashion brands to coexist with well-liked Oz brands like Dotti, Supre, Jeans West.

      Date and time
      April 05, 2014, 3:58PM
      • Great, more throwaway fashion to add to the pile!

        Much prefer quality recycled clothing.

        Some LIke It Hot
        Date and time
        April 05, 2014, 4:29PM
        • My friend's son bought some H&M clothing in America and she said the quality was pretty poor. Cheap and cheerful but not long lasting!

          Date and time
          April 05, 2014, 5:22PM

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