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Surviving the fashion industry's 'perfect storm'

After eight years of running designer clothing label Thurley, Helen O'Connor shares some advice about how to survive in the fashion business.

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Australian fashion retailers are moving to slash prices, increase product ranges, improve customer service and are even looking to global expansion in the face of increased competition from internationals.

But despite efforts to stem the loss of market share to overseas retail giants such as Zara, Topshop, H&M and Uniqlo, which have, or are about to, set up shop here - not to mention those who already sell to us online - retail experts say some Australian fashion retailers simply won't survive the foreign invasion.

''I think there's a lot of shedding to do,'' says Steve Ogden-Barnes, a retail industry fellow at Deakin University. ''I see a parallel between Australia's retail environment and the Galapagos Islands of old. In relative isolation some interesting and unusual species have grown up but now someone else has turned up on shore, it exposes all those weaknesses,'' he says.

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Chasing value: Linh Hoang (left) and Athena Trinh in the QVB. Photo: Dean Sewell

Already the internationals are looking fitter than the locals. Last month Spanish retailer Zara posted an impressive $18 million profit for the year to January.

It has eight stores here and some predict it will open up to 20. Topshop and Gap have three each.

And there are more to come. A recent report prepared by by Colliers International found 28 international retailers would establish 235 new stores and look for 220,000 square metres of Australian retail space within the next five years.

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Designs such as this from Cue are fighting the influx of foreign brands. Photo: Chris Colls

Sweden's H&M and Uniqlo from Japan are among the big names expected to open outlets in the next 12 months. The report also identifies retailers Forever 21, J.Crew, River Island and Next as new arrivals.

''There is no way these internationals can come in and infiltrate the way they will over the next five to 10 years without there being casualties,'' Cue Clothing chief executive David Kesby says.

Mr Kesby, however, is confident Cue won't be one of them. Unlike many of his domestic peers, he refuses to get into a ''price competition'' with overseas giants and says his ''defence'' is to continue to produce clothing ethically and predominantly in this country (it produces 75 per cent here), using ''high quality'' fabrics rather than ''cheap, easy and disposable'' fashion. He says ''Australian brands that make offshore, using cheaper fabrics, are in the same pot as the internationals'' and are most at risk.

Retail consultant Michael Baker, from Baker Consulting, says so far these retailers' delayed response to the overseas threat has been to ''reduce their prices further and expand their [product] assortments''.

However, Mr Ogden-Barnes says they should be adding to their artillery by ''taking the fight to them by expanding globally with either physical or virtual stores''.

Australia is among the six leading online shopping destinations for overseas shoppers, according to a report released last week. The report by PayPal and Nielsen found international demand for Australian goods will grow to $16.1 billion by 2018, up from $5 billion this year, with clothing and accessories in most demand.

Australian retailer Forever New, with stores in eight countries, is already focused on the global battle. Its presence in other countries cushions the impact of increased competition here and chief executive Dipendra Goenka says this gives it ''the advantage of having successfully traded alongside these brands in international markets''.

Sophie Kapetanellis of Blakehurst, with son Zac, 12, and daughter Alana, 14, spent a rare sport-free Sunday shopping in the city. At Topshop Alana bought a $44 top which is popular with her friends. ''It is just in style, and everyone my age has the same style,'' she said.

While Topshop was bustling, business was slower in the Australian family-owned Cue in the QVB. Linh Hoang and Athena Trinh, both Cue regulars, browsed for a while before deciding on a $95 knit top which they said was reasonable value for something Australian-made. But a quick check of the label revealed it had been made in China.

The women said they loved Zara.

''It's cheap and the quality isn't bad,'' Ms Hoang said.

 

WHAT THE LOCALS ARE DOING

  • Reducing prices
  • Expanding product offerings
  • Improving customer service
  • Expanding globally
  • Ethical and/or local manufacturing
  • Localised marketing
  • Tailoring merchandise