INTERNATIONAL brands like to make as big a splash as possible when they enter a new market.
Global retailers entering the Australian market in the past couple of years, such as Zara and Topshop, have arrived with great fanfare, and their opening-day queues suggest local fashionistas are embracing them enthusiastically.
Now, an examination of debit and credit card spending data, conducted by retail analysts Andrew McLennan and Sam Teeger at the Commonwealth Bank, has provided some insight into just how popular the new entrants are.
The data is also putting some colour around which kinds of retailers are losing traction as a result - and there are few surprises.
The CBA analysts looked at the spending patterns of 3.5 million consumers at 135 fashion retailers, which they divided into nine categories based on product mix and price point.
They found that two of the nine categories - pure play online retailers and new international players - were sprinting ahead of the overall market.
In the six months to September 2012, pure plays had enjoyed year-on-year sales growth of 42 per cent while the internationals had experienced 32 per cent growth.
And despite the fact that fashion retail has been in the throes of a weak recovery in recent months, it has not been enough to buoy everyone. High-end fashion was doing OK but low and middle-market apparel were going backwards.
The CBA report confirmed one other important thesis as well - that members of the under-30 age group are responsible for more than 50 per cent of fashion spending; these consumers are really the motor for sales at the global retailers.
Although CBA did not include department stores and discount department stores in its analysis, the meaning of the data should not be lost on them.
Put bluntly, the mid-market jack-of-all-trades fashion retailers that clothed baby boomers and Gen-Xers now have a bleak future unless they both downsize and reposition. Their loudly trumpeted strategy of shifting sales online is a fine one for protecting short-term market share. In the long run they will have to be downsized or repositioned.
But this requires leadership that is not so invested in the fiction of growth that it can make some bold moves.
The store counts for at least three of Australia's biggest chains - Myer, David Jones and Target - look way too high for market demand either now or in the future.
Frequently Asked Questions about this Article…
What did the Commonwealth Bank (CBA) debit and credit card spending data analyze in the Australian fashion retail market?
The CBA analysis tracked spending patterns from about 3.5 million consumers across 135 fashion retailers, grouping those retailers into nine categories based on product mix and price point to reveal where sales are growing and which segments are losing traction.
Which types of retailers are outperforming the Australian fashion market according to the CBA data?
CBA found that pure-play online retailers and new international entrants are sprinting ahead: in the six months to September 2012 pure plays grew about 42% year-on-year and international players grew about 32%, outpacing the overall market.
Are international brands like Zara and Topshop making an impact on Australian retail spending?
Yes — the report highlights that new international retailers are popular with shoppers and have enjoyed strong sales growth, helping explain why global brands such as Zara and Topshop generated big opening-day interest and contributed to the international segment’s 32% growth.
Which segments of fashion retail are losing traction and what does that mean for investors?
Low- and middle-market apparel segments are going backwards while high-end fashion is doing reasonably well. For investors, this signals pressure on mid-market players that historically served baby boomers and Gen X, who may face declining sales unless they restructure or reposition.
How important are under-30 consumers to fashion retail sales?
Members of the under-30 age group account for more than 50% of fashion spending in the CBA data, making younger consumers the primary driver of sales growth—especially for global and online retailers.
What does the report suggest about big Australian chains like Myer, David Jones and Target?
The article notes that store counts for Myer, David Jones and Target appear too high for current and future market demand, implying these chains may need to downsize or reposition to align with changing consumer behaviour.
Did the CBA analysis include department stores and discount department stores, and why does that matter?
No, the CBA report excluded department stores and discount department stores from its analysis. Despite this exclusion, the findings still signal broad market shifts—particularly the threat to mid-market apparel retailers—from online and international competition.
What strategic responses does the article say mid-market retailers might need to survive changing fashion retail trends?
The article suggests mid-market retailers should consider downsizing or repositioning their businesses. While shifting sales online can protect short-term market share, long-term survival likely requires bold leadership willing to make structural changes rather than clinging to a fiction of growth.
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