It was 1975 and a smart, bespectacled young manager was representing Fletcher Jones & Staff at an annual retail industry seminar.
“You will not wear any holes in the pockets of your Fletcher Jones garments,” he said.
“...We see garments coming in for after-sales service after one month, six months and, would you believe, up to 20 years.”
Fast forward 40 years, and fashion retailing has sped up just as much as the rest of the world. The latest local arrival, H&M, plans to open 375 new stores around the world in 2015 while Zara (the globe’s largest fashion retailer, with parent company Inditex SA boasting a market capitalisation of €70.777 billion) takes deliveries of new stock at its stores every few weeks.
Fletcher Jones was justly proud of its market-leading position in local design, innovative culture and quality construction. But by the mid-70s there were also signs of an ominous trend: “Competition from imported materials has been aggravated by contracting clothing production as a result of the flood of imports of made-up garments,” the same manager wrote for The Financial Review in the year of his speech.
Fifteen years later, the then 66-year-old icon was crashing head-on into consumers’ shifting definition of “good value”. Having fallen behind a preference for cheaper trends, and failing to capture the increasingly lucrative youth market, it was unable to withstand the Hawke-Keating removal of tariffs. In 1991, amid swathing losses, the company voted out its managing director; staff who had in its hey-day numbered 3000 and controlled 70 per cent of the company’s stock lost their shares.
H&M was, in Sweden, celebrating the first anniversary of its listing on the country’s stock exchange while Fletcher Jones was eyeing the early signs of offshore retail disruption. With a bright eye to the future, the ambitious department store -- moving into its fifth decade in operation -- was expanding across Europe and had acquired a mail order company; by 1991 the group operated shop fronts in Sweden, Norway, the UK, Germany and the Netherlands.
But Australian customers, in fact, never took their fingers off fast forward. Today, H&M’s black stilettos and soft-fabric office-to-evening jackets are making the same bet in Australia as newcomers did against Fletcher Jones’ newly “straighter legs” and “more colourful fabrics” in the early '80s: that cheaper can be better. Over the first weekend of operation in the country it’s paid off: visitors to the flagship 5000 square metre Melbourne store ran into the several thousands, some queued for hours to best position themselves in front of the opening doors.
Of course, H&M isn’t the only challenger. European peers Top Shop (UK) and Zara (Spain) have the same advantage of mass buying power and far-reaching distribution networks which allow them to shift designs rapidly from the catwalk to store rooms, at a very low sale price point. Each is expanding in the local market at varying pace -- adding a touch of European élan to the budget segment.
Certainly, with brand positioning activities including dressing Penelope Cruz in a flamenco-style dress for the 2014 Oscars Vanity Fair party, an underwear and swimwear collection created in collaboration with David Beckham, and a pop-up store at Belgium’s annual Tomorrowland festival -- an electronic dance music festival considered the hottest in the world, pulling up to 180,000 pilgrim youths from around the globe -- H&M carries a worldly glamour that Target, Supre or Premier’s Dotti, for example, would presumably kill for.
But this repositioning of the local budget segment is perhaps also not the best of news for players in the next-highest pricing tier. As in the 1980s, Australian customers in recent years (and conditioned by sales markdowns of the post-GFC era) have decisively signalled a desire for cheaper, more expendable clothing -- when it can meet their trend and branding needs.
Of course, the European newcomers are not without their own challenges. Their own costs of production are rising along with wages in developing countries (H&M sources workers in Asia and Europe). And the Australian market, though rosier than many in the northern hemisphere, has seen department store sales growth track 4.2 per cent lower in the year to March (Retail still needs rates therapy, April 3).
Ultimately, though, these players have the capital power of the world’s biggest multinational fashion retailers behind them -- and if they manage to snatch a portion of sales from higher-priced incumbents it wouldn’t be the first time in Australian history. Assuming static pricing markets for fashion retailers is still dangerous.