Mid-Tier Retailers are Starting to Find Online is Fashionable
In the current economic climate, consumers are putting their money into savings, travel or online retail, which leaves little room for mid-priced bricks-and-mortar fashion retailers.
Bricks-and-mortar fashion stores are largely under-performing compared to the rest of the market, particularly those stores with mid-priced products. The phenomenon has been attributed to shifting consumer habits, as baby boomers and generations X cuts back on their traditional retail spend.
The Commonwealth Bank analysed the spending habits of 3 million customers in 109 fashion markets, revealing that middle-market fashion retail experienced the slowest growth over 2011 – 8 percent below average. Interestingly, growth was positive for the more luxury-end categories and not quite as slow for the low-priced goods.
“We often read about this ‘barbell’ pattern of consumption, where people are happy to buy some low-end basics and smarten it up with luxury goods,” CBA’s Deputy Head of Equities Research, Andrew McLennan said.
“The other thing is that there’s a theory that it’s the mid-priced categories and brands that may be more adversely impacted by the online offers from international retailers.”
Overall, McLennan warned retailers not to look forward to 2012 as a year of marked improvements in sales or consumer confidence. Certainly, the kind of growth that was achieved just before the global financial crisis is not about to return.
However, there is good news for retailers. McLennan pointed to overseas examples that demonstrates that established bricks-and-mortar brands that produce a great online offering, then consumers will spend in both channels.
“The Australian retailers for the large part got caught out by the rapid change in consumers’ behaviour but, in the last 12 months, particularly in the unlisted space, we’re hearing more … about some of the fashion retailers that have become success stories online. Not all is lost.”
In today’s world the consumer now has total power in the retail space. Advances in technology and the internet means information can be found on just about any topic at almost any time, so retail brands can no longer afford not to be staking a claim in as many channels as possible.
Will Australia’s mid-tier fashion retailers find salvation in the e-commerce space?