Fashion funk paves way for retail relevance

GUEST OBSERVER

As e-tailing and large format fashion reshape the retail landscape, shopping centres are evolving into community hubs offering a broader range of experiences.

There’s change brewing in the domestic fashion world. Big international retailers like Zara, H&M and Uniqlo are accelerating cycles and smaller retailers need to differentiate their brands to survive.

Fashion retail is not just about the product. If you are a ‘me too’, you’re in no man’s land and highly exposed – it’s increasingly about the experience and how you engage with customers across all channels. And that means owning and building your brand. 

We feel that the industry is seeing more fashion wind-ups at the moment, as businesses without sufficient differentiation are losing customers.

It's quite possible that some fashion retailers are failing, in part, as they try to create an increasing number of collections each year to compete with online or fast fashion – something that puts massive strains on their resources. They can’t keep up with changing consumer preferences and online shopping.

Pressure on the fashion retailers

Sales are transferring to big box fashion retailers. The apparel pie isn’t growing to the same extent, so naturally that’s put pressure on the rest of the fashion category - there’s a re-aligning of the fashion spend. 

Big box fashion has a key operational advantage too, as their gross occupancy charges are substantially cheaper than the average specialty store. 

A typical specialty fashion store has rental costs greater than 20 percent of sales, which means sales don’t have to decline much for profit margins to be decimated.

If they don’t own their brand, provide a great experience and don’t have a sharp business model, they’re in trouble. 

The shift for shopping centres

Failing fashion retailers aren’t a sign that people are necessarily moving away from shopping centres. Instead, customers are looking for something different.

Broadly speaking, total square meterage of fashion retail isn’t dramatically changing, but the mix and composition is evolving. We foresee that there’ll be fewer but larger fashion offerings over the next few years, which will be paired with a sophisticated range of services that put retail and services at the heart of the community. 

We’re seeing demand growth in entertainment, experience and service uses – things that can’t be replicated online.

As long as you can’t go bowling, get your teeth fixed, eat a steak or get a manicure online, you’ve got a potential retail operation. 

This trend is spreading right across Australia. Smaller shopping centres that were largely focused on fashion and food are diversifying to include a broader ranges of categories – which is a great thing. The old concept of one-stop shopping is making a comeback. The customer wins, and so do landlords. Good retail environments always adapt to the times to maintain relevance. 

Leighton Hunziker is director - Retail Services and Occupier Services for Savills. He can be contacted here.