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| Enter the dragon |
Posted Date: 09/07/2012
By Bill Rooney
I recently read an interesting article about how H&M sales were up 10 per cent in the UK in 2011, one of the toughest years in retail especially in the UK and Europe.
This got me thinking about the potential impact H&M could have in Australia if they enter this market and replicate their success in the UK and Canada, which are two countries comparable to our own.
H&M could potentially carve out up to a $500 million share of the Australian fast fashion market based on overseas results in similar countries. I have estimated the value end of fast fashion in Australia to be worth $1.36 billion – and this segment will be impacted the most.
H&M could potentially take more than a 30 per cent market share out of the value end of the market.
As a result, there would be several causalities among H&M Australian competitors, with all retailers in the fast fashion segments having to lift their game in order to compete and grow.
Some current Australian players are ill-equipped to meet this challenge, with little point of difference, variable quality of product, poor presentation, lack of format innovation, thin management structures and a lack of focus on people capability and service.
The H&M phenomenon
H&M is ranked as the ninth largest fashion retailer in the world with revenue of US$16 billion, from more than 2472 stores and over 64,000 employees. In the UK, where it has been established since 1976, it generates US$1.38 billion from 213 stores with an average of US$6.47 million per store. In Canada, H&M opened its first store in 2005, and at the end of 2011 was generating US$414 million from 58 stores.
With H&M’s focus and expansion shifting to Asia, and with the success of its major rival Zara’s expansion into Australia, it will not be long before we see their attention focus towards this market.
There are several reasons Australian fashion retailers should admire and fear H&M’s market entry into Australia. These include:
• The customer experience – better value, more choice, visually appealing stores.
• Size and financial muscle of the parent company, which carries little debt.
• Superior management expertise and marketing that comes with being the ninth largest fashion retailer in the world.
• It has created differentiation in their brand and merchandise.
• It will negotiate favourable rental deals as anchor tenants.
• Successful e-commerce strategy and website.
• This company represents global best practice in fast fashion (compare your own results to figure 1).
The impact
So what is the potential impact of H&M and other fast fashion global retailers entering the Australian market?
I have estimated that within five years of H&M entering the Australian market, it could carve out a market share of $500 million based on mirroring its success in the UK and Canadian markets. While H&M would have the largest impact in the Australian market, the likes of Zara, Top Shop, Forever 21, and Uniqlo will also have a devastating effect.
I have detailed below my estimates on the market share potential of top global retailers within five years of entering the Australian market (fig. 2).

But it is not all bad news. These global retailers will also typically grow their market segments by 20 per cent or more as they draw in customers from traditional retailers and older demographics.
In Inside Retail Magazine’s June/July issue I will reveal the impact of H&M and other large international fast fashion platters on the Australian fast fashion industry, which retailers are most vulnerable and potentially most effected, and in the following issue I’ll discuss how much lead time you will need and strategies for retailers to counter these companies.
* Bill Rooney is a director of 6one5 Retail Consulting Group, specialists in retail strategy, consulting and retail training. Bill can be contacted by visiting www.6one5.com, email Bill
Footnote: The figures above on potential Australian market size for H&M and the other fast fashion global retailers are based on like performance in comparable markets overseas obtained from published financial statements and other available data. The size of the Australian market segments these are a best estimate based on analysis of key players in each segment, store numbers, and a reasonable estimate of average revenue per store. Detailed analysis has been prepared to back up each of these figures, however, no responsibility is taken for their accuracy. |
Saturday, May 18, 2013 by jeg
wish they'd price their goods at the European prices in Australia - again I think we are being played for fools with the prices charged in Australia for the same goods. Will this bubble burst? How long can we blame high retail prices and costs of labour? Just been to Europe and served by multilingual people actually interested in making a sale ....
Saturday, April 06, 2013 by Anonymous
So it's been a year since this discussion and we have seen and bought. I believe that the majority of fashion savy customers have traveled around the world, putting visits to these shops high on their priority list when overseas.
The problem is, for those who travel, one can see that the collections on offer in the Australian branches of Topshop and Zara are inferior to the items on offer elsewhere in the world. One gets a sense that the company is off loading dead stock from seasons past. For example, whilst in Spain, a friend purchased a winter coat a year and a half ago from Zara and was proudly parading it, telling all she got it at Zara with all of us sighing and nodding (with a hint of jealously) our approval. Such is the respect Zara gets.. I just saw that same coat hit the shops here...
Wednesday, July 11, 2012 by Iscariot
Kev you've obviously never been into an H&M. I for one can't wait for the likes of H&M and Uniqlo to come out here and give things a real shake...Aussie retailers have been fat & lazy for a long time now.
Amidst the usual cries and externalisation of problems that will no doubt occur as the marketplace goes through more growing pains, the ultimate winners will be the healthy businesses that should be sticking around (because they never stand still and they understand their customer and the changing market) and consumers as a whole. Good houses still sell in a depressed housing market, just as good retailers still grow in a flat market.
Wednesday, July 11, 2012 by Tanya
Ah Kevin... I'm afraid it's this mentality which is fast-tracking retailers to a slow and painful death in this country.
Please 'wake up and smell the roses' - holding out just won't do anymore. You've only got to read about the success of ASOS.com in this country to see what's going on... Australian consumers are crying out for international brands to break the monopoly this country has on retail and what's considered 'quality product'.
Whilst quality was important in the day, it's much, much more involved today.
We should look at the positives of this 'invasion'. The ultimate winner is the customer who's becoming more fashion-savvy and style-aware which should/can translate to purchasing more. For the players, it's upped-the-stakes on creating product which is on-trend, budget-considerate AND goes beyond the basic cuts and styles seen FOREVER in this country. This means moving away from rehashed backroom patterns and actually providing value for money - it's all in the detail.
We'll see many more retailers go under before retailers start to pay attention. And whilst some understand the need for change, in my experience 'talking' and 'doing' are two completely different things.
Those retailers innovating will ultimately win the day.
Tuesday, July 10, 2012 by Solly
Kevin, if you have been to H&M you obviously have a different impression than me. The quality is good, service good, fashion good, prices fair and the brand us strong. Carrying a H&M bag out of a store is a proud experience rather than one to be ashamed of. They compete head to head with Zara and as the Melbourne store opening has shown, shoppers aren't viewing Zara as cheap and nasty, it's seen as fashionable and affordable. Australians will LOVE H&M.
Tuesday, July 10, 2012 by kevin
the one missing quotient is that the australian consumer mentality is different from those other countries. and fast fashion should be read as low priced fashion. and as most any retailer who operates in that bottom dollar world will tell you, and that inside retail has written about often, is that cheap will never be cheap enough. if the merchants of higher quality can just hold on the cheap shops can actually help their business grow. it is a matter of value of product and value of customers. just like the friend that dates that person beneath them and you point it out, now is the opportunity to point out to the customer that they deserve more than cheap products that only work for today. quality will win out in the end. just look at your spouse or significant other. quality, comfort, compatible with lifestyle and reliability. that is what we should be selling. and that is just wrapped up in the product that you accept money for. cheap and fast fashion is like dateing. fun but not always in it for the long haul. australians do like quality and branding. they dont always want thier friends to know they do. like riding a moped. lots of fun but you dont want your mate to see you on one!
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