Zara, H&M rock American retail

DISCUSSION TOPIC

America‘s Favorite Retail Imports – 3/26/09

TOPIC SUMMARY:

They’re fast fashion. They’re cheap chic. They’re moving up on America’s favorite places to shop even though they were definitely not made in the U.S.A.

As a piece on Forbes.com points out, consumers here are increasingly drawn to the high style and low prices of chains such as Sweden’s H&M and Spain’s Zara. Others including Uniglo from Japan and Mango from Spain are still relative newcomers that have achieved some success. Another import in the same vein, Topshop from the U.K., is scheduled to open its first store in the U.S. next week in Manhattan.

Zara was the first to make its way to the U.S. market back in 1989. The company uses an in-house design staff, its own factory and tightly controlled distribution network to get new product to the stores in as little as two weeks. This year the chain is looking to add 10 stores in the U.S. It currently has stores in 13 states and Washington, D.C.

H&M, which has 169 U.S. stores, came to the U.S. in 2000 and plans to open 16 new locations in 2009.

“Foreign retailers deliver an [inexpensive] product that is not perceived as a uniform,” Marshal Cohen, chief retail analyst at The NPD Group, told Forbes. “They offer what you want, when you want it, as well as self-expression through fashion.”

Discussion questions:  What is it that makes Zara, H&M and other apparel retailers from outside the U.S. successful here? Do you see domestic chains picking up ideas and competing more effectively in this area? Is there one – Zara, H&M, Mango, Uniglo or Topshop – that you are particularly impressed with?

My post: 

These retail stars were shining well before the current economics made their formula a darling of the media.  Zara and H&M have been in the US for a while now and not only are their openings huge local “events’, but they seem to maintain their followings of teen to 40-something fans effortlessly as they consistently add small quantities of fun, cool fashions for cheap.  Now Uniqlo and Mango are gaining traction with Topshop coming soon.  American fashion fans are eating up this foreign feast as they have tired of the majority of American specialty and department stores’ miles of boring overstocked sameness.  Simple message:  fun, fast, affordable fashion, constantly refreshed.  Forever 21 is one exception to the rule, but most of American retail now buried in debt and teetering has to wake up to what the customer is looking for.

Mike Osorio, your Dare to be Contagious! ^TM strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13637

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Luxury Brands Fire Sale

DISCUSSION TOPIC

Luxury Hits the Sales Rack – 2/25/09

TOPIC SUMMARY:

Luxury-goods sales are expected to fall 15 percent this year, according to Bernstein Research, as even the well-to-do are trading down or cutting back on unnecessary expenditures. According to the Wall Street Journal, luxury brands must decide how much of the slump is cyclical and how much reflects a permanent change in consumer behavior.

The slowdown represents a sudden turnabout for a sector that some felt could be recession resistant. From 2003 to 2007, the global luxury market grew on average seven percent a year, and future growth was expected to be driven by “an ever-expanding minority of ultra-wealthy individuals.” Many of these individuals were expected to come from emerging markets.

But Saks began slashing prices by 70 percent on designer clothes before the holiday season even began, and soon Neiman Marcus and Barneys joined Saks in cutting prices and canceling orders. Smaller boutiques such as Scoop and Intermix in New York City were forced to sell their goods for less than they bought them.

According to the Journal, the steep discounts in the high-end channel ended up “toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.”

Discussion questions:  Should luxury brands and designers be lowering prices? How risky is it for high-end brands to bring in lower prices or lower-priced extensions? What’s the best strategy to do so?

My post: 

Like so many of the economic “miracles” of the last 20 years the luxury segment grew beyond it’s natural state driven by easy credit and the top end of the middle market consumers reaching for aspirational symbols of wealth and status.  The luxury manufacturers and retailers who have avoided the excesses of many of their consumers by avoiding the lure of expansion through taking on enormous debt and who have remained true to their artisan heritage will survive and even thrive in what is sure to be a slower growth sector for many years to come.  The emerging market consumer will continue to drive growth for many but a new sense of sanity will likely pervade this category for many years to come.  The brands that choose to create lower price products for H&M and other value retailers will manage to continue growing for a time but will likely lose the luster of their true luxury heritage.  It the design of the product remains excellent they may find a new niche for their brand at lower price points.  Otherwise those brands will either wither and die, or become simply a moderate brand.  That may be fine for investors, but surely removes them from the pantheon of true luxury brands.  You’ll never see Hermes or Cartier in H&M and I wager brands like these will be here in 2109.

Mike Osorio, your Dare to be Contagious! ^TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13575

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