H&M | Sector Overview

FASHION RETAIL

sector Overview:

To be successful in the glossy, visceral world of high-street fashion you need to be efficient. The key for the mass-market, low-priced clothing labels is to have the season’s ‘must-have’ in store faster and cheaper than anyone else. Fashion is still focused around three capitals: Milan, Paris and New York. Whilst London provides direction it is in New York where the power of the American buyers and of American Vogue is indisputable. High-end and high street fashion are becoming increasingly intertwined – the true fashionista mixes a thousand pound handbag with a Top Shop skirt and delights in the difference in price. To pull in the customers, the savvy high street retailer needs to get the key trends from the catwalk to the store before the next issue of Vogue has arrived on the shelves.

While the market remains relatively fragmented mergers and acquisitions as well as organic growth are starting to build global players which enable large chains with logistics strengths to compete aggressively with local brands. Fashion is no longer the province of the few, but a familiar part of the urban landscape with identikit stores across the globe. Alongside the established global brands of Gap, H&M and Zara, other companies are also growing fast. Most prominent of these have been Uniglo from Japan, Spain’s Cortefiel and Hong Kong based Giordano, all of whom are expanding steadily into new markets in Russia, Europe and Asia. In addition, there has been a rise of ‘own labels’ within general retailers such as Wal-Mart and Tesco that have grown to gain a significant share of the markets in which they operate.

ONES WE ARE WATCHING

Baugur
This Iceland based company continues to grow through acquisition and is now starting to make some interesting innovation-driven moves. With over 3,900 stores worldwide and a turnover approaching £10bn, Baugur’s fashion brands include Nine West, Coast, Karen Millen and Oasis. With department stores also in the fold, cross-brand product synergies are high and process and business model innovation is showing promise.

Giordano
Giordano is a well extablished retailer across the Asia Pacific region and has been pushing a fast fashion mix with success for a while. With an ambition to become the best and the biggest world brand in apparel, Giordano currently operates 1700 shops in 30 territories worldwide, including over 700 stores in China alone. As it embarks on further growth, it is using new brand outlets such as Giordano Junior and Giordano Concepts to help drive expansion with gross margins of around 50%.

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