Magazine article Marketing

Helen Dickinson on Retail: Fashion Retailers Feel the Squeeze

Magazine article Marketing

Helen Dickinson on Retail: Fashion Retailers Feel the Squeeze

Article excerpt

You may have seen that French Connection recently issued its second profit warning in eight months, stating that profits would now fail to meet City expectations.

When picking over the bones of that announcement, some analysts have claimed the business is struggling to compete against some of the discount fashion stores.

In that respect, French Connection is not alone. There is certainly a shake-up taking place in the lower reaches of the fashion retail sector, and the effects of this are now being felt further up the value chain.

Mintel's recent report on the state of the value fashion sector made interesting reading. The non-specialists, including the supermarkets, have taken 3% of market share from the specialists since the last report three years ago. That may not sound like a huge amount, but it is the way they have managed it that is key. In the case of the supermarkets, it was by undercutting the price points of even the traditional bargain-basement fashion retailers.

The advent of the pounds 4 supermarket pair of jeans epitomises the manner in which the new players strode boldly into this market.

The reaction of many of the established players has been to avoid confrontation.

After all, who wants to take on the sheer scale and buying power of the supermarkets? The decision appears to have been made not to take them on at their own price-led game. And the result? A number of value fashion retailers trying to take their product offerings that little bit further up the value chain and away from the supermarkets. As evidence of this, I read recently of value retailer Peacocks' intention of avoiding the bloodbath of competitive discounting by establishing its entry-level pricing above that of the supermarkets.

The decision of these retailers to aim a bit higher and to ramp up the fashion and trend-driven aspects of their offerings has come at an opportune time.

Increasingly, the British consumer appears to be much more comfortable with making purchases from the value end of the high street, mixing and matching them with more expensive purchases.

But as these value retailers move up the value chain, the effect has to be felt elsewhere - which brings us back to the analysts' comments about French Connection. The supermarkets' decision to enter the pool has set off a ripple effect which is now being felt much further afield. Now the mid-tier of clothing retailers - New Look, Next, French Connection et al - are feeling that effect. …

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