Rag trade ramp-up

The clothing retail industry in Australia is looking good, and should continue to do so for the foreseeable future. By JASON BAKER of IBISWorld.

The clothing retailing industry has seen steady growth over the past five years. IBISWorld estimates this industry grew at an average annual rate of 3.1% in the five years to 2006-07.

Industry revenue is expected to continue to grow at a slightly lesser rate – 2.9% for the five years to 2011-12.

Women’s clothing represents the fashion industry’s biggest revenue segment, at close to 50%. Men’s clothing makes up nearly 25%, with the rest shared between infants’ clothing, boys’ and girls’ clothing and headwear.

In the fashion retail industry in Australia, small independent operators outnumber the major chains by about 100 to one, but they account for just 20% of sales, with department stores (from Target and Kmart at the lower end to David Jones at the upper end) making up 40%. The other 40% is contributed by franchised and chain stores.

Competition in the clothing retailing industry is expected to remain strong during the next five years as industry participants fight for the consumer dollar. With profits having increased in line with strong industry revenue growth in recent years, many of the larger players have consolidated industry share by making selective acquisitions.

Internet penetration in Australia is increasing and participants in the clothing retailing industry need to have an online presence. Although presently marginal, there has been an increasing trend of consumers buying items from internet retailers located abroad.

This represents a leakage of industry revenue and should be a catalyst for Australian retailers to invest in online shopping platforms for domestic users.

Some larger players within the industry have developed successful loyalty and member programs, which have proven to be highly effective methods of driving stock turns higher, and also for clearing excess inventory by having “member sales”. The larger players will continue to invest in their own loyalty programs, but smaller players will also seek to develop innovative ways of attracting and maintaining a core client base.

Demographics in Australia are changing, with baby boomers becoming older and life expectancies rising. This represents opportunities for some. In the forecast period, operators who target a niche will profit. Other industry participants will also realise that their niche is in decline and will need to reassess their presence.

Technology is expected to play a major part in shaping stock control, industry profitability and customer service experiences during the outlook period. The key technology for this industry is radio frequency identification (RFID), which is being implemented within supply chains to monitor and replenish inventories more efficiently. RFID tags can either be passive or active, and both types respond to radio frequencies that are sent from a transceiver.

So it’s smooth sailing ahead for the industry as a whole. Smaller retailers should focus on niche markets to remain profitable, while the larger retailers and chains continue to dominate market share.

Source: IBISWorld