Risks for home-grown Australian fashion brands

Challenges faced by Australian fashion labels, including Lisa Ho, Kirrily Johnstone and Alannah Hill, have left many wondering whether Australian fashion retailers can compete with international players like Zara, Topshop and GAP.

The entry of international competitors into the Australian fashion market is posing challenges for domestic retailers. In the last three years, Zara, Topshop, GAP and Hollister have all opened flagship stores in Australia, and with the impending entry of Swedish label H&M and Japanese label Uniqlo to the market, it seems that international arrivals will only increase. But the question is: can Australian labels compete?

Australia's geographical isolation has traditionally discouraged international retailers from setting up shop here. However, online shopping has allowed international retailers to test the waters (online) and ascertain whether it would be profitable to enter the Australian market in a bricks-and-mor tar arrangement.

For some domestic retailers, the competitive advantages of international retailers seem daunting. International retailers generally have the benefit of economies of scope and scale, due to the size of their operation and often to the efficiencies created by vertical integration. This allows these retailers to offer a wide variety of goods at a low price. International retailers' significant profit margins also give them more bargaining power to secure highly sought-after store locations. Disappointingly for domestic retailers, Australian shoppers often associate international fashion brands with a certain cachet and may be more likely to purchase goods from an international retailer like Zara than from a domestic retailer like Cue.

In order to remain profitable in this environment, domestic retailers should use their knowledge of the local market to differentiate themselves from international competitors. For example, Australian brands might:

  • Offer distinctive in-store experiences
  • Produce unique designs that are not available from international retailers and
  • Have an online presence to compete in the cloud.

A key to survival in today's market might be providing the consumer with an exceptional online shopping experience – perhaps offering an easy-to-use, customisable interface and local services such as same-day delivery to customers within city CBDs. Australian retailers could also use global consumer take-up of online fashion retail to expand their customer base internationally through online sales.

It is clear that a growing list of international retailers have expansion into Australia on their radar. It is therefore vital that domestic retailers devise effective methods of remaining afloat in the turbulent waters that are surely ahead By Melinda Upton and Carly Roberts (Sydney) .

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