APRIL 2014

RETAILMARKET REPORT

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The days when the retailer told the consumer how they should shop are over. Today’s consumer is well and truly in charge and lets the retailer know when and how they want

to engage, browse and, ultimately, buy. This was the consensus when Drapers brought

together a selection of leading medium-sized fashion retailers, including Reiss, French Connection and Bonmarché, for a roundtable discussion last month.

The event marked the launch of the Drapers Retail Market Report, which is focused on fashion retailers with a turnover of £20m to £200m. Despite the domination of larger players, dozens of companies within this bracket are fighting for a significant share of spend, and this report examines the issues they face.

On page 2 we look at the state of the market, and who is winning or losing against a background of constrained spending and tough competition.

As if things weren’t complex enough at a domestic level, many busi-nesses serve international markets, so the challenges they face are greater. On page 4 we find out how British businesses are faring overseas.

The transformation in the way customers shop is reshaping the fashion business. So on page 6 we focus on multichannel strategies, to assess how retailers are adapting to these changes.

Ultimately, though, it comes back to product, and changing manufac-turing cost ratios between East and West is rebalancing production away from China. On page 8 we examine how this is working.

But there is no escaping it. Businesses have to adapt to keep pace with changing shopping habits, or face losing share to more nimble competitors.

welcome

ApRil 2014 / Drapers Retail Market Report 1

Customers are firmly in control of the retail agenda

Market Overview 2 What will it take for mainstream chains to prosper in a polarising market?

International Horizons 4 UK retailers are blazing a trail abroad, where shoppers love British brands

Multichannel Strategies 6 Why mobile wallets, iPads and analytics are integral to retail

Back to Britain 8 Fast fashion, rising costs and volatility in Asia are bringing manufacturing home

Retail Roundtable 10 Drapers’ breakfast meeting agreed that customers are now calling the shots

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James Knowles Features editor, Drapers

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Fashion is at the forefront of retail innovation and taking brands to a global market.

Customers are adopting the ‘any product, anytime and anywhere’ philosophy at an astonishing rate and ecommerce is proof of this – purchases on tablets have soared from hardly any in 2012 to an astonishing 40% share in

2013. Shoppers have more confidence and retailers are coming to realise that the customer truly is king.

Retailers should know their customers and their journeys with the brand. With the diversity of data on product, customer and social media, it is essential that these rich sources are gathered and interpreted to inform the best customer service.

K3 is seeing an appetite for change among fashion retailers and a desire to join up their product and services proposition. Investing in the right areas of technology will provide retailers with a true omnichannel retail experience.

UK fashion retailers are showing and driving greater engagements with their ever-demanding customers, and are perfectly placed to exploit international opportunities.

tony BryantHead of business development, K3 Retail

Fashion Follows shoppers’ lead

Multichannel and logistics are the new battleground in retail

tony MannixManaging director, Clipper

With many UK fashion retailers reporting a return in consumer confidence, the battleground that is multichannel retail is starting to heat up.

As we’ve seen already in 2014, many retailers are looking at options for expansion, with several fashion businesses

floating, or signalling their intention to float. It is also more important than ever to have a

cohesive scalable multichannel strategy, that follows best practice in terms of process and

systems. Ultimately, it is about reducing risk, cost and complexity, while protecting the brand’s reputation with great customer service.

A clear international expansion plan is key. There have been some high-profile failures among retailers that took their product abroad, but there have also been some spectacular successes.

In the coming year, reverse logistics will be a cornerstone of fashion retail. In a multichannel age, consumers do not differentiate between online and in store. If you lose brand loyalty online, you lose store reputation too, and the efficient handling of returns can be a stumbling block.

Fashion is a fluid business and selecting a logistics partner with expertise in international retail, combined with the agility to adapt is vital.

The retail market has always been one of extremes. In any given week, one chain could post record results, while another collapses into administration.

So far 2014 has been no different. Within the first two months of the year there were a catalogue of failures across the sector as businesses continued to stumble in the tough economic climate.

Barratts was one of the first to falter this year. In January the footwear chain’s administrators closed down all 42 of its remaining stores, and then sold off its intellectual property three months later.

In February Internaçionale also succumbed to poor trading and pressure from landlords and rating authorities, when the value retailer fell into admin-istration, putting 1,000 jobs at risk.

Yet conversely some retailers have enjoyed a rosy start to 2014. John Lewis revealed record revenues in March and its turnover for the year exceeded £4bn for the first time. Womenswear retailer Warehouse toasted the opening of its first store on Oxford Street, and French Connection reported a drop in operating losses, thanks to its turnaround plan.

Meanwhile, etailers Boohoo.com and India-based Koovs.com have taken advantage of the upbeat market by debuting on the London Stock Exchange.

Verdict Research retail analyst Kate Ormrod says that after years of fragility the fashion and footwear sector is beginning to stabilise.

“Shoppers are more willing to buy into products that are available, and retailers are also a bit more savvy in terms of transitional ranges,” she says. “Unseasonal weather has had such an impact on clothing and footwear sales in the past few years

retail market Overview

2 Drapers Retail Market Report / apRIL 2014

chains’ pains and gainsthat players really should be learning from it and being more proactive.”

Ormrod adds, however, that retailers need to have more confidence in their propositions. She encour-ages medium-sized fashion businesses to learn from their larger counterparts and stick to their guns when it comes to discounting.

“Next was a real winner at Christmas – it didn’t do the heavy discounting that Marks & Spencer or Debenhams did. We need to see more retailers holding off from the heavy discounts,” she says.

Discounting has continued to be rife on the high street, and some retailers are offering a plethora of promotions and discounts while others turn to voucher codes and special offers to woo shoppers.

With shoppers hungry for value for money and many consumers wanting to find the ultimate bargain rather than splashing too much cash, value retailers have been reaping the rewards. primark, the largest value retailer on the UK high street, continues to reign with the low-priced chain deliv-ering relentless revenue rises.

Beth Butterwick, chief executive of value retailer Bonmarché, says that in the tough economic climate fashion retailers must work hard at encouraging the consumer to spend with them.

“One thing is for sure: it is the customer, not the retailer, who has the upper hand,” she says.

wiTh reTailers vying to win every penny, every-thing is on consumers’ terms now, and forward-looking fashion retailers are intent on offering a seamless omnichannel shopping experience to their customers. Those that can offer the full range of multichannel experiences and, in particular, convenient delivery options, such as 90 minutes, next day, click-and-collect, Collect+ or pick-up lockers and specific delivery slots are the ones that will reap the rewards.

Butterwick adds: “[Retailers] that take the time to understand their customers’ wants and desires, and engage with them accordingly, will do well. The winners have a real and present understanding of who their customers are and what they want. They are in tune with how they shop and communicate with them on a regular basis. They have made the emotional and personal connection with their audience.”

It is clear that those who know their market and have a compelling proposition could be the ones to prosper in 2014 and beyond. and this is something retailers should bear in mind – particularly as the market has levelled out and fresh opportunities are opening up, they should focus on delivering a consistent omnichannel experience online.

Jigsaw chief executive peter Ruis says that, although the market is flat at the moment, consumer confidence is improving and he believes it will grow throughout the year. “We are having a mini-housing boom and interest rates remain flat, plus there is some room in the market, as high streets have changed and brands withdrawn. We are not quite as over-shopped,” he says.

“It feels like the early 1990s,” he adds. “Coming out of a difficult economy, it will be about winners and losers and a stabilisation of the digital revolu-tion. The truly omnichannel [retailer] will win.”

although digital is now a huge plus point for most, success still comes down to product.

Colin Temple, managing director of footwear chain Schuh, says the winners in the fashion market

As the fashion retail market continues to polarise, what will it take for mainstream chains to survive and prosper?

this year will be those that are able to source “hot product and are selling it in a pleasing environment efficiently with great customer service and are able to lever this over all channels”.

Like many others, Temple believes the market remains volatile but is on the road to recovery.

“Fashion can be fickle but overall the economy seems to be strengthening a little,” he adds. “Our experience shows that these consumers have the time for fashion, which will always glean great opportunities for retailers. With trends coming quicker and finishing quicker, anyone who can read the market right and get into these trends at the right time, but also exit at the right time, has the potential for success.”

The speed aT which people shop has changed and will never go back to the way it used to be. Shoppers can get the latest look at the click of a button and brands are produc-ing collections almost straight off the catwalk.

“Consumers are more willing to spend but they are much more circumspect about spending than they

were pre-recession,” says Maureen Hinton, retail analyst at research company Conlumino.

“Consumers are more demanding – wanting better prices, better products, better services and better value, and our shopping patterns have altered. We shop more online, locally to our homes and work, and less out of town. So although retail expenditure will grow, there is not enough extra spending for everyone to win – only the best retailers will get an increased share and they have to provide us with not just the products and services we want, but the way we want to shop – by being in the appro-

priate locations and offering us the appro-priate online services.”

Hinton says that although consumer confi-dence and the housing

market are improving, life will remain difficult for UK retailers.

The market is continuing to polarise, with price-led chains providing shoppers with the value they are looking for and premium retailers delivering the inspirational product that justifies the price tag.

For those in the middle market, however, the squeeze continues.

Hinton adds: “The mass middle-market will continue to find it tough – especially big players,

because they cannot rely on opening new stores to drive spending anymore.

“Competition is so intense, and consumers have access to so much choice, that the only way to win share is take it

from competitors – or find a completely new market.”

Words byVICTORIA GALLAGHER Illustration by MITCH bLunT

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april 2014 / Drapers Retail Market Report 4

Cath Kidston, Blue Inc, Karen Millen and Reiss are blazing a trail abroad, where shoppers love British brandsWords by Manfreda Cavazza

The ignominious end of Tesco’s american dream when it called a halt to its Fresh & Easy venture in 2012 sent shivers through the retail sector. The failure of a power-

house such as Tesco to perform in the world’s biggest economy demonstrated that international expansion carries serious risks. Yet the potential gains can be exceptional. and, for medium-sized retailers from the UK high street, moving overseas could help them to leapfrog their competitors.

But where should they go? Verdict analyst Kate Ormrod says markets such as asia pacific, China and some countries in eastern Europe have shown strong economic growth despite the global financial crisis. it is in these territories that British fashion brands have triumphed. in addition, some fashion retailers have been much less affected by the down-turn and have continued to expand regardless.

“These players have a unique proposition and can sell their products almost anywhere,” says Ormrod.

Cath Kidston is one such company. its colourful, spotty bags and floral clothing have captured the world’s imagination, and now 36% of total sales are generated overseas. it has 88 international outlets,

compared with 66 in the UK. The brand has initially focused on asia, where it has stores in Japan, China, Korea, Thailand, Taiwan, Singapore, indonesia and Malaysia. However, it is also expanding through department stores in Europe, where it has wholesale accounts with El Corte inglés in Spain, Galeries lafayette in France and De Bijenkorf in amsterdam.

The company is exploring further opportunities in the Middle East, russia and australia. Cath Kidston is also keen to set up shop across the pond in the next two years, despite – like Tesco – being forced to beat a swift retreat from america a few years ago.

Cath Kidston marketing director Sue Chidler admits that first attempt was “botched”.

“We Were running before We could Walk,” she says. “We were out of our depth.” However, the business has learnt from its mistake. Cath Kidston, which is 60% owned by private equity firm Ta asso-ciates, has doubled in size in the last two years. inter-national sales have quadrupled in that time, while total group sales passed the £100m mark in 2013.

“You have to be mindful, when you expand over-seas, that you know what you’re doing and that you have a robust enough structure to support the growth,” warns Chidler.

Expanding into new territories can put a strain on the central organisation: ensuring you have the logistics to back the expansion up, as well as a good understanding of the rules and regulations of the country you are targeting is essential, she adds.

Cath Kidston analyses its online sales to deter-mine where demand is. its three biggest markets

online are the Middle East, North america and australia, so it is logical that stores will follow in these territories eventually.

Entering a market via wholesale is another cost-effective way to find out whether the brand will be a hit in another country. Cath Kidston’s initial forays into Japan were through wholesale – and it is now its most successful overseas market, with 31 stores. The company owns and operates its stores and concessions in Europe and China, with the remainder run as franchises.

Chidler says Cath Kidston’s international success is down to the “uniqueness of the brand”.

“love us or hate us, we are very distinctive,” she adds. “Our stores really stand out.”

Having a unique proposition is also key for young fashion chain Blue inc. The company, which is backed by the reuben brothers and former Marks & Spencer chief executive Sir Stuart rose, has carved a niche for itself by focusing on the

affairsForeign

Following a pattern: Cath Kidston’s

overseas shops, in cities such as

Shanghai (pictured) and Kawasaki (inset),

outnumber UK outlets

international expansion

5 Drapers Retail Market Report / april 2014

young, male market. Chief executive Steven Cohen believes this is what has driven its success both at home and overseas: “We have got something different. We’re targeting the under-24 market in particular, focusing on youth, male fashion. people in that bracket have more disposable income, they’re less affected by macroeconomic factors. We don’t believe there are any other retailers like us.”

Blue inc took its first international steps in 2011, targeting eastern Europe, following an increase in online orders from that region. initial plans to open stores in Ukraine were shelved because of political uncertainties in the area and the brand settled on the Baltics instead, where there are five stores: two each in Estonia and latvia, and one in lithuania.

Cohen believes young men from eastern Europe discovered Blue inc when they came to the UK for work and “they remained loyal to the brand when they returned home”.

There are also two stores in Malaysia. Blue inc plans to expand further in the Baltics and Malaysia in the short term, but has also set its sights on russia, the Middle East, the Far East and South america. it expands via the franchise model because it carries less risk and requires less capital investment.

it is gearing up to float in the next two years and has big ambitions.

Cohen says: “We have turned this company around, breathed life into it and scaled it up. There is still a significant opportunity to expand the business further.”

karen Millen is another multiple that has broadened its horizons, after reaching market saturation in the UK. it trades in 60 countries and international sales, which represent 70% of group turn-over, are growing 30% year on year.

Simon Gaffey, international busi-ness development director, says:

“We’ve reached the optimum level with the store portfolio in the UK [where it has 75 stores]. However, we are aggressively pushing into new markets.”

Karen Millen operates two business models over-seas. if the market has good potential for growth and scale, and if there is ease of doing business, it targets that market independently.

if, however, scalability is limited and ease of doing business is low and complex, it adopts a fran-chise model. Directly owned businesses at the moment are in western Europe, the US and australia. The rest is franchised. The only exception is China, which Karen Millen manages directly, despite the complexities of doing business, so it can benefit from the expansion potential.

Gaffey believes Karen Millen has prevailed because of its consistency: “Our stores all look the same, smell the same and the collection is the same.”

The UK is Karen Millen’s largest market, followed by russia, the US, Middle East, Hong Kong and australia. However, Gaffey thinks there is plenty of

scope: “We have absolutely not reached our full potential. We think we’re at 50%. We can grow more in our existing territories and there are new territo-ries to target.” The hit list includes latin america, india, South Korea and Japan.

Gaffey says the main challenge has been balancing what is a global brand with keeping it local.

“There are subtle nuances in climate, cultures and fashion in different markets,” he explains.

like Karen Millen, premium retailer reiss has expanded into the US and Hong Kong. Of its 120 stores, 45 are overseas and it also plans to open in india, China and southeast asia. reiss has grown with franchise partners, as well as independently.

Finance director Steven Downes explains: “The US is a hugely exciting, relevant market for reiss with growing support for the brand. Therefore direct expansion with our own British team is the best way to truly ensure success.”

in countries where there is desire for the brand but a lack of market knowledge, reiss works with experienced franchise partners, who have an estab-lished infrastructure and extensive knowledge of the territory.

“This ensures a far greater chance of early success as you have direct experience with regard to sites, pricing, cultural sensitivity, product mix and sizing,” explains Downes.

Where next for british fashion retailers? Verdict forecasts that Germany offers an exciting opportunity for retailers at the moment, and larger businesses such as primark have been a success

there. it has noticed a lot of activity with UK players entering the country via local language websites, own stores or selling via department stores. it is the size of the market that is appealing.

This view is echoed by logistics firm Clipper, which has recently bought two distribution hubs in Germany to make the most of this trend.

Managing director Tony Mannix says: “We are seeing a lot of our customers looking at central Europe. international is now back on the agenda.”

looking ahead, Tony Bryant, head of business development at retail systems provider K3 retail, says the opportunities for UK businesses to enter markets online is vast. “as other international markets realign their businesses and distribution networks around ecommerce, there is a golden opportunity for UK companies to export their skills and thought leadership in this space.”

it seems the UK fashion industry has a few tricks up its sleeve when it comes to conquering overseas markets. long may that continue.

Male order: Reiss has opened in New York and finds the US “hugely exciting”, while Blue Inc (left) is targeting the Baltic states and has opened in Riga

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6 Drapers Market Report / April 2014

seAson preview TExTilEs spEcial

FeBrUArY 8 2014 / Drapers v

in its 208 stores in the UK and ireland, opening eight to 10 shops a year from now on. international expan-sion, initially to the Us, is also on the cards.

in fact seager argues the stores are essential to the multichannel journey, as many shoppers buy online and collect in store. Customers will often end up trying a garment on, deciding it isn’t right and buying something else. Fat Face staff – or “crew” – are trained to help them throughout that process.

Keith nesbitt, chief operating officer at shirts and suiting specialist TM lewin, agrees. He says the online and store businesses benefit each other.

“we don’t think a bricks-and-mortar business can survive without online and vice versa.”

The presence of a TM lewin store boosts the retail-er’s online sales in an area by 15%. The online busi-ness, which represents a quarter of total revenues, has also helped the retailer expand geographically. orig-inally focused on selling in the City of london, today around 50% of the portfolio is outside the capital.

nesbitt adds: “Multichannel has helped us make a wider range of product available to more people.”

staff are encouraged to see multichannel retail as “normal” and not separate or added on.

“we have one business and our sales strategy is very much aligned. You might sell things on the web, in a catalogue or in a store, but shoppers will get the same experience, the same product and the same price at all three,” says nesbitt.

A training programme for store managers focuses on using technology such as tablets to boost sales.

“we told them not to spend too much time worrying about what multichannel meant and to just see it as what we all do now,” nesbitt says. The tablet is used as a tool to help customers make their purchase. if they can’t find what they are looking for in store, they can look it up online on the tablet.

Multichannel will eventually be used to expand the wholesale business. TM lewin currently sells uniforms, personalised ties for clubs, embroidered shirts and bespoke suits for special occasions or foot-ball teams. nesbitt sees potential in expanding whole-sale operations by promoting them and targeting new customers by email, online and in store.

in the fashion sector selling is all about the customer experience – as it was before multichannel retail, but today it is even more important.

patrick o’Brien, lead analyst at verdict, says: “Multichannel used to mean two channels. You either shopped online or in store. They were two separate entities. now it’s all part of the same thing.” However, he warns that understanding profitability can be a challenge. “it is not easy to track the journey

A sk a fashion retailer about multichannel selling and the reaction is often one of bemusement – akin to pondering on the usefulness of hangers.

The so-called clicks-and-mortar revolution is not really a revolution anymore: online sales of clothing and footwear have tripled in the last five years from £2.3bn in 2008 to £6.6bn in 2013, according to verdict research.

As Mark seager, ecommerce, marketing and brand director at Fat Face, says: “You can’t really do retail without multichannel.”

Fat Face is a typical example of a company that has embraced the practice of selling to customers across multiple platforms. Three years ago, the life-style retailer launched a project to track the journey its customers went on before making a transaction.

“we literally drew diagrams of how we wanted that journey to work,” explains seager. “we realised that customers don’t think by channel. They want to experience the brand in the same way across all channels, be it in store or online.”

As A result of thAt exercise, Fat Face over-hauled its website to make it more user-friendly, and improved imagery and navigation. it also installed a new epos system in every store that linked up to the online offering.

“store staff have access to a full view of our range. The screens can also be turned around, so customers can see for themselves. essentially we are now offering our entire range in every shop,” says seager.

The investments appear to have paid off. ecom-merce sales rose by 55% in the first half of this finan-cial year compared with the preceding half and now represent 14% of Fat Face’s total revenue. The last annual statement showed sales of £178.6m to June 1, 2013 – up from £163.5m in 2012 – and further sales growth is expected this year.

ensuring a streamlined service to shoppers is not easy. seager admits Fat Face needs to respond to the greater use of mobile. However, he views technology as an “enabler” rather than a challenge.

“i see multichannel as a great opportunity, as long as you embrace it,” he says. “our range has nearly doubled in the last three years, and our sales and profits have grown.” The next five years will be about harnessing the use of mobile wallets and the company is considering introducing paypal in stores.

However, seager – who started at Fat Face in 1997 as a store manager – says technology should not distract businesses from their traditional bricks-and-mortar estate. Fat Face will continue to invest

the customer has been on before making a purchase. You don’t know the true viability of the stores. You don’t know whether to make an investment in a certain area,” he says.

some retailers solve this by allocating the sale to an area based on the postcode of the purchaser. This helps retailers to make decisions on buying habits in that area and therefore whether to invest in stores.

the next big thing in multichannel retail will be mobile payment systems, believes o’Brien, via social networks and mobile wallets. For example, industry rumours suggest Twitter is considering launching a payment system to enable shoppers to buy clothing from different brands using one account.

“it may seem odd,” says o’Brien. “if you’re online, why not go direct to the retailer’s website? But because people are increasingly using Twitter on their mobiles, it does begin to make sense.”

if shoppers have all their data, including bank details and delivery addresses on Twitter, it is easier than having to input that information on each retailer’s website. Furthermore, Twitter and Facebook have worked hard to optimise their sites for mobile.

logistics firm Clipper’s managing director, Tony Mannix, says social networks are also essential for customer service. The company manages returns for Asos, superdry and John lewis, so it plays a key role in ensuring shoppers are satisfied.

“people expect to be able to buy anything from anywhere and send it to anyone,” explains Mannix. “They expect to receive exactly what they ordered in pristine condition. They also expect the experi-ence of returning it and getting a prompt refund to be as good as the experience of buying it.” Get any of that wrong and the customer will be complaining on Twitter in an instant.

Tech-savvy high street chains have introduced an array of innovations in stores: from internet-connected ipads in changing rooms for customers to tweet “selfies”, to smart mirrors for virtual trying on, to radio frequency identification trackers that alert sales staff to your buying preferences.

Use of CrM (customer relationship management) technology to get to know shoppers at a personal, granular level is what will set winners apart.

“There is a huge opportunity here,” says Domenico Antonucci, sector manager at retail tech-nology provider K3 retail. “ensuring customers are really engaged with your brand, by knowing who they are and speaking to them in ways that interest them, will drive profitability.”

Mobile wallets, iPads and analytics have become essential parts of retailers’ armoury – both online and in store

Words by Manfreda Cavazza Illustration by MITCH BLUnT

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british manufacturing

The garment industry in the Far East is not what it used to be: dirt cheap. The reality of sourcing in Asia is unravelling. Cambodian textile workers are battling

for improved working conditions and in China wages are rising by about 20% a year. Combined with speed-to-market pressures, these hurdles are leading to an increase in manufacturing in Europe and the UK for some retailers.

Gifi Fields, owner of high street supplier Coppernob, says retailers are now seeking a mixture of manufacturing locations because of the risks attached with sourcing in just one area.

“It’s a question of risk analysis. With the disaster in Bangladesh and the troubles in Cambodia, you don’t want to have too much exposure in one country,” he says.

Retailers are also rethinking their manufacturing bases and moving production closer to home, particularly to countries such as Romania, Turkey and Portugal, because of the increasingly important speed-to-market factor.

A more accessible factory means that, if a particular trend isn’t flying off the shelves, or a design needs tweaking, then – hey presto – the product can be altered and on the shop floor far more quickly than the six weeks it takes for a shipping container to cross the water from Asia.

Edinburgh WoollEn Mill is making clothing in the UK and Europe, which cuts delivery times and helps it respond quicker to new trends.

Owner Philip Day says: “Historically we’ve always produced in the UK anyway. It’s the way Edinburgh Woollen Mill was set up – as a manufacturer. We have done business in Europe for a long time – it’s just not quick enough from the Far East.”

Day believes there is a growing trend for “nearshoring”. “The reason why retailers are coming closer to here is the quick response to the market,” he says. “The benefits of manufacturing in the Far East aren’t as big as people think.

“ Of course there’s a cost saving, but it’s not that significant if your factory is, say, in Leicester and they can get the product on the line on the Wednesday, and in shops on the Saturday. The market might have changed if you’ve got six weeks to wait [from the Far East].”

Although Fields believes there is “a lot of media hype” around reshoring and nearshoring, he has noticed an upswing in both.

“A lot of customers are trying to move production closer to market to quicken up lead times,” he says. “For some retailers it’s heating up, and for some it’s always been there. There tends to be a herd

mentality among retailers: they think that because so and so is doing it, they should be doing it.”

Jaeger is one brand that is bringing manufacturing closer to home. The premium retailer is shifting production from Asia, where it sources most of its garments, to Turkey, Italy, Portugal and the UK.

The company has said the change in strategy is down to improving the quality of its garments, but is also part of its quest to slash the time it takes to get orders from the factory and onto the shop floor.

UK manufacturing has been thrust into the spot-light in recent years, as one after the other, retailers such as Marks & Spencer and John Lewis launch Made in Britain-style ranges, which give a little boost to home production, but in reality make up just a small proportion of their overall clothing.

The latest Markit Purchasing Managers Index, published in March, indicates growth in production. It said a “strong upswing in the UK manufacturing sector was maintained during February”, and fore-cast levels of production and new business would continue to increase at “robust and above-trend rates”. The index, however, does not split out the garment industry.

Fast fashion, and rising costs and volatility in Asia are pulling retailers back to British manufacturingWords by suzanne bearne

Homing instinct: Coppernob (top) and Jaeger (above) are sourcing garments from a range of locations – including the UK – to spread the risk

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APRIL 2014 / Drapers Market Report 8

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John Miln, chief executive of the UK Fashion & Textile Association, says there is no hard evidence to suggest a boom in the industry.

“There’s not a lot of understandable data coming through,” he says. “We are trying to build our own. Some retailers are investing in the supply chain in the UK because of a quicker response for fast fashion. There seems to be evidence of elements of nearshoring and reshoring, but it’s the exception rather the rule.”

Young fashion brand Luke is bringing manu-facturing back to Britain. Owner Simon Poole says it has just started to make garments in the UK for the first time after noticing demand for British-made goods from overseas.

“The stronger we get internationally, the more [there is] demand for local product,” explains Poole. “Selling Chinese-made product back to the Chinese is like selling sunshine in Vegas.

“We have expanded our sourcing because of increasing prices in China and looked closer to home for speed for our customers. Although not as diverse a sourcing network as others, because we want constant control over quality, we work mainly in China, Turkey, India, Thailand and now the UK.”

Poole says that although the UK is more expensive, the gap is narrowing.

“We are looking at other Asian countries to mop up the margin-driven volume, and locally to offer the diversity and speed,” he adds. Poole expects 20% of Luke clothing to be produced in Britain in the next three years.

Jaeger plans to bring up to 15% of its production back to the UK. Chief execu-tive Colin Henry tells Drapers: “Jaeger has a history of manufacturing in the UK – that is an essential part of our DNA. This has been ignored for the last decade.

“Our customers are very positive about the prospect of us introducing up to 15% of our collections being made in the UK

as part of our strategy of returning Jaeger to its former glory.”

Dilip Pancholi, director at Leicester-based K&A Fashions, which was set up around 40 years ago and specialises in woven womenswear, has noticed more retailers

wanting to bring production back to the UK – although he is not at liberty to reveal names.

“All of the high street wants to. A lot of production has come back to the UK already because of the quick turna-round. In the Far East, the lead time is too long and labour costs are going up.”

He points to factories in China strug-gling over Chinese New Year, when many workers return to their home towns, which add to retailers’ woes.

One retailer that has kept to its English roots, and is expanding them, is Mulberry. The UK’s largest manufacturer of luxury leather goods has two British factories in Somerset: the Rookery and the Willows, the latter of which

opened in June 2013.“We expanded our UK manufacturing

before onshoring became a fad word,” says Mulberry group supply director Ian Scott. “The business had grown so much. The Rookery [in the village of Chilcompton] was

producing 25% to 28% of our handbags and we wanted manufacturing in the UK to reach 50%.

british manufacturing

9 Drapers Market Report / APRIL 2014

“The plan was to identify land and design a factory. So we opened our second factory, the Willows, near Bridgwater.”

The factory now employs 300 craftspeople and has increased Mulberry’s UK production to more than 50% of the total.

ThE brand has stopped manufacturing in China and has instead spread production across the UK, Italy, Turkey and Spain.

“Very simply, as an English brand – and one that’s a luxury product – you need to offer the best quality, whatever brand you are. China is nine months away in terms of lead times and this adds risk to a busi-ness. And with the distance travelling back and forth to Asia, there’s a cost to think about.

“Also, labour costs are increasing. In Asia they’ve increased 20% every year for the past three years. The gap is closing. It would be wrong to say that the gap has closed – of course it’s cheaper than Europe, but if you put it all in a basket, for many businesses, manufacturing in the UK is viable.”

Scott says that another UK factory will be required if the brand continues its pace of growth, but he does not envisage a time when all of Mulberry’s products will be made on home turf.

“All businesses need a balanced strategy,” says Scott. “There’s an opportunity for more companies to manufacture in the UK and close to their market-place, where the real benefit is maintaining control of product.

“However, it’s wrong to say you should 100% manufacture in the UK – you shouldn’t put all your eggs in one basket.”

British champions: Marks & Spencer (left and below), John Lewis (centre) and Mulberry back UK style, and the publicity they create is encouraging others

It is a cliché that successful businesses put the customer at the heart of what they do. But the challenge for retailers now is to � nd exactly where the customer is, and make sure they are

properly targeted. At Drapers’ breakfast roundtable, held at London’s

Covent Garden Hotel on March 27, retailers and brands as varied as Ted Baker, Bonmarché, Reiss, Closet Clothing and Coast all noted that, although con� dence was returning, customers were still cautious about parting with their hard-earned cash.

Young fashion brand Duck and Cover’s head of sales Gareth Jones said: “Almost without exception people have said it feels like it’s getting better, but we are not seeing business rushing back.”

Beth Butterwick, chief executive o� cer of value chain Bonmarché, agreed. “Everyone talks about the economy getting better, but that is not necessarily

falling right to the bottom of customers’ purses at the moment,” she said, adding that poor weather at the start of the year also hindered spending.

Jigsaw product director Barbara Horspool noted that consumers were still “very considered now in the way they are spending” and that they were “looking for brands that give them value” – no matter where they sit in the market.

“Consumers have come out the other side [of the recession] behaving quite di� erently. They want emotional engagement, quality, trust – all these things are really important,” she said. “When there is a lot of the same thing on o� er, those that show a bit of entrepreneurialism will win. People want choice on the high street.”

Discounting is still rife. Horspool said the number of sales suggested “some of our competitors aren’t quite as con� dent as us”.

Reiss’s head of information systems, Hugh Raeburn, echoed this. He observed that some competitors o� ered promotions so frequently “they are either sitting on a mountain of stock or nervous that things aren’t going to sell”.

But retailers are getting savvier about how they spread the message, as they realise that brand reputation is damaged by being constantly on Sale.

One director spoke of how a sales assistant in a rival store had “whispered” that there was a Sale on, while others talked of the increase in online-only sales, � ash promotions and tie-ups with consumer magazines. Hackett ecommerce director Kristine Kirby agreed there was a move to “make it look less panicked”.

Duck and Cover’s Jones noted the rise in the number of Sales right

Words by CATHERINE NEILAN Photography by PHIL WEEDON

Small- and medium-sized fashion businesses at a Drapers breakfast meeting had one thing in common: their customers are calling the shots

KnowledgeIS POWER

RETAIL TRENDS ROUNDTABLE

10 Drapers Retail Market Report / APRIL 2014

after pay day, saying “the competition to get money out of people in those � rst two weeks of the month is stronger than ever before, because people are worried about running out of money”.

RETAILERS AND BRANDS agreed there was still tension between those working in ecommerce and those working in stores about who “got the sale” and who was stuck with the returned goods.

One attendee told an anecdote about a previous job in which they discovered a sales assistant had o� ered personally to post an item for a customer returning it to avoid having “negative sales” that day. Others agreed the two arms remained “siloed”.

Reiss’s Raeburn said: “If we all had the time again, we would build our systems completely di� erently.”

Hackett’s Kirby said her approach was to insist “we only have a customer channel” – that it is irrel-evant where the purchase actually took place because of the way people browse across channels before making a � nal commitment to buy. “At the end of the day, we all work in the same company the customer bought something from,” she said.

The new dynamics created by the online revolu-tion meant that many in the room felt the customer was driving change.

Antony Comyns, head of ecommerce at shirtmaker Hawes & Curtis, said: “The customer is taking us on the journey – not the other way around. We have to try everything we can to join everything up for them.”

For example, Comyns noted that consumers did not feel comfortable using iPads, so he wanted to introduce kiosks in store instead. “If I put a computer in the middle of the store, no one will touch it. With iPads, people are still unsure. Kiosks look like some-thing from a railway station – it’s something they are used to, so people will walk up to it and start using it.”

Reiss’s Raeburn agreed that consumers are now dictating how they shop: “Twenty or 30 years ago it

put it by the doors,” he said. “Don’t make it di� cult – click-and-collect is what the customer wants to do.”

The question, is what the customer will want next? Ease of access appears to

top the list. Ful� lment issues – especially the time taken to refund a customer – were raised by many as potentially damaging.

Choice also was a high priority – the more distinct a retailer or brand’s o� er, the more likely it is to succeed. The attendees – most of whom represented � rms with a turnover of under £200m – said they felt their size was a help rather than a hindrance.

As Raeburn put it: “The smaller guys are in the stronger position. They are more agile than the ‘oil tanker’ guys and they are the ones that can make that change.”

was us saying to them, ‘This is how you shop with us.’ Now it’s the other way around. We are being led by [the customer]. You feel slightly out of control, but we will get there.”

Butterwick agreed in principle, but felt it could be costly to constantly second guess what they wanted. “There is no point in investing in a really expensive system if the customer is not there yet – you want to be one step ahead, not four,” she said.

She highlighted some of Bonmarché’s upcoming initiatives – such as launching in garden centres or considering developing lines for sale on cruise ships – as a savvy way of “going where the customers are”.

However, in this age of listening to the ever-demanding customer, mistakes are still being made.

Tony Mannix, managing director at Clipper Logistics, noted that several retailers looking to upsell to the click-and-collect customer located the pick-up desk upstairs or deep inside the store, which he argued was a blunder.

“Click-and-collect customers want to be in and out. They want a quick shopping experience, so you should

Shared experience: clockwise this page, from above, Beth Butterwick, Bonmarché; Ted Baker’s Charles Anderson; Barbara Horspool, Jigsaw; K3’s Domenico Antonucci

APRIL 2014 / Drapers Retail Market Report 11

Ideas exchange: this page, clockwise from left, Tina Hayward of Paul’s Boutique and Tony Mannix, Clipper; Sean Hallows of Clipper and Gareth Jones of Duck and Cover; Hackett’s Kristine Kirby

THE DRAPERS ROUNDTABLE BREAKFAST was sponsored by Clipper Logistics and K3 Retail*Visit our website, www.drapersonline.com, to download a full Retail Market Report for free