Topshop, H&M and Zara are homogenising retail

  • News
  • March 10, 2016
  • Sarah Dunn
Topshop, H&M and Zara are homogenising retail

McKee sees fast fashion as more of a business model than an issue of scale, tracing its origins to discount-driven customer behaviour prompted in 2008 by the Global Financial Crisis. For him, fast fashion is about making smaller amounts of product, replenishing faster, sending items direct to stores, testing product in stores and only making what’s popular.

“You don’t just make a bunch of something,” he says.

As an example of a smaller fast fashion player, McKee cites an Infor client, Varner-Gruppen. This Norwegian company has 1,436 shops across a number of Scandinavian and Eastern European countries with a 2014 pre-tax profit of approximately €151 million. It’s not strictly big or small, says McKee, but its business model is pure fast fashion: “Constant change, not going deep on anything.”

Infor is a cloud-based software company. It is present in more than 200 countries, and works with a few Kiwi retail customers including Ziera shoes.

Asked about the three global fast fashion companies which have recently established themselves in New Zealand – Topshop, H&M and Zara – McKee says that while they make similar products, there’s not a lot of similarity between them internally.

He favours Zara over its competitors, saying it has retained a “very manual” approach to fashion design. It bases its empire on internal communication between designers: “Talking to each other. What a radical concept!”

Zara is owned by Spanish textile manufacturer Inditex. McKee shared some background about its rise to prominence: “The only reason Zara became Zara is because they had large cancellations and leftover product.”

Finding itself in a tight position, Inditex decided to make some clothing out of the leftover textiles, and the pieces sold well. In the early days, McKee says, there was a belief that Zara could never succeed outside of Spain because it was a unique economic environment.

“Then, the belief was that it could never succeed in Europe, and then Asia, and now it’s all over Asia.”

McKee says apparel is often design-driven rather than material-driven, but because it’s owned by Inditex, Zara bucks this trend.

Topshop, H&M and Zara all announced their entry into New Zealand within a year or two of one another. Asked whether this might be evidence of collaboration between the megabrands, McKee says the answer is a definite no: “They usually hate each other.”

The reason for their near-simultaneous arrival on Kiwi shores is not collaboration but competition, he says. Each company would have studied the same demographics and its real estate division would have made similar decisions about timing and placement.

“They have very similar people doing similar jobs,” McKee says.

McKee feels that opening a store in Auckland is not a surprising move as it’s one of the top 100 cities of the world, but he says Topshop’s expansion into Christchurch, announced last November, shows it’s really serious about New Zealand.

McKee says smaller fast fashion players shouldn’t be concerned about international giants entering the Kiwi market as they are likely to be more agile.

“Fast fashion is all about agility,” he says. “In the industry we talk about ‘time to market’ but it’s actually ‘time to consumer’.”

Unless a small fast fashion retailer is operating off a very traditional model, McKee says, it should be able to get new product into the consumer’s hands faster than Topshop, Zara, H&M and their cohorts.

McKee and Infor Pacific managing director Jo-Anne Ruhl share broader concerns about the effect of intense competition between fast fashion megabrands on global retail. These companies don’t collaborate, say McKee and Ruhl, but they do copy one another constantly.

“Retailers have fallen into a pattern of doing the same thing over and over,” McKee says. “It’s like we’ve got into a bit of a doldrum with product innovation.”

This has had the effect of reducing choice for the consumer, giving them no reason to shop as every store is offering the same products. McKee is nostalgic for shopping in New York during “the old days”, when small businesses offering products with a clear point of difference were easy to find. Retail there is now more homogenised and he feels an important element of independent thinking has been lost.

McKee and Ruhl believe this sameness is pushing shoppers online, fuelling the growth of pureplay and omnichannel retailers. The barriers to entry are much lower for ecommerce companies, allowing pureplay vendors much greater creative freedom.

Ruhl lists Australian ecommerce venture Hard to Find as a sign of what’s to come. The site collects items from other vendors and allows them to fulfill the order. This “curated” model is becoming more and more popular, she says.

McKee says customers are clearly signalling their preferences on social media and the key to success is to listen to them, but companies must be careful to correctly interpret their wishes. Sometimes when customers ask for lower prices, what they really want is better value.

Asked whether he thinks the ubiquity of similar products across global fast fashion retailers is what customers want, McKee is doubtful.

“I can’t imagine customers want homogeneity – they want choice.”

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