Helen Dickinson on retail: Fashion retailers feel the squeeze

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 £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.

Traditionally, their domain has been well-defined. They would admit they couldn't quite command the premium prices of a Ted Baker, for example, or some of the big department stores. However, at least the tier of retailers beneath them was firmly rooted in a much more basic product offering and so did not represent a major competitive threat.

That appears to be changing and they are under more pressure than ever before.

What this doesn't change is the need to get the product right. That's why you still get success stories even when consumer confidence and spending levels are at their lowest ebb. Somebody somewhere will still be getting the look, style and quality 100% right and laying claim to what reduced spending power still remains. You can talk all you like about price points, but if the product is not right, price won't even come into consideration in a shopper's mind.

The developments of recent months have blurred the boundaries of the old established tiers of fashion retailing. You may now rightly ask where 'value' retailing ends and the next tier begins. In some ways, does it really matter? Every retailer wants to give value to its customers, whether it sells products at £4 or £400. Success in this area will only ever be judged by the strength of product - and no retailer can afford to forget that.

- Helen Dickinson is head of retail at KPMG

30 SECONDS ON ... FRENCH CONNECTION'S ADVERTISING

- In the mid-90s FCUK was used as shorthand on fax heads in correspondence between French Connection Hong Kong (FCHK) and French Connection United Kingdom (FCUK).

- TBWA's Trevor Beattie devised the controversial FCUK campaign which has since had several run-ins with the Advertising Standards Authority (ASA).

- The first ban came in spring 1997 following 10 complaints to the ASA. The campaign relaunched that winter after a strategy change, which separated the acronym FCUK and the word advertising.

- The ASA banned the campaign again after a further 27 complaints.

- Last year FCUK lawyers were outraged when pro-fox hunting campaigner Otis Ferry, son of rock-star Bryan, invaded Parliament wearing a t-shirt with the message 'FCUK yer ban'.

- The lawyers wrote to Ferry, warning him that he had infringed its copyright and that action could be taken if he wore the offending garment in public again.

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

Lynx tells men not to leave love to fate
HBO captures awkwardness of watching sex scenes with parents
Primark to open first US stores with Boston chosen as flagship location
Marketing spend on the up but a reality check is needed before celebrating
Top 10 ads of the week: Jackpotjoy and BT Broadband fend off Kevin Bacon
Lidl beats Tesco to 10m Facebook fans
Center Parcs ad banned for encouraging parents to take kids out of school
Coca-Cola, Cadbury and Amazon named top brands for targeting youth market
Leaked document shows Nokia to be rebranded as Microsoft Mobile
Nike lays-off hardware staff in move that casts doubt on future of FuelBand
Greenpeace says save the bees or humans will die
What brands need to know about changes to VAT and online downloads in 2015
Jimmy Savile victims urged to claim compensation in new ad campaign
UKIP launches biggest  ad campaign and stirs up 'racist' accusations
Apple boss Tim Cook provides voiceover on ad touting firm's renewed green commitments
John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message