‘UK fashion retail’s choice – lie down and accept decline or come back fighting’

Even just a few years back John Lewis was launching well-branded fashion lines AND/OR and Kin – to great fashion industry acclaim – and high streets were filled with UK fashion brands with their finger on the pulse. The UK owned fashion.

Fast-forward to today and what do we see? M&S’ value appears largely based on its food business. Topshop in NY is shuttered and Arcadia’s profits have slumped from £119m in 2017 to a loss of £137m in 2018.  

Sharon White barely made mention of clothing in her recent strategic review update as chair of John Lewis and many standalone high street fashion brands have failed or are failing.

Self-inflicted wounds

How have some of our best-known fashion retailers reached this grim place? External forces – global competitors, the growth of ecommerce, fickle consumers– are given most of the focus. But less attention is paid to the self-inflicted wounds that have weakened some of our most prominent brands.

So, where should we start searching for the root causes of UK fashion’s difficulties? We need to go back 30 years to when the industry was flying high – when most high street clothing was manufactured in the UK. 

Zara is celebrated for its pace today, but the UK was the pioneer of speed to market with lead times of four weeks typical – and often just two. Back then, intake margins of 40% required disciplined focus on full-price sell-through. There were only minimal promotions and discounting, and the key to success was getting the price right first time. And with supply so close to home, manufacturing and restocking were really fast.

“Where should we start searching for the root causes of the UK fashion’s difficulties? We need to go back 30 years to when the industry was flying high – when most high street clothing was manufactured in the UK”

What changed? Manufacturing started to shift overseas, margins got much fatter and merchandising discipline relaxed – but the industry also became sluggish. Making money was almost too easy with margins as wide as they were, but it was also easy to make mistakes.

Lead times of up to 40 weeks for manufacturing and shipping meant making big bets almost a year out. And the only way to remedy a wrong call was through discounting.

The discount spiral of doom

While offshore manufacturing unlocked enormous profits in the short term, the longer-term impact was that the discipline engendered by narrow intake margins – ‘first price right price’ and limited discounting – disappeared. The UK high street became much slower to react in season, core retail skills were forgotten and an irreversible behaviour change occurred as many customers became addicted to discounts.

The net impact? Fashion has become ever harder and many brands have disappeared. The UK high street has largely surrendered to the likes of Zara, Uniqlo and H&M.

UK fashion may be down, but it’s not out. Focus is needed on three things: 

Customer first, last, always

Preparation: get buying right from the outset by using data and deploying customer analytics to ensure that you go into the season with the products most likely to sell at full price.  

How? Knowing the customers who actually make you money (as opposed to the ones that only ever shop at deep discount) and buying what they want. What sizes are your early-season, full-price shoppers and how does this vary from the usual size breaks? What products are being purchased time and again (a great fit on a jean)? What products acquire new customers that go on to shop profitably for years to come? 

“Focus on ‘hero’ products that are barely tweaked from season to season but engender trust for delivering exceptional quality at a great price” 

Focus on ‘hero’ products that are barely tweaked from season to season but engender trust for delivering exceptional quality at a great price – this is something that Uniqlo does really well.   

The added bonus of getting it right from the outset and not having huge quantities of stock to clear when it is past its sell-by date? It’s deeply sustainable and good for the planet to just make less stuff.

Supply chain flexibility 

Once in-season trading begins, nothing trumps the trading levers that come from having a fast and responsive supply chain to replenish fast-selling items. Today, many UK fashion retailers source from an offshore supply base offering 48-week lead times. 

That means a massive upfront commitment that, if misplaced, can only be corrected through discounting. Instead, high street fashion retailers need to enter each season with a substantial open to buy that enables them to react fast, doubling-down on successes and retreating quickly from mistakes. One solution? Bring sourcing closer to home, as Next is doing with its 200-person nearshore sourcing office in Porto.  

Trading agility

Analytics and digital tools now have the potential to allow retailers to take customer- and SKU-level actions in real-time to drive sell-through.  These tools also enable promotional precision, offering discounts to the right customer at the right time, rather than through a blunt, one-size-fits-all approach.

Furthermore, having a full grasp of their customer P&L allows retailers to align digital marketing spend with incremental customer lifetime value. Retailers of the future will look more like financial trading floors, with merchandisers trading their products in real-time. Boohoo shows the way forward, holding twice-daily trading meetings.

UK fashion retail has a choice to make. Does it lie down and accept a graceful decline, or does it regain its heritage, amplified by best-in-class merchandising skills and technology, and come back fighting? I think it can, and should fight for dominance of the UK market.