Author: Olivia Gannon, 16 June 2017

What is it about the middle? All encompassing, but squeezed from both sides, not one thing, not quite the other? Yet, for the past two decades it is the mid-market retailers, right in the middle of it all that have dominated Britain’s high streets and shopping centres. Think M&S, an icon of British retail, Arcadia Group; Topshop, Miss Selfridge, Oasis, Dorothy Perkins, Evans and Burton amongst others, New Look, H&M, Zara and Next, all who have embarked on expansive store opening strategies and become firmly established in the retail landscape.

Whilst the collapse of BHS and ongoing struggling performance of M&S have indicated that trouble might be brewing, the announcement this week that Arcadia Group have reported a drop in profit of 79% in the 12 months to 27th August 2016 and New Look saw revenues decline by £36m in the year to 24th March, suggest a more wide-spread issue may be at large. The retail market is becoming highly competitive and challenging for typical bricks and mortar retailers; other mid-market brands to suffer include American Apparel (UK) which went into administration last year and Banana Republic, which now trades solely online.

clothing

In one respect, the political and economic climate is not currently favourable to consumer confidence. Slow wage growth, political uncertainty and rising inflation mean consumers are more discerning in their buying choices. Quality, differentiation and convenience are gaining importance and this is where mid-market retailers are struggling in an increasingly overcrowded marketplace. There is little differentiation between brands and the market risks becoming homogenous.

Online retailers such as ASOS, Boohoo and Misguided selling “fast fashion” compound this problem.  Product range is more extensive, new products are available daily, prices are competitive (on the lower side of affordable) and streamlined operations ensure the customer experience is both straightforward and convenient, with next day delivery and click and collect options to name a few. Whilst almost all mid-market brands have an online presence, extensive store portfolios (New Look has nearly 600 UK stores, Topshop has over 300 and H&M over 260) can present a challenge. E-commerce has diminished the necessity of a large store estate and many, such as New Look, have failed to rationalise their store portfolios in recent years. Investment has focussed on Flagship stores, particularly in the case of Topshop and other Arcadia Group brands, at the expense of smaller stores in less prime locations; risking a lacklustre and uninspiring shopping experience which can damage brand perception.

shopping

That being said, it’s not all doom and gloom. One of the largest fashion retailers in the world, Zara, has successfully cultivated the quick turnaround, fast fashion model without compromising on quality or price competitivity. The parent company, Inditex, reported a profit increase of 18% in the first quarter. Similarly H&M has continued to maintain strong performance and recently opened its largest store in the UK at Westfield Stratford.  The success of these two giants is undoubtedly down to their absolute understanding of their customer base - tailoring products and operations accordingly, with a clear positioning. The problem is; if these two giants keep growing, will there be room left for anyone else?

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