Clothing retailers – be afraid, very afraid!

Overseas apparel retailers have been welcomed with open arms by Australian consumers

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A recent piece of research by investment bank Goldman Sachs, highlights the speed with which Spanish-based chain Zara has grabbed market share, from incumbents like Premier Investments' (ASX: PMV) Portmans retail chain.

According to Goldman Sachs, in just 2 years Zara's sales revenue already rivals that of the long established Portmans. What's more, Zara has an estimated profit margin over twice that of Portmans is already generating far higher profits.

With Zara just one of a bevy of global retailers setting up shop in Australia, the battle for market share is only going get more intense. Local retailers at risk from the likes of Zara, American Apparel and Hollister also include Country Road (ASX: CTY) and department store Myer (ASX: MYR). The problem for incumbents is that the size of the apparel market is  increasing slowly, forcing them to divide the market 'pie' into more pieces.

Ironically (perhaps) it is actually some of the smaller, 'less fashionable' apparel retailers like Noni B (ASX: NBL) who are better placed to survive. Noni B has built itself a loyal customer base and its niche offering makes the retailer less prone to competition for offshore or start-up "fast-fashion" rivals.

Of course, all apparel and footwear retailers are also facing the threat of competition from online shopping. Recently launched sites such as The Iconic and ASOS have established significant presences in a short amount of time. The online threat makes the need for 'bricks and mortar' stores to offer a point of difference, such as personalised service all the more important. RCG Corporation (ASX: RCG), owner of The Athlete's Foot franchise in Australia is one retailer who appears to be doing just that. Given how critically important it is to be fitted with the correct sports shoe, it appears customers are still prepared to pay for this service.

Foolish takeaway

Perusing the world's rich list shows that a number of fortunes have been acquired through retailing. While some local retailers will continue to grow through store roll-outs programs, the fortunes made in retailing in the 21st century are unlikely to follow the path of those from the previous century.

Looking to boost your own wealth? Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."More reading

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »