She is hardly the most sinister character in fashion, but the return of Miranda Kerr's glowing smile to Australia's fashion scene represents a huge threat to incumbents David Jones Limited (ASX: DJS) and Myer Holdings Ltd (ASX: MYR).
That's because Kerr is the new face of Swedish fashion brand H&M which later this year will be opening its flagship Australian store in Melbourne's GPO (general post office).
Bad breakup
Kerr's return comes less than a year after the break-up between David Jones and the model as the face of the retailer. According to the Sydney Morning Herald, research conducted by David Jones suggests its core market of fashionable young women couldn't relate to the jet-set lifestyle of the rising Kerr.
David Jones quickly moved on to another model, Jessica Gomes, but whether the separation did any good for the company's sales is hard to tell. Sales for the full-year 2013 declined for a fifth straight year. Kerr's return with H&M is unlikely to help the matter.
"How do they manage?"
H&M has become a staple brand in many of the world's biggest cities and the brand's absence from Australia to date had one writer for fashion magazine ElleUK.com ask "how do they manage?"
The biggest threat for existing fashion retailers like David Jones, Myer and even Country Road Limited (ASX: CTY) is the ferocious brand recognition H&M commands and the loyalty of its customers. The company drives this loyalty primarily through quality products and cheap prices.
As a brand H&M has been ranked above major names including Nike, Burberry, Ford and even Facebook as one of the best global brands in 2013 and is ranked number 30 on Forbes list of most valuable global brands. The company could truly be a force to be reckoned with.
Additionally, if H&M invests smartly in its local online storefront it could grow to rival existing players in the market. Online retail sales grew by over 12% in December and are expected to grow by 11.3% in the first part of 2014, with the lower Aussie dollar keeping more spending to local websites.
Foolish takeaway
Miranda Kerr's symbolic return to the Australian fashion scene will come with a sting for existing fashion retailers. Through quality products and strong pricing H&M has built a globally renowned brand, which drives customer loyalty to a level many companies struggle against.
