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Fast fashion retailer set for big Aussie debut

Australian fashionistas rejoice: H&M is coming.

Next year, the Sweden-based “fast fashion” retailer will bring its ripped-from-the-runways apparel and ultra-low price points Down Under. Already a compelling presence in the American and European markets, H&M joins other fashion retailers, from Zara to Topshop, who’ve lately entered the Aussie market.

The company released the news via its Twitter and Facebook accounts. ”We are happy to announce that we will open our first H&M store in Australia, in 2014! Stay tuned for more details,” read the statement.

While the company has yet to sign any leases, it’s likely the first stores will be located in Sydney and Melbourne, which figure among the world’s most desirable retailing sites.

Fast fashion or race to the bottom?

H&M is perhaps best known for collaborating with well known designers, from Stella McCartney to Karl Lagerfeld, to release their designs at H&M stores at H&M-style low prices. These special collections generate huge excitement among budget-conscious fashionistas and have a reputation for selling out within just hours — an example of how fast fashion just keeps getting faster all the time.

But who stands to win as the retailing game speeds up? Surely the appeal for consumers is obvious. Why not pick up a few Karl Lagerfeld designs for what it costs to buy lunch?

Yet for the retailers themselves, fast fashion can be more of a mixed bag. The business model boasts incredible unit-level economics — stores cost little to open, and the inventory turns over incredibly fast, with new merchandise brought in weekly or even daily. Yet, with its focus on low prices, the model also encourages consumers to be more loyal to price than brand or shop, leading to a race to the bottom in which retailers must constantly lower prices — and see their margins reduced.

There’s also the question of where these cheap goods come from and under what conditions, and by whom, they’re manufactured. In the U.S., where consumers buy on average 64 new items of clothing each year, the fast fashion industry has come under scrutiny and been the subject of books such as Elizabeth Cline’s 2012 exposé, “Overdressed: The Shockingly High Cost of Cheap Fashion,” which chronicles the possible environmental and social damage fast fashion can cause.

May the cheapest skirt win

For existing Australian retailers, there is a more immediate kind of damage to keep an eye on. H&M will compete directly with privately owned retailers such as Ice and Cotton On, and also with the likes of Country Road (ASX: CTY), as H&M offers similar office-appropriate outfits at far lower prices.

H&M stores also poses a threat to Premier Investments (ASX: PMV) which has lately seen success with its fast-fashion concepts Dotti and Portmans. That’s to say nothing of older, legacy retailers such as David Jones (ASX: DJS) and Myer (ASX: MYR).

If history repeats itself, and H&M performs as well as it has in other markets, these retailers are right to be shaking in their platform studded booties.

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