MENU

Clothing retailers – be afraid, very afraid!

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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!