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Swedish retail invasion

Swedish fashion retail giant H&M is set to open its first store in Australia. With more than 2,000 stores in 43 countries, H&M represents a serious threat to our local retailers.

The first store is planned to open in the GPO building in Melbourne in 2014, with H&M setting up shop right next door to Myer Holdings’ (ASX: MYR) flagship store. It will be one of the biggest H&M stores in the world, taking over three floors. H&M is regarded as the world’s largest clothing group and is well known for affordable high-street style, as well as collaborating with famous designers such as Karl Lagerfeld, Stella McCartney and Versace.

The new store will also be just metres away from another blow in, Spanish colossus Zara, which opened the doors to its first store in 2011. In a wave of foreign retailers invading our shores, British giant Topshop has already set up shop in Australia, while US retailer of high-end cookware and home accessories Williams-Sonoma established its first store at Bondi Junction in Sydney.

Japanses fashion powerhouse Uniqlo has also announced plans for its first Australian store – due in early 2014.

For Australian fashion retailers, the arrival of global fashion giants represents a serious threat to their businesses. The likes of David Jones (ASX: DJS), Myer, Premier Investments (ASX: PMV) and Country Road (ASX: CTY) have their work cut out for them, and need to improve their products and services to remain competitive. Department store retailers in particular need to increase their customer service offering to entice customers into their stores, and fine tune their products to offering something that is unique.

So far they have responded through massive improvements to their online stores, hiring more staff to service customers on the store floor and signing exclusive deals with fashion brands. But will it be enough?

Foolish takeaway

Australia’s retail fashion scene has changed significantly over the past five years, as more international retailers set up shop. The arrival of H&M is likely to intensify the competition, and could place more pressure on our local fashion retailers.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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