global fashion powers 2018

68 Pages·2017·38.01 MB·English

GLOBAL
FASHION
POWERS
2018
JULY 2018
Global Fashion Powers
2018
MDS BUSINESS DEVELOPMENT
The global fashion business journal Vanesa Luaces
S MDS DOSSIER DESIGN AND LAYOUT
ER July, 2018 Àxel Durana, director
W
O themds.com Alba Durana
P
N
O
HI ILLUSTRATIONS
AS EDITOR-IN-CHIEF Maria Martí
OBAL F Pilar Riaño GINA 2
M GL EIDrDiaaInT PiOe.R lGaIAe GLsa tTarEclAíaM EMGDroaITdnSa Veisa Idnefo lerms Cacoirótsn ,C SaLtUalanes 646, PÁ
O
C Silvia Riera Principal 1ª — 08007 - Barcelona
S.
D Carmen Juárez 933 180 551
M
E Graciela Martín
H
T
ISSN
EDITORIAL CONTACT 2340-616X
[email protected]
[email protected] LEGAL DEPOSIT
B-7239-2012
All rights reserved. It is
strictly forbidden, without the
written authorization of the
copyright holders, in any form
or any procedure, including
reprography and IT processing,
the distribution of copies of the
present document.
linkedin.com/company/mds-news
twitter.com/MDS_news
PRESENTATION
The giants
also cry
2
A
N
GI
Á
P
BY PILAR RIAÑO main events and the evolution of fashion makes it escalate positions in a segment
MDS DIRECTOR business leviathans, analysing the sector in where even its leaders (LVMH and Kering)
subsegments such as big retailers, industry, seek new ingredients for their formulas such
sports fashion, footwear, childrenwear, as creativity and specialisation. But if there is
e-commerce or urbanwear. someone who has felt most strongly the so-
In total, ten chapters including all names called Retail Apocalypse (the most repeated
During the last year of the seventies, Televisa and facts from the sector’s top players, to words throughout this Modaes.es Dossier,
produced a soap opera whose title could which this year we add a previous chapter sorry, we will try to correct it in the future)
briefly summarise the situation of fashion that deals with the elements necessary to are department stores.
business in 2017 and 2018. The rich also understand the transformation companies Restructuration, layoffs, closures and long-
cry, directed by Rafael Banquells, told are going through. Macro information in term plans to be able to grow have been their
throughout 248 episodes in the Mexican order to find the keys for micro information. persevering issues during these last years,
TV channel Las Estrellas the events that If out of all Global Fashion Powers 2018 and some of them are already starting to
happened to young and poor Mariana (which obtains data and references from the reap their benefits.
Villareal, as well as her relationship with last ended fiscal year, that is, 2017) we can Even sports have reasons for some weeping.
the capital’s bourgeoisie. extract a conclusion, it is that even giants The entrance of big retailers, luxury and
In the same way as the telenovela started its are suffering and undergoing a process of pure players into the sporting segment with
journey in Mexico but was later exported change. specific collections has revived competition
to 120 countries around the world, the Among big retailers, almighty Inditex among the section’s behemoths and even
transformation that fashion business is going admitted after the end of fiscal 2017 the untouchable Nike has had to start
through also echoes in almost every country that the group experienced a structural restructuring plans to face the new situation
and company all around. transformation process (with a special of struggle.
It could be said that 2017 was for fashion emphasis in distribution) which allowed it Ultimately, this is most likely one of the
business the year in which no one escaped to say that it was ready to face the future. Global Fashion Powers editions where most
and giants also cried. For the seventh year in H&M, the second one within that segment, changes can be appreciated in the different
a row, Modaes.es launches Global Fashion is found in a similar situation, although its classifications and, even though you have
Powers, a report series that every fiscal path seems somehow more complicated and probably already checked it during the
year starts its path in the web in order to it may cry a little more. course, we hope you can use it to write a few
become the Modaes.es Dossier which right Regarding luxury business, the first ever more notes down before going on holidays,
now appears on your screen (or in your publication of Chanel’s results has readjusted or that you leave it in your desk waiting for
hands, if you printed it). In it, we revisit the the world’s ranking, as its 8 billion revenue the next school year. m
THREE IDEAS
• Fashion experienced two parallel crisis: • “While more consumers prefer to spend • Internet has revealed a clear symptom of
the financial one (from which no one their disposable income on experiences, fashion illness: an overcapacity installed in
escaped) and an inherent one, with a they are reassessing their priorities” states physical stores. Internet plays the role of
business that was starting to transform. Euromonitor. China in the past decade.
Fashion is 2013, and black numbers reached the sector’s
sales in 2014, once ending the fiscal year in
a rise after seven years going downwards.
This joy was maintained during 2015, but
sick (and titans in 2016 (with employment, the creation of
companies and GDP recovered) the blow
struck back: fashion sales dropped in the
country once more.
have high fever) The truth is that fashion was living two crisis
at once: the first, a financial one (from which
barely no one could escape) and the second,
an inherent one, with a business that was
already starting to evolve. That means that,
even recovering from the circumstantial cri-
sis, the sector will be immersed in a turmoil
which is currently making fashion sick.

SYMPTOMS: RESTRAINED
GLOBAL MARKET
S S
ER Fashion’s global sales continue to grow, but ER
W W
O rate has slowed down notably during the O
P P
N last fiscal years. In 2017, the world’s fash- N
HIO ion market ascended to 1.7 trillion dollars, HIO
AS which represented an increase of 4% above AS
OBAL F ltaaskte yne ianrt’so fiagcucroeu. nNt ethveartt ihne l2e0ss1,6 i tt hhea ss etoc tboer GINA 4 OBAL F
M GL hifinnacdarne gacrsioea lws cinnr ciasei s32,.0 a80c%8c,o, d rruderigniingsgt te torh ietnh igne ttdehraent aalo tgiwoantehsa-tl PÁ M GL
O O
C ered by Euromonitor. C
S. S.
D BY PILAR RIAÑO Fiscal 2016 was complicated for the world, D
M M
E and that also affected fashion. Brexit, the E
H H
T arrival of Donald Trump to the White House, T
International fashion business shows signs of the scalation of terrorism in Europe or the
deceleration of Chinese economy impacted
chronic pain: stagnated global evolution, de-
altogether in the global economy, mounting
crease in mature markets and loss of positions up to the feeling of global uncertainty.
“The era of robust growth following the re-
in the list of consumer priorities. Giants remake
cession could be over as we enter a period of
themselves to seduce a client who has fallen out continued uncertainty” said Euromonitor at
the end of fiscal 2016. In 2017, the world was
of love with clothes, footwear and accessories.
expecting to face the consequences of the
previous year’s changes, but neither Brexit
had an immediate impact nor Donald Trump
met his worst threats proposed during the
first year of his mandate.
Thus, 2017 was a year of transition in which
fashion avoided uncertainty. In any case,
despite the fact that 2017’s growth was su-
Fashion is sick. Like a person who starts but was at the same time the first brand to perior to that of the precedent fiscal year, it
coughing before going on holidays and feel their joy again. was still below the figure registered in 2015,
knows that, inevitably, fever will shortly Likewise, during the years of the financial for example, when global fashion sales in-
follow, global fashion business is showing crisis, the sector blamed its drifting to the creased 4.5%.
signs of a disease that has been revealed as economic situation: closures, layoffs, margin Euromonitor’s predictions also forecast
chronic. The scenario has changed, and with falls and executive changes were justified global business growing merely an interan-
it, so are international business giants who directly by the reduction of consumption, nual 2% until 2022.
are doing acrobatics to seduce consumers product of the economic situation.
again. Clothing, footwear and accessories When after 2014 the whole world started SYMPTOMS: MATURE MARKETS
companies were, except for banks and real to say its farewells to red macro indicators, THAT DO NOT PURCHASE FASHION
estate, the first ones to feel the impact of fashion started to rub its hands. In Spain,
the international financial crisis after 2007 one of the most difficult markets in the world Furthermore, fashion industry’s global
fiscal year. Tiffany, for example, felt the fear for fashion business, textile and footwear growth must be directly attributed to the
of consumers in its accounts out of a sudden, consumption started to recover at the end of upturn of developing markets, as in mature
Fashion was living Fashion leviathans Internet plays the
two crisis at once: face a reduction of role of China in the
a financial and an their margins and past decade and it's
inherent one profitability changing the business
ones, fashion consumption is either falling to spend their disposable income on expe- of their margins. Since 2011, Inditex has
or frozen. In the United States, fashion and riences, they are reassessing their priori- reduced year after year its gross margin: if in
footwear sales slowed down in 2017 both ties”, says Euromonitor in reference to the 2011 it stood at 59.3%, in 2014 it descended
in volume as in value according to Euro- United States. “In a context of abundant to 58.3% and in 2015 it was placed at 57.8%;
monitor, whereas German economy was low-cost offerings and discounts, consum- in 2017, the gross margin weakened again,
“stagnated despite favourable market condi- ers have grown tired and are beginning to standing at 56.3% in comparison to 57%
tions”. In France, on the other hand, clothing adopt more practical shopping behaviours, the year before.
and footwear sales decreased again in value, reducing compulsive buying”, sustains the In the case of H&M, gross margin has gone
and it is estimated that the market will keep organisation when talking about France. from 60.1% in 2011 to 54% in 2017. Gap,
the downward trend for the next years. In Another proof of this trend is the decrease in immersed in a restructuring plan to reduce
Italy, business was kept static in volume but profitability. International fashion leviathans costs, has nonetheless increased its margin:
contrastingly, it grew in value. have faced some quarters ago a reduction from 36.2% in 2011 to 38.26% in 2017.
Whilst predictions for future fiscal years in
the world’s main markets are kept on the
low, some territories are in safe grounds. The The environment is transformed, consumers again. Titans change Rawpixel, Unsplash
Near and Far East are other markets which and with it, international business their strategies to adjust to the new
giants are doing acrobatics to seduce situation.
have grown strongly during the last years ,but
according to forecasts by Datamonitor and
EAE Business School, they will lower that
rate from now on and until the end of the
S
ER decade. China, for its part, is installed still
W
O in an upbringing phase, but its evolution is
P
N not the same as it was a decade ago.
HIO In Saudi Arabia and the Middle East, growth
AS continues to be highlighted but the possible
GINA 4 OBAL F cainvdic c aonudl dp obleitcicoaml ies sau reiss akr ien q fuuitteu rceo nyecaerrns.i ng GINA 5
PÁ M GL Lbuenascttie npr trAaeidmnitceytr iaioclnsaos i sirne ci tguhnrers e winnht tolhylee t htgelero rmbiteoa, rrakyl,te htta owkuiignthhg PÁ
O
C into account the elections from important
S.
D markets such as Colombia or Mexico.
M
E As the BMI consultancy company remarks,
H
T Latin America is the market with a bigger
potential of growth in the fashion industry
around the world, with sales of 160 billion
dollars in 2016, a size much smaller than
Asia’s, but much bigger than the Middle
East’s. Estimations also defend that the fash-
ion market will grow 7.2% per year in Latin
America until 2021, when it will surpass the
figure of 220 billion dollars.
However, in the United States and Europe,
whilst economy and consumption recover,
fashion loses weight in the shopping basket
and the acquisition of articles from the sector
has stopped being a priority.
The evolution of consumer trust and retail
consumption in relation to fashion sales
in countries like Spain showcase it. In the
Spanish market, the restoration of trust
has not been infected into fashion. During
2016, a year marked by political instability,
consumers trust raised 1.6 points and retail
consumption increased by 3%.
Fashion sales, however, were contracted a
2.2%. In 2017, the situation was repeated:
trust increased 2.7 points, retail consump-
tion 2.4% and fashion grew a negligible
0.1%.
Mobile phones and restaurants have sur-
passed apparel in Spain and in some of the
most important countries in the world for
the sector. “While more consumers prefer
The Middle and Far Latin America is The categories which
East are other of the currently the market rule the fashion
markets which have with best predictions business are also
grown strongly changing
Nowadays, consumers seem more willing digital channel, but not in that way alone. The casualisation of fashion (which is show-
to spend 150 euros in a tasting menu from The categories which rule fashion business cased by the peak of sports among the cat-
a Michelin star restaurant than in a jumper are also changing. egories that have grown the most) derives
of any brand. If, traditionally, women have reigned in the in the fact that consumers need and have
But if all chefs with stars start offering the sector’s sales, the category that grows faster less variety of clothing items in their closets
same menu and, at the same time, they all nowadays is sports, which has become the and, therefore, they buy less.
enter discount battles, consumers will stop sector’s star, followed by childrenwear. If the working environment permits to wear
being willing to pay as much, and the ex- In 2017, the sales of men’s fashion increased, sneakers already, why buy shoes and suits?
perience of enjoying dinner will become materialising in a rise of 3.3%.
one commodity more. Something similar The change of priorities in fashion con- EFFECTS:
is what has happened to fashion. sumption have a direct impact in volume COMPANIES DOING
of business. HEADSTANDS
SYMPTOMS: LESS STORES
AND NEW USES
Fashion industry’s global growth must fashion consumption is either drawing Adrian Williams, Unsplash
The emergence of the Internet (which ac- be directly attributed to the rise of back or freezing completely.
cording to Euromonitor occupied 16% of developing markets, as in mature ones,
the sector’s global sales in 2017) in fashion
business has revealed a clear symptom of
fashion’s illness: the sector has an overca-
S S
ER pacity of physical stores installed. ER
W W
O If trade brought to light after the 1st of O
P P
N January 2006 (years before and years later) N
HIO that Europe counted with too many facto- HIO
AS ries, the same is happening now with brick. AS
OBAL F Iinn ttehren peat sist dpelacyaidneg, tahned s iatm ise a rlsoole t rCahnisnfoar dmid- GINA 6 OBAL F
M GL iRenxegpt rabeiuls ssAiionpneo scfsoa.r l ygploseb ahl arse tbaeilc boumsien tehses, ubtumt tohset PÁ M GL
O O
C truth is that the loss of physical retail’s in- C
S. S.
D fluence due to the rise of the digital one was D
M M
E another of the structural symptoms hidden E
H H
T by the situational ones. If the first closures T
of stores were directly blamed to the fall of
consumption, the closures between 2017
and 2018 are justified due to the rise of the
web and omnichannel strategies.
The reasons for Retail Apocalypse go way
beyond e-commerce, including macroeco-
nomic factors (like price and the maturity
of the debt) and the shift of consumers’
budgets towards new categories.
The most hurt players have been those that
based their strategies precisely in territorial
penetration through brick, that is, depart-
ment stores. But not just them: H&M, for
instance, has started a global reduction of its
network of stores in order to adapt to the new
situation of fashion consumption, whereas
Inditex confessed last March that they have
been doing such thing for five years.
The rationalisation of installed physical
stores capacities does not only entail clo-
sures (and layoffs), but also affects logistics
and margins, at the same time as online
distribution gains importance in the com-
panies’ global sales.
The channel that provides the biggest vis-
ibility and occupies, for the time being,
the majority of fashion sales, is in full-on
transformation.
Consumers change their shopping meth-
ods more and more every day towards the
S
R
E
W
O
P
N
O
HI
S
A
GINA 6 OBAL F GINA 7
PÁ M GL PÁ
O
C
S.
D
M
E Those that base their Consumers change The change of
H
T
strategy on brick are their shopping fashion priorities
the ones that suffer methods shifting has an impact on
the most expenses to digital volume of sales
channels
The effects of fashion’s disease are compa- efficiency, rationalising their distribution, Although luxury is living in its own bubble,
nies doing headstands in order to seduce but also speeding up their logistics and pro- Kering is shifting towards specialisation
consumers back. duction processes absolutely measuring and experience getting rid of their commit-
The ever-lasting experiments in points of every step they take. ment to sports (a sector in which reigns, but
sale (leaving behind the flagship expression In essence, industry behemoths that not without transformation, closures and
to adopt the brandship one, for instance) are transform Global Fashion Powers. Ama- firings, almighty Nike), whereas Richemo-
nothing but brands looking for formulas in zon pulls off fashion market shares in the nt admits, finally, the future of the digital
order to make clients take a chance on them. United States from giants such as Macy’s, channel and takes control again over YNAP.
The agitated activity in M&As follows the at the same time as it also scratches de- LVMH continues, for the time being, in
same pattern: companies seeking the perfect partment stores from other markets like luxury’s high altar.
formula to capture the current client and Marks&Spencer or El Corte Inglés. Low growth rates, a shift in the destina-
heal their undergoing illness. Inditex comfortably leads the big retailers tion of expenses, pressure on margins or
Or the signings or dismissals of executives category, but its spin towards the web is restructuring in distribution are symptoms
and new profiles incorporated to compa- more evident by the day and, considering and consequences of an illness that could
nies, which hide companies looking for an that H&M is weakened, and Gap under- certainly be called lovesickness: fashion is
orchestra conductor or a wizard who man- goes an almost perpetual restructuring, Fast not fashionable anymore and it has lost its
ages to do a match with the client. Retailing could benefit from the situation consumers’ bewitchment during the second
Or companies more concerned than ever by and bang its fists on the table. decade of the 21st century. m
1
SS
RR
EE
WW
OO
PP
N N
OO
HIHI
SS
AA
OBAL FOBAL F GINA 8
M GLM GL PÁ
OO
CC
S.S.
DD
MM
EE
HH
TT
BIG RETAILERS:
THE EMPERORS
INDITEX
H&M
BESTSELLER
C&A
8 9
A A
N N
GI GI
Á Á
P P
FAST RETAILING
PVH
PRIMARK
GAP
VF
L BRANDS
The business of global fashion distribution have managed to defend their position in the took the main role in advancement during the
ends a convulse fiscal year with changes in global fashion business. Big retailers’ top five year, ascending to the seventh position and
the ranking. Titans have continued adjusting is maintained without variations, although beating PVH and C&A despite currency playing
their structures, their portfolios and their Fast Retailing has enlarged its distance with against it. The Dutch group, however, lost
retail networks and refining their strategies Gap once more. H&M, for which 2017 was positions due to its full-on restructuring to the
to face the new environment. Whereas some “disappointing”, kept the silver medal in fiscal point of ranking at the end of the chart, only
of them have stranded along the way, others 2017, although lost the momentum. Primark surpassed by Bestseller.
Inditex 1
YEAR OF FOUNDATION FOUNDER KEY EXECUTIVE
1963 Amancio Ortega
HEADQUARTERS CHAINS
Arteixo (A Coruña, Spain) Zara, Massimo Dutti, Bershka,
Pull&Bear, Stradivarius, Oysho,
Zara Home, Uterqüe and Lefties
STORES WORKFORCE
7,475 stores in 96 countries 171,839 employees
REVENUE SHAREHOLDERS Pablo Isla
25.33 billion euros. Pontegadea (50.01%). Chairman and CEO
Fiscal year ended January Listed on the stock exchange
S S
ER 31, 2018 ER
W W
O O
P P
N N
O O
HI HI
S S
A A
F 0 F
AL A 1 AL
B “Five years later, we can say that Inditex is weight of its online sales, a channel through analysists insist on the impact of the business N B
GLO ready to face the future”. That is what Pablo which it produced 2.53 billion euros last year, enlargement within online channels. ÁGI GLO
M Itasltaio, Inn odfi tfiesxc’sa Cl 2E0O17, c rlaeismuletds. dTuhrein cgo tmhep apnreys henas- aT 1h0e %we oafk ietns itnogt aolf iintsc momareg. in is another element Sbruasntadi’ns asbtrilaitteyg iisc maxaiisn, twaiinthe dc laoss ea nthoeth leoro opf atnhde P M
O O
C completed a transformation plan to adapt to that stands out in Inditex’s last fiscal year. Since the development of new materials being the C
S. S.
D the new fashion industry background and has 2011, Inditex has reduced year after year its two main roles of 2017, a year in which Inditex D
M M
E revalidated its position as the biggest fashion gross margin and in 2017 it stood at 56.3% has created the figure of Pablo Isla’s number E
H H
T distribution company. ahead of the 87% from 2016. two, occupied by Carlos Crespo, new general T
In fiscal 2012, the brand that owns Zara started Inditex blames currency for the fall, although manager of operations. m
a progressive adaptation of its strategy. Besides
restructuring their network of stores, the com-
pany has implanted RFID technology in all
its chains so as to support their intention to
integrate physical and online stores. In total, the
company has closed 1,046 stores since 2012,
some of which have later meant the opening
of new stores.
In 2017, Inditex closed 341 stores down, the
highest amount of the last five years, and opened
524 stores more.
By the end of the fiscal year, the company op-
erated with 7,475 stores in 93 countries around
the world. In parallel, e-commerce continued
gaining importance in its business, and, for the
first time ever, the brand revealed in 2017 the
EVOLUTION 2017 SALES ONLINE
+12% +41%
NET PROFIT STORES
+7% +183