Miranda Kerr may have joined the front ranks of the global fashion industry, but business information research firm IBISWorld predicts a troubled future for fashion retailers and manufacturers.
Indeed the future looks ugly for the industry, as IBISWorld predicts anaemic growth of just 1.6 percent between 2012 and 2017 for fashion retailers, and 2.5 percent contraction for manufacturers.
“Consumers have become accustomed to price reductions and now expect to buy items at sale prices – whatever the time of year. They are also becoming increasingly savvy in the use of price-comparison websites, as well as buying items directly online from both domestic and international retailers,” said IBISWorld General Manager (Australia), Ms Karen Dobie.
Dobie says retailers are cutting costs so they can meet buyers’ price expectations. “This year, Myer will further decrease wholesale purchases by lifting its global fashion outsourcing budget to $200 million and increasing direct trade with manufacturers through its two global outsourcing offices in Shanghai and Hong Kong,” she said.
“International manufacturers face significantly cheaper operational costs than are possible in Australia – making it cheaper for retailers to source items offshore. For many of Australia’s well-known brands, such as Pacific Brands, the solution to keeping costs low has been to move their manufacturing operations offshore.”
Complicating matters further are increases in external costs.
“Global cotton prices rose by 65% last year and are expected to increase by another 70% in 2011 due to tight supply conditions and increased demand to reach record levels,” Dobie said. “At the same time, average wages in the Chinese apparel manufacturing sector have risen by 42% in just five years. So while the high Australian dollar will provide some protection to retailers’ profit margins, it will also encourage retailers to source more clothing from overseas, forcing more clothing manufacturers to close or to move offshore to competitive low-cost countries such as Vietnam, Pakistan and India.”