Though the UK value clothing sector continues to outperform the total UK clothing market, with growth of 8.9% in 2007 against 3.8% overall, a new report* published in November by retail analysts Verdict Research, part of the Datamonitor Group, predicts this will be its slowest rate of growth since Verdict first started researching the market in 1997.
Furthermore, this growth is primarily due to one retailer, Primark, which will gain 4.1 percentage points share this year, overtaking George (Asda) to become market leader. As the sector matures and growth decelerates, participants must look beyond low prices to sustain growth and profitability.
One of the main factors behind this slowdown is that value is now ubiquitous in the clothing market as middle market retailers have sharpened their own prices in response to the growing competition. Indeed, shoppers no longer need to visit value retailers to get low prices, which make it harder for value retailers to differentiate on price alone. The result is that value retailers are not only competing against each other, but also against more midmarket retailers.
With price less useful as a differentiator, retailers have to work much harder at driving footfall into their stores, maintaining their sales volumes and retaining customer loyalty. Price architectures are being extended into higher price points through fast fashion, niche, designer, premium and ethical ranges. Value retailers are investing more heavily in store environments and higher footfall locations and supporting thiswith higher spend on marketing activity. Such developments are moving the sector further away from its traditional low cost, no frills model and resulting in higher costs and lower profit densities.
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