SYDNEY, Australia — Although Australia is the only advanced economy that did not enter a deep recession as a result of the global financial crisis, today, the country's fashion industry is facing tough times, affecting established retail chains, independent designers and luxury boutiques alike. Among them are womenswear retailer Ojay; Bettina Liano, which went into liquidation for the second time in two years; and premium brands Kirrily Johnston and Lisa Ho, both of which were forced to close late last year. Marnie Skillings, Colette Dinnigan and George Gross & Harry Who have also shut shop, while Grab Jeans, Little Joe Woman and Belinda International were all narrowly rescued by administrators. Alannah Hill and Kit Willow recently departed their eponymous brands under contentious circumstances. And things remain challenging for cult streetwear brand Ksubi, which fought off liquidators in 2010, and embattled surf giant Billabong, which has struggled since 2008. What's more, Australia's two biggest department stores, Myer and David Jones, are currently in talks over a potential $3 billion merger.

Since 2009, retail sales in Australia's domestic clothing, footwear and accessories industry have declined and it's forecast that revenue will be relatively flat over the next few years. But this is not to say that Australians aren't spending. Research firm Roy Morgan reports that in the last 12 months, Australians spent an estimated $3.4 billion (up from $2.4 billion in the previous year) shopping for fashion online.

So what’s going on?

Competitive international pricing, unaffordable real estate and manufacturing woes are amongst the primary challenges for domestic fashion businesses. Australian-born Ryan Lobo and Ramon Martin of New York-based womenswear label Tome say that they couldn't have built their business in Australia. "There are too many limitations on production, fabric and price." What's more, the impending arrival of multinational chains H&M, Uniqlo and Cos has not helped matters.

But local retailers are not just victims of circumstance, said Catherine Taouk, director of Think Consulting and former international brand manager of Australian womenswear chain Supré: “It was only a matter of time before these fast-fashion chains arrived and local retailers should have accounted for it whether through product, price or strategy. Business forecasting is imperative.” Customer service is also needs improvement, she added. “We need to translate the service mentality of brands like Nespresso and Apple.”

Today's Internet-enabled Australian consumers are savvier and have access to greater choice than ever before, "so the next generation of [Australian] designers needs to have a unique perspective that the global consumer finds appealing," said David Bush, director of DB Consulting. "If they are copying or interpreting they will fail. I think that perhaps some of those brands [that failed] weren't listening or providing the customer with the most original or appealing collections. The brands that will succeed are those with distinct IP and that continuously innovate, all the while remaining true to their original handwriting — it's as simple or as complex as that," he continued.

Nicky Zimmermann of Australia's successful swimwear label Zimmermann said that times had changed significantly since she co-founded the label in 1991 with her sister Simone. "It was easier to make mistakes and learn as we went along — we were lucky in that respect. The difference now is that there's no room for error or a bad collection," she said. "A fashion business has to be global now," she added, attributing Zimmermann's success to a distinctly Australian aesthetic with global appeal. "It's what helped us breakthrough in a very crowded market."

Indeed, an international presence is imperative for the next generation of Australian designers and needs to factored in from the very beginning, said Edwina McCann, editor of Australian Vogue: "The world has changed. The customer base is global… if they set their business up for export taking into account pricing, shipping costs, etcetera, it will be easier to grow that business in tandem with their Australian business, which will mean greater sustainability long term."

What’s more, for many Australian brands, e-commerce remains a largely untapped area, a cause for concern as Australians consumers continue to migrate online and international e-tailers like Net-a-Porter and Matches Fashion count the country as one of their biggest markets.

But it isn’t all doom and gloom. There are a number of Australian brands and retailers adapting to the current climate with innovative new products lines and business models.

Melbourne-based technical sportswear brand 2XU has built a distribution network in over 50 countries and, late last year, entered into a partnership with L Capital Asia 2, a private-equity fund backed by LVMH, in which the fund acquired 40 percent of the company. Meanwhile, Chris Kyvetos' Sneakerboy, a Melbourne-based company, has attracted attention for its highly covetable selection of sneakers and innovative digital retail model that blends the tactility of a physical store with the efficiencies of the Internet.

A handful of emerging Australian brands also made an impression during Milan Fashion Week, which wrapped up yesterday, noted McCann. Three of the 11 finalists of the Vogue Talents Corner.com initiative (in which pieces from emerging designers were selected by Italian Vogue to be sold online) were either born or based in Australia. "It is events like this that help raise awareness and sales," said McCann. "Anna Wintour said [Sydney-based Milanese expat] Nicolo Bretta of Giannico was one of her favourites… There is a substantial customer base for up-and-coming Australian talents when you look at it on a global scale, as opposed to just an Australian one."

So is there a future for the Australian fashion industry?

“Yes, definitely, and it’s very bright,” said McCann. “What I saw in Milan was very reassuring. The young Australian creative talents I talk to are savvy, internationally focused, and inspiring… though we need to help not just with one-off prizes, but with mentoring and consistent support and advice through their careers."

To that end, McCann has spearheaded the development of the newly-formed Australian Fashion Chamber with the goal of strengthening the Australian fashion industry. “Endorsed by the CFDA and the BFC, the AFC is a welcome addition to Australia’s fashion landscape that will help foster young talent and create sustainable, unique and inspiring businesses of which we will all be proud,” she said. There are also plans afoot to reinvigorate the Australian Fashion Council.

But, with international competition stronger than ever, there is still more to be done, said McCann. “We need to come together as an industry to support our existing, emerging and established talents. We need to pool our talents to support theirs.”