SYDNEY, Australia — On my last trip to Sydney, a wave of international e-commerce and high-street arrivals were just starting to take hold in Australia. A sprawling new Westfield mall had just opened in the city’s central business district (CBD), bringing with it the country’s first ever Zara store, while online retailers from Europe and America were just beginning to actively target the Australian market, with its advantageous customs duties and lack of local competition. But fast-forward two years and these forces have become a full-fledged disruption that’s bringing parts of the local fashion industry to its knees, even while the overall Australian economy — which hasn't dipped into recession in over 21 years, even during the depths of the global financial crisis — continues to be one of the strongest in the developed world.
I first saw the signs of this disruption on a quick trip to Sydney’s Paddington neighbourhood on my first day in the city. On previous visits, I had enjoyed popping in and out of the trendy boutiques, cafes and ethnic restaurants along the Paddington stretch of Oxford Street, a major thoroughfare which runs from the CBD all the way to the world famous Bondi Beach. But on this visit, Paddington’s vibrancy had noticeably diminished. There was a new batch of stores from well-known Australian fashion brands at The Intersection, around Glenmore Road, but along the other parts of the road, shops were shuttered and foot traffic was much reduced.
“What happened?” I asked my friends and local fashion industry professionals.
It seems a perfect storm of forces, both international and local, have put pressure on this once lively Sydney neighbourhood. Parking and zoning laws, issued by one of the two local councils responsible for Paddington, have made it expensive and difficult to park in a city where the car is king. But the primary reason for the neighbourhood’s decline is the existential challenge posed by H&M, Topshop and other international fast fashion chains, as well as the meteoric growth of international e-tailers like Shopbop, Net-a-Porter and ASOS, who are now aggressively targeting Australia.
The online retail market in Australia is booming. A 2012 report by PWC, an accounting and consulting firm, predicts that online retail in Australia will grow from $16 billion in 2012 to $27 billion in 2016, with much of that growth going to offshore etailers. According to an article in the Sydney Morning Herald, two jumbo jets full of products lands in Australia every week from American fashion retailers alone, destined for a growing base of Australian consumers who are fed up with the poor service, inflated prices (even before local sales tax) and low digital competency of local retailers.
Indeed, speaking at the Bespoke Luxury Summit, held last week by the Australian Financial Review, Mr Porter’s editor-in-chief Jeremy Langmead said that Australia, where the menswear e-tailer has just launched free express shipping, was now the company’s third biggest market after the UK and US. It was Langmead’s first trip down under and the Mr Porter team was on a full-court press of media appointments and PR events aimed at further consolidating their pole position in the country.
With Westfield shopping centres positioned at both ends of Oxford street (in Bondi Junction and the CBD) attracting more and more shoppers, those few local brands with the capital to open new stores have relocated to malls where parking is ample and footfall is high.
But walking around Westfield's malls, it was hard not to feel a bit depressed at the sight of so many of the same stores, with the same product and the same advertising campaigns as those in Hong Kong, London or New York. For the most part, there was a distinct lack of local Australian flavour.
Sadly, the beautifully curated Harrolds mens store at Westfield was virtually empty when I visited. One local told me that he shops for his wardrobe by browsing the selection at Harrolds, then purchasing the products he likes with the Mr Porter app, which gets him a lower price. It’s the kind of thing you hear over and over again from savvy locals, especially those who have had a taste of international product and service offerings and are unwilling to pay a premium for shopping locally. 59 percent of customers in the PWC survey said that lower prices were their main reason for shopping online.
Meanwhile, earlier this month, fashion designer Lisa Ho, who has 10 retail stores across the country, was the latest Australian retail business to go into administration. In April, the company cancelled its plans for an IPO.
And what about those young local designers like Dion Lee and Josh Goot, who have developed global reputations? Industry insiders told me that businesses like these, facing the ongoing challenges of running international luxury fashion companies from Australia — a market of only 23 million people, geographically isolated from the world’s fashion capitals — are struggling to sustain their businesses, let alone find investors.
But all is not lost. While acknowledging the challenges of the local market, some seasoned fashion executives told me that they were still doing a brisk business at home and abroad. David Briskin, chief executive of Sass & Bide — a company which he has transformed from what was a severely loss-making enterprise, a few years ago, into a business that was strong enough to receive an $42 million investment from Myer, one of the country’s leading department stores — still believes there is money to be made in Australian fashion, as long as brands have “character and soul.” This was certainly more than apparent in Sass & Bide’s moving presentation of their collaboration with Simone Cipriani’s Ethical Fashion Initiative at the Bespoke Summit.
The night before the conference began, Nicky Zimmermann, another successful Australian fashion entrepreneur reported booming sales at her relatively young New York store. Indeed, her Australian swimwear label, Zimmermann, has been gradually expanding into ready-to-wear and is taking advantage of an unexpected end to her current New York lease to open an even bigger store in the heart of Soho, an area that is experiencing something of a retail renaissance.
But my favourite new discovery on this trip to Australia was undoubtedly RM Williams, the under-the-radar Australian leather goods brand which recently announced an investment from L Capital Asia, an LVMH-backed private equity fund.
Over lunch with RM Williams’ creative director, Jonathan Ward, I was fascinated to learn about this underleveraged, iconic brand, which dates back to 1932 and has carved out an indelible position in the Australian national psyche. One local told me that while she was growing up in a small town in rural Australia, her family used to order RM Williams by catalogue to be delivered to the local haberdashery. Indeed, it is one of those rare companies that has real potential to become a broad-based, globally-recognised lifestyle brand.
But in order for the brand to work outside Australia, it’s clearly going to need a significant overhaul. The store concept will need a rethink, the complicated brand hierarchy will need to be streamlined, and the company’s brand assets and communications will need to be refreshed and modernised.
But RM Williams has already got the most important thing right: a core product around which an entire business has been built. On my way to the Sydney airport, I popped into the RM Williams store at Chifley Plaza to buy a pair of the company’s ‘Craftsmen’ boots which I had spotted on a few stylish locals. It was the best souvenir of another wonderful trip down under.
Disclosure: LVMH is part of a consortium of investors which has a minority stake in The Business of Fashion.