Fast fashion chain, Topshop/Topman, will likely be revived and vertically integrated into the brand’s UK parent organisation, after falling into receivership.
Administrator Ferrier Hodgson said it will work with Arcadia Group, Topshop/Topman owners in the UK, to convert the Australian business into a sustainable platform going forward.
In a statement to Inside Retail, James Stewart of Ferrier Hodgson, said that after discussions earlier today with one of Britain’s best known businessmen, Sir Philip Green and his Arcadia Group team, that the administrators are reviewing a potential structure that would see the UK multinational take a controlling interest in the Australian business.
“Our priority is to develop an appropriate operating model and structure that will continue the Topshop / Topman brand in Australia,” he said.
“These initial discussions are only preliminary, but we are hopeful and finding a structure suitable to all parties.”
IR understands the process will likely take weeks to thrash out, pending the consolidation of stores that aren’t profitable and the administrators review. The process will heavily involve department store giant, Myer, which formed an exclusive partnership to become the brand’s department store partner in Australia. Myer made a 25 per cent investment into Austradia, the company set up by retail veteran, Hilton Seskin in 2015 to operate the Topshop franchise, as part of its ‘wanted brands’ strategy.
Stewart said the move was to optimise the operating structure of the business, which will continue to function as usual while Ferrier ‘right-sizes the Australian business to a sustainable platform going forward.’
Bettina Kurnik, senior retail analyst at Euromonitor International said the increasing competition on the Australian apparel market and established domestic brands and overseas entrants are vying for market share against a backdrop of weak consumer spending.
“Despite arriving to Australian shores to much fanfare in 2011, Topshop/Topman has not been immune from competition from H&M, Zara and Uniqlo, with the brand’s combination of demographics, affordability and range contributing to its undoing,” she said.
“While Topshop/Topman’s quirky apparel appeals to a younger demographic, its more premium offering and subsequent higher-end price positioning – for a fast-fashion brand – makes it less accessible to this demographic than H&M, for example, which has more of a diversified range at lower price points. Meanwhile, Zara, which also operates in the higher price tier, targets a slightly older demographic with typically more disposable income.”
Australian Apparel Market Size (AUD million) Historic/Forecast
Source:Euromonitor
Topshop/Topman has 760 employees and annual sales of approximately $90 million across nine stores, 17 Myer concessions and online.
Bernadette Kissane, apparel and footwear research analyst at Euromonitor and based in London, said that the past five years had seen a flurry of international apparel and footwear brands from Forever21, COS, Gap to Topshop expand into Australia in an effort to capitalise on high disposable incomes, healthy inbound tourism and growing demand for international brands.
“However, this has also been met with the rapid and aggressive expansion of behemoths such as H&M and Uniqlo,” she said.
“Fast fashion has taken the market by storm, illustrated by Zara who now ranks as the fourth largest brand, despite having only entered the market in 2011.
“However, unlike the behemoths who have maintained a tighter control over their Australian operations, boast a broader geographic presence and lower prices, Topshop’s appeal was tarnished by higher price points and stock quality that fell short of expectations.
Kissane said Topshop had all the right components to generate a strong position in the Australian market, targeting the millennial population with its fashion forward designs and accessible price points.
“Given the brand was initially a huge success in the market, it comes as no surprise that Arcadia owner Sir Philip Green is stepping in to resolve and restructure the business. Topshop may have fallen on hard times but there is still potential for the brand to regain its relevance in Australia if it addresses its value perception, or lack of, among its consumer base.”
