Fashion fails if doesn’t make climate change

clouds, sky, weatherUnseasonal weather and an inability to differentiate their offer has a number of fashion retailers staring down the barrel of receivership.

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Like farmers, fashion labels are at the whim of the weather.

The certainty of the seasons give cues to spend – be it planting new crops or ordering new stock.

But while farmers can be pretty certain they’ll find a buyer for the food they produce, clothes retailers can’t even be sure of that.

It all comes down to weather happening when it’s supposed to.

In Europe, summer has kicked in at the right time and given rag traders a boost. Here in Australia, record high temperatures are now very constant and shoppers are making do in droves this year – yet to refresh their winter wardrobe with a new coat or jumper for season 2016.

Fashion retailers have been discounting hard to move stock. But talk has now turned to a bunch of local retailers struggling so much that they may face insolvency by August.

Getting bigger via mergers could be the only alternative to going bust for some fashion retailers, so we could be seeing a wave of consolidation in fashion driven almost entirely by climate change.

Warmer winters are nothing new. It is just that the records are being set so constantly now that retailers relying on seasonal fashion changes are really being hit. Many were already hanging by a thread – the weather will just be the final cut.

Clothing sales actually rose by 4.8 per cent in the March quarter compared to the same period in 2015, according to the ABS, the second highest of all retail sales categories.

Pummelled by online, department store wars and the influx of offshore giants, such fickle conditions mean supply chain control is paramount.

That means having the volume to negotiate with suppliers to hold inventory longer and maintain discounts for early buying further into the year, as well as asking the bank for more flexible working capital loans.

All that adds up to fashion retailers facing higher inbuilt costs.

Many of the bigger chains, especially the global retailers, will weather the weather because they can get stock orders in quick enough to timely respond to temperature changes soon after they happen.

Global fast fashion chains more or less own their whole supply chain, from making it to warehousing and the shops selling it, and can move winter stock to parts of the world where it is colder.

Former David Jones CEO, Paul Zahra, says customers now wait until the last minute to make seasonal purchases and in a retail industry that is now very much global.

“Retailers start out global now,” Zahra says. “The local retailers – they have bought the inventory and they are stuck with it. They have to sell it with a reduced margin. Deeper discounting, means they have to sell more to get last year’s numbers, it becomes a vicious cycle.”

Smaller retailers will survive if they diversify their business to sell less cold weather clothes. Or they will be forced to find a way to get bigger to increase their bargaining power with suppliers.

Winter could suddenly return and those teetering retailers will be saved. But one day soon, the weakest will succumb to inevitably thinner and thinner winter sales. So even if the insolvencies or mergers don’t happen this year, they are coming.

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