Professor Neil Towers

8th International ConferenceRetail Management

The Road Map to the New Europe

'From Catwalk to Coathanger'

Professor Neil Towers

Agenda

1. Challenges for the Coathanger

2. Retailing, post 2004

3. Responsive Retailing Challenges

Professor Neil Towers

The Catwalk

• Influences high street trend as opposed to purely for luxury brands

• Democratisation– Fashion for all

Professor Neil Towers

Professor Neil Towers

Old Textile World

Professor Neil Towers

OLD TEXTILE WORLD

Quota Constraints

Large Textile Capacity in US & Europe

Dispersed Garment Manufacturing

Huge Shipments of Semi-Finished Goods

Inefficient Supply Chains

Overcapacity & Cyclicality

Demand Growth Mainly US & Europe

Professor Neil Towers

Typical call to arms: Can Turkey compete

against China?

Fashion Supply Channels

• Significant power shift in past three decades in the UK

• Power move from manufacturer / intermediary domination

• Channel domination in favour of retailer : power in distribution (Hines, 2007)

Fashion Retailing – Market Structure

• Distribution Fragmentation – dominated in numerical terms by single-outlet, family owned businesses

• Significant decline in numbers in past 10 years – by 40%

• Significant in volume, not however in terms of market share levels

Professor Neil Towers

New Textile World

1. Challenges for the Coathanger

Fashion Retailing – Market Structure

Market Concentration :-• Clothing specialist chains : account for

68% of clothing spend• Remainder – department stores, mail

order and food retailers• Concentration of power : top 5 retailers

have a combined share of 43% in 2006 (Mintel, 2006)

• M&S : 15% market share

Fashion Retailing – Market Structure

Concentration – why and how?• Scale : number of outlets / national

coverage• Customer patronage volume• Own-brand domination• Multi-segment coverage / diversification• Multi-channel participation • Adoption of a strategic management

approach

Multi-Channel Distribution

• Rapid change in perspective in past decade with respect to viability and potential

• Current challenge relates to multi-channel integration

• Strategic advantage will emerge through high brand / service delivery in a cost-efficient manner

• Basis for international brand development and expansion

New Entrants• Supermarket and discount retailers ; pure

internet players• Impact upon attitude but also participation

in clothing consumption• Emergence of consumption polarisation :

Prada-Primark effect• Price deflation• Increase in clothing sales volume – but

decrease in value terms

Professor Neil Towers

Global Apparel Exporters (Excludes EU, US and Canada)

Source: World Bank 2005

45.7%

Professor Neil Towers

Professor Neil Towers

Rise of ‘fast fashion’

• Rapidly changing collections of high-fashion garments – the speedy replication by high street retailers of the latest fashion (catwalk) inspired ranges – up to 20 collections per year

• Dependent upon short lead times and limited availability

• Ability to refresh ranges in store is dependent upon supply chain flexibility

Professor Neil Towers

Responsive and FlexibleRetailer + Supplier:

From Catwalk to Coathanger

‘Bring on Sheila and Fred’

2.. Retailing, post 2004

Professor Neil Towers

Fashion Supply, post 2004Loss of quota protection

Supply chain concentration

Global sourcing but fewer producer countries

Number of suppliers will continue to fall

Logistics factors

Social & labour Issues

Non-competitive producers will suffer

Prices drop, volumes rise

Professor Neil Towers

Globalisation of the Supply Chain

• Move away from vertical integration of the textile-apparel pipeline towards use of flexible global subcontracting relationships e.g. Nike, Zara,

• The large-scale shift of labour-intensive garment manufacturing operations of Western retailers to developing countries with lower labour costs e.g. China, Cambodia, Vietnam e.g. Top Shop, H&M

• Fashion products sourced from responsive UK/EU/Asia suppliers with high customer service capability eg. Benetton, Paul Smith

Professor Neil Towers

Lean & Agile Supply

• Lean – for continuity products (26+ weeks)– elimination of waste, including time, to

enable a level schedule and achieve cost-efficiency

• Agile – for fashion products (13 weeks or less)

– prioritising speed & flexibility to reduce lead time & match supply to demand

Professor Neil Towers

 

Retailer

Regional Distribution

Centre

 

Consumer

 

Yarns

 

Fabrics

 

Fabrics

 

Yarns

 

Trend ForecastEuropean

manufacturers

Overseas manufacturers

Lean & Agile

Mixed Mode Supply Model

2004

Fashion Agile Route

Commodity Lean Route

Professor Neil Towers

Seasonal (13 week) fashion

• Example of cotton knitted product for DKNY

Africa India China UK UK

Typical global fashion supply chain

Professor Neil Towers

Supply Lines from S.E. Asia

Spinning Mill

CottonFields

Dyeing, Weaving & Knitting

Shipment to UK6 – 8 Weeks

3,500 km

Professor Neil Towers

Logistics & Infrastructure

Professor Neil Towers

International Shipping

8 RTW vessels

Emma Maersk: 11,000 TEU

Professor Neil Towers

Inaugural Lecture Series

'From Catwalk to Coathanger'

Professor Neil Towers

Professor Neil Towers

Professor Neil Towers

Professor Neil Towers

Professor Neil Towers

Professor Neil Towers

But!!

Professor Neil Towers

What Retailers Want

All Merchandise sold at full

price Less stock in store or in transit

Responsive Suppliers

Social & Environmental Compliance

Fast & “On Time” Deliveries

Good Margins & Profits

Professor Neil Towers

What Suppliers Want

Reliable Forecasts

Long Production Runs

No mid-batch changes

Good Buyer Relationships

No competition

Acceptable Margins & Profits

Professor Neil Towers

3. Responsive Retailing Challenges

33% of merchandise is discounted

Forecasts are often wildly wrong

Many customers leave without buying

Distance adds cost

Logistics cost are rising

Hunt for Margin leads to longer lead

time, more errors, less reaction time,

markdowns etc.

Professor Neil Towers

Multi Channel Retailing

• Selling across more than one channel

• Examine goods in one channel, buy them in another and collect them from a third channel, linked by a process of product distribution

• Online UK Clothing Sales 2009: 26%2010: 35%2013: +50%

Professor Neil Towers

Shirts: Retail Model

Ex-China Ex-Turkey

(C) Cost : $/piece 15.1 18.6 +3.5

(P) Price Point: $ 120 120

(S) Sell Through % 65 80

(m) Markdown ratio 0.35 0.20

(D) Discount rate 0.5 0.5

(G) Gross Margin

83.9 89.4 +5.5

Professor Neil Towers

Turkey can still compete

•despite 5x China's labour cost

•if the merchandise is a fashion product

•and the delivery time to market is critical

RETAIL MANAGEMENT CHALLENGE !!!

INTEGRATED SEGMENTATION,

TARGETING & POSITIONING

Professor Neil Towers

The Dynamic Research Framework, 2010

The Agile Supply Chain

Demand Chain Management

Supply Chain ManagementVirtual

Integration

Network Integration

Customer Integration

Process Integration

Agile Merchandising

Supply Chain Structure

Management Components

Value Chain

Professor Neil Towers

Seasonal (13 week) fashion

China China China UK UK

I. Seasonal ProductSE Asia fashion supply chain

Thomas Nash Woven Jacket at Debenhams

Professor Neil Towers

Made in China

Professor Neil Towers

II. High Street Fashion European supply chain

Short season (6 week) fashion

West China India Turkey UK UK

Example of Per Una (M&S)

Professor Neil Towers

Made in Turkey

Professor Neil Towers

III. Luxury fashionUK supply chain

Luxury fashion season (10 week) fashion

China Scotland Scotland UK Edinburgh, UK

Professor Neil Towers

V neck Cashmere

Pullover £159

Fair Isle Cashmere Scarf

£95

Professor Neil Towers

 

Coathanger

Regional Distribution

Centre

 Retail Experience

 

Yarns

 

Fabrics

 

Fabrics

 

Yarns

 

CatwalkEuropean

manufacturers

Overseas manufacturers

Agile Merchandising Supply Model, 2010

Supply Attributes

Professor Neil Towers

Questions

and

Answers