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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