Non- Specialists Take The Lead In Apparel Retailing

The past ten years have seen little consolidation among apparel retailers in Europe. The dominant retailers in the UK, France and Germany have lost market share, and, in the case of the largest UK and German retailer, reduced the number of countries in which they trade.

Wal-Mart has increased its apparel sales significantly (though its US share is still lower than the UK’s two largest apparel retailers), so commentators globally assume apparel retailers are getting bigger everywhere.

The problem is that apparel retailers are really rather small by retailer standards. Apparel-intensive department store chains, like JC Penney ($41.4 billion sales), Sears ($41 billion), Daiei ($19 billion) and Marks and Spencer ($11.7 billion) are the largest retailers that are heavily dependent on apparel. But in total size they are dwarfed by:

/  Wal-Mart ($244 billion).

/  The major global supermarket chains with serious apparel offerings, like Carrefour ($65 billion), Metro ($49 billion) and Tesco ($41 billion), and;

/  Other US mixed-goods operators like Target ($44 billion).

But the department stores are still bigger than true apparel specialists like Karstadt ($15 billion) or Gap ($14 billion).

Does this matter? Traditionally, department stores and apparel specialists disregarded non-specialists: Discounters’ size seemed a drawback, rather than an advantage. But today:

/     Non-specialists have grown to a significant share of the apparel market.

/     Wal-Mart is now clearly the world’s largest apparel retailer.

/  Non-specialists’ credibility has grown as predictably in fashion as it has in markets like meat, wine or cheese. Led by the Wal Mart “George” label, non-specialists can no longer be dismissed.

/     Non-specialists’ sheer size gives them advantages in retail R&D. In IT systems, this has long been acknowledged. Less attention has been given to non-specialists’ advantage in dedicated sourcing operations. Already Carrefour’s network of sourcing offices is wider than any apparel specialists.

Western apparel specialists will need to work very hard indeed to counter the threat, driven mainly by deeper and wider management skills and resource development, non-specialists now pose. And those non-specialists are probably far better placed than apparel specialists to work their way through the uncertainties of the post-2005 world.

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