Antonio Rodríguez, Retail consultant and with experience in firms such as the Spanish fashion brand Hoss Intropia, offered an interesting seminar on how to do business in the fashion industry in United States. This seminar is part of the “Doing business in” talks. One of the first questions that he asked was: How do we manage uncertainty? How do we manage changes?
Points of view to take into account
From a global point of view, low-cost leading countries in the fashion field such as China are not growing at the same pace as before (they have gone from 10.6% to 6.7% growth).
From the consumer’s point of view, a change of habits has occurred: 76% of the sales in the US has a discount. Casualization is also common, let’s think of the ADIDAS phenomenon, where athletic wear is becoming increasingly popular in all environments. Likewise, we live in a digital world; it is estimated that in 2020, 12% of the sales will be online.
Lastly, we need to consider the fashion sector’s point of view. Antonio told us that firms are constantly trying to cut costs by using a smaller structure with a higher efficiency, which improves agility and immediacy (“see now, buy now”). Currently we can observe a creativity crisis: consumers ask for constant novelties. We cannot deny that in the last few years there has been a trend towards responsible innovation, respect to the environment and sustainability.
Features and trends
As we can see, there are more and more risks, volatility and challenges, and clients are more informed and demanding. They tend not to buy compulsively anymore. In 2015-2016, the sector grew 2%, but it is estimated to keep growing globally in the future. The US is the reflection of what is happening in the rest of the world. What are the opportunities? Mainly, organic growth: looking for profitability in clients, taking care of them.
According to our speaker, currently there are several trends:
- RETAILTAINMENT: Entertainment at the point of sale
- SOCIAL AND ENVIRONMENTAL RESPONSIBILITY (reputation, good social practices)
- DISRUPTION OF DIGITAL PLATFORMS (social networks, a very cheap way of “making noise” in the United States)
- INDIVIDUAL COMMUNICATION WITH CUSTOMERS
- OMNI/MULTICHANNEL STRATEGY
Apart from these, we also see other effects such as ROPO or WEBROOMING (with a high conversion rate, consumers look online and buy offline) and the opposite, SHOWROOMING (a buyer visits a shop to have a look at the product, but then they buy it online from home).
Fashion industry in United States
If our goal is to open our business to the world, first we have to design a plan where we specify how we are going to position ourselves, what management model we are going to use. In the case of the United States, Antonio recommended opening an office there, instead of managing the business form Spain.
As we have already introduced, the United States is a key country in the fashion field. Spain has a good quality, style and prices, but the US is a competitive market, difficult, with big cultural differences (even in different areas within the country).
Antonio used Inditex’s successful case to provide inspiration to Spanish fashion companies when going international. Inditex went from Spain to Portugal, and then they decided to go to the United States in 1998. They did not open many stores between then and 2007. Today, however, they have 85 stores, a revenue of 1 billion USD and a very positive EBITDA. It is true that there are many brands that they have not been able to develop (82 stores are Zara and 3 are Massimo Dutti).
Other companies such as GAP, Abercrombie or Ralph Lauren are having difficulties staying afloat, understanding the market and being up-to-date. The US does not value fashion itself, they prefer good price and rationality.
Hoss Intropia company
Hoss Intropia, the brand which Antonio works for, decided to go to the US after trying its luck in London. It is a mid, mid-high segment (accessible luxury) company, addressed to women between 35 and 50 years old. They currently have 30 stores, 18 of which are in Spain. Some of them are their property, others are franchises and others multi-brand. Here’s their strategy:
- Price: between High Street and designers
- Product: they do not care that much about the logo, but about the design
- Distribution: positionning in prestigious streets
- Personalised service
The best practices, according to our expert, when a firm decides to go to the US, are the following:
- Vision and focus
- Knowledge of the market and of the country (economy, demography, sector, real estate)
- Relationship with local partners
- Resources and local structure
- Adapting the trade policy
Potential market in United States
The potential US market is 90 million people, out of a total population of 330 million people. Hoss Intropia realised that people most interested in fashion were located in New York, Los Angeles and Dallas. They analised the streets and found out that hiring a store in Soho cost 1,700,000€. Therefore, they looked for partners who allowed them to sell in “shops in shops”, also called multi-brand stores. Thanks to these, they managed to sell in a store located in Florida, and then they tried their luck in New York. The direct goal was to find symmetry in their strategy. First of all, they started in Miami, then NY and Washington, California. In the case of California, Antonio admits that it was a difficult process, and that if he could travel back in time he would wait longer. Lastly New Jersey, Chicago and Atlanta, where they also introduced E-Commerce.
Management in the country and contacting clients
After 12 months in the country, they got in touch with a logistics partner and opened a logistics centre in New York. It would let them manage leftovers and improve efficiency. They increased promotions and events, and created clienteling programmes, which consist of contacting clients regularly and offering them the product they need. We asked Antonio if he could please tell us more about that topic in particular. He replied that there is an initial phase where they acquire the customers’ profiles and then they group several clients with the same profile. Lastly, 20 years later they send them an email that convinces them to go back to the shop. It must be a completely personal message, from seller to buyer, and it is estimated to generate 25-40% of the total revenue.
If you want to watch some of the key aspects of this seminar, do not miss the video about it in our Youtube channel!