Fashion retailers outline desire to reset the discounting model
EARLIER this month several international luxury designers and retailers published an open letter following a Zoom meeting where they thrashed out some of the problems facing the fashion retail business.
Sustainability and customers’ needs formed part of the letter, but a key message in the short missive — which was signed by Brown Thomas fashion director Shelly Corkery as well as the Irish group’s sister company Selfridges — was an end to discounting.
Discounting has become an integral part of retail over the past decade as it has struggled with changing consumer habits and a shift to online shopping. The letter suggests this difficult Covid-19 experience might be a time to reset the rag trade.
“We agreed that the current environment, although challenging, presents an opportunity for a fundamental and welcome change that will simplify our businesses, making them more environmentally and socially sustainable and ultimately align them more closely with customers’ needs,” said the letter.
“We hope to achieve this by adjusting the seasonality and flow of both womenswear and menswear goods, starting with the autumn/winter 2020 season.”
This would result in the autumn/winter season being firmly put back in to the traditional winter goods period (August to January) and the spring /summer season being aligned in the summer period (February to July). A key recommendation is to “discount at the end of the season in order to allow for more full-price selling — January for autumn/winter and July for spring/summer”.
For those not familiar with changes in retail in recent years, Christmas sales or January sales, for example, aren’t what they used to be. Discounting is well in place before December 25 and winter stock is barely in the door before special offers are introduced. Brown Thomas sticks generally to a 20pc-off special offer a couple of times a year but elsewhere in the trade, discounts have become an addiction for retailers and shoppers alike.
The luxury retailers may be leading the charge on this call for a change but the problem is very much evident on ordinary shopping streets across Ireland. Lots of Irish retailers have had little choice but to jump on the Black Friday bandwagon and other promotional events. The margins are naturally hit, but much needed volumes are hard to resist. One of the best known discounters in recent years has been Debenhams, which almost constantly offered sales and special deals. Some retail analysts believe its inability to wean itself of the discounting cycle is partly to blame for its downward spiral.
The open letter is the fashion industry’s attempt to break out of this margindraining cycle. Retailers should buy in just enough stock to meet demand rather than have to flog it off. There is clearly a sustainability message in all that.
However, trying to reset right now may be too much to stomach for some shop owners who are sitting on several million euro-worth of unsold summer stock, many Irish retailers included. For them, their cashflow problems mean they are wondering what level of stock they can afford to carry for the winter season and beyond. The likelihood is that only the heaviest of discounting will get them through this summer.
Take-private looms for IPL
TWO sons of the IAWS Co-op — Aryzta and IPL Plastics (formerly known as One51) — are both in the headlines again.
Swiss-Irish par-baked goods company Aryzta and Canadian-focused IPL have proven to be unruly offspring over the years, getting themselves into all sorts of scrapes. And failing to deliver on their early promise, as many Irish shareholders, among them Irish dairy co-ops, can attest.
It looks like Aryzta is finally running out of road. The aggressive growth story once jealously guarded by former chief executive Owen Killian and his lieutenants has been crumbling for many years and has continued to face huge challenges.
Despite new chief executive Kevin Toland’s palpable enthusiasm for his turnaround strategy at Aryzta, the Covid-19 outbreak has pushed it over the edge.
Last week, activist shareholders Spain’s Cobas and Switzerland’s Veraison laid out their demands, which included the removal of Gary McGann as chair.
The time to break up the business and sell it off may have passed. A complex debt restructuring seems a likely outcome. Equity holders will no doubt lose out and there will be little reason to remain listed.
At IPL Plastics there is a lot less drama these days but it appears its short time as a listed entity is limited also. A listing on the Toronto Stock Exchange was pitched as a long-awaited exit for Irish shareholders, who originally were shareholders in One51.
However, the stock remains illiquid and the share price depressed.
As reported in these pages last week, three private equity funds have been circling the company, which has a solid underlying business. While timing may again have robbed Irish investors of an exit in the short term, it seems inevitable IPL will go down a take-private route when conditions permit.