Case study Market research snapshots examining the size and dynamics of the world clothing and retail apparel industries vary. The world clothing and apparel industry is described by IBISWorld as a US$578 billion market that has for the last five years (including 2013) been experiencing a slight contraction. This measure includes only clothing manufacturers purchasing fabric and those manufacturing fabric; it does not, for example, include footwear. The Houston Chronicle suggests that ‘the retail apparel industry generated more than $304 billion in revenue in 2009’ (Wagner 2013). Meanwhile, according to Treehugger.com, ‘the world clothing and textile industry (clothing, textiles, footwear and luxury goods) reached almost $2560 trillion in 2010’ and ‘the world children’s wear market is expected to reach beyond $186 billion in 2014, marking a 15 per cent increase in five years’ (Breyer 2012). Meanwhile, Companies and Markets.com estimates that the global children’s wear market will be worth around US$173.6 billion by 2017. Developed regions within Europe and North America are considered traditional leaders and account for a principal share of the global children’s wear market, and the Asia-Pacific market—spurred by rapidly escalating markets in India, China, Korea, Thailand, Taiwan and others—is poised to deliver the fastest growth rate of 5.3 per cent through to 2017.
IBISWorld publishes a range of industry reports that shows each industry’s supply chain, economic and market drivers. It suggests that the US children and infant’s clothing market is a US$10 billion market which experienced 1.1 per cent growth between 2008 and 2013. However, this measure of the US market excludes sales from department stores and online-only retailers. In contrast, the highly competitive Australian market is estimated to be worth US$13 billion, although it contracted in the five-year period from 2009 to 2014 at a rate of 0.9 per cent.
Children’s fashion is particularly popular in the Asian clothing market, with parents paying close attention to trends. High- end luxury fashion brands such as Burberry, Mark Jacobs, Gucci and Roberto Cavalli have all developed children’s clothing lines, either opening additional stores or distributing products through famous department stores in Asia. Reasonably priced mass-market American and European retailers, such as H&M or Gap, are also doing well, relying on Asian consumers to drive business growth. Sales in Asia represent more than half of the US$80 billion spent globally on luxury brands, and the exploding demographics of China will continue to impact upon performance within the global market. The number of Chinese children under 16 years old has already exceeded 300 million; with the baby boom that is projected for China in 2011–2021, this number may increase to over 400 million. It is projected that Asia-Pacific, encouraged by swiftly escalating markets in China, South Korea, India, Thailand, Taiwan and others, may deliver the fastest growth rate of 5.3 per cent through 2017. Asian parents are well informed, prefer known brands and tend to do their research online. China’s luxury market is estimated to become the biggest globally by 2014, while Indian consumers are also keen to purchase luxury brands.
The children’s wear market in the United Kingdom is a little different. Sales grew only modestly in 2010, driven by a 1.6 per cent rise in the birth rate. However, a change in consumer behaviour has shown a significant shift, with fewer people shopping at specialist baby stores. Just under a quarter of consumers purchased babies’ and children’s clothes from specialist retailers in the 12 months to November 2010, compared to nearly a third in the previous year. It has also been suggested that many consumers may be waiting for sales before they buy.
In order to gain market share, small clothing stores need to find a niche. Other key components of successful international business include market entry (for example, getting a new apparel brand into a retail outlet, perhaps even establishing a retail site), manufacturing, outsourcing, distribution, inventory management and quality practices. To succeed in this business requires more than just great designs; brands need to be distinctive and new stores need to differentiate themselves (and their product) from others in the market. According to a 2010 IBISWorld study, children’s wear was one of only two specialty retail sectors to experience growth between 2006 and 2010; the industry is considered to be one of the safest because families always need clothes for their children. Despite this, entering the children’s clothing industry is still risky for entrepreneurs because of the changeable nature of fashion, and they should do plenty of research before starting a children’s clothing business. The retail apparel industry is heavily influenced by trends, both in terms of what is considered fashionable or on-trend and also in relation to where or how consumers purchase.
A third dynamic or trend that is affecting the retail apparel industry is the increase in the numbers of people shopping for clothes on the internet rather than at traditional retail sites.
Pumpkin Patch was founded by Sally Synott in 1990 in New Zealand, initially as a mail order business offering quality, stylish clothes for children. A short time later, the Auckland retail store was opened, with the parent company still based in this city. Synott held an executive role within the company until 1992, and she is currently a non-executive director. In 1993 the business expanded to Australia, before moving to the United Kingdom and
United States markets where it established retail stores as well as selling its products via mail order/online catalogues.
In 2012, the company appointed Deloittes as administrators in the UK. Five of the 36 stores were shut and 60 of the 400 employees made redundant. Deloittes said the company suffered as a result of the unprecedented and prolonged downturn being experienced in the UK retail sector. Other clothing retailers made similar announcements at the same time. This announcement was followed by the closure of its remaining UK (excluding Ireland) retail stores.
The closures in the United Kingdom follow the company’s experience in the United States, which ended in 2010, although Pumpkin Patch still continues to trade online in the UK market. In discussion of the appointment of administrators in the United Kingdom, the then CEO Neil Cowie said:
We are confident that there is a place in the UK market for our brands. This is supported by our fast growing UK online operation and the fact that 750 000 customers shopped at our UK stores over the last 18 months. In fact the review highlighted a number of interesting opportunities for Pumpkin Patch and Charlie & Me in the UK and we will be exploring these over the coming months (Richards 2012).
The Australasian market also began to feel the pinch during this time, with consumers tightening their spending.
The children’s wear specialist has since entered into an agreement to sell its products through Amazon for the French, German and UK markets. With this news the share price lifted. Cowie said: ‘While we don’t expect to see noticeable earnings from the Amazon relationship until the 2014 financial year it is strategically an important step for us’ (Pumpkin Patch Limited 2012). He said that partnering was an important aspect of Pumpkin Patch’s international multi-channel growth strategy, as this type of approach allowed Pumpkin Patch to ‘leverage off our existing design, supply chain and other support functions so the capital investment we have to make to establish the relationship is minimal’ (Pumpkin Patch Limited 2012).
Di Humphries joined Pumpkin Patch mid-year in 2012, as CEO. She has an extensive background in retail.
What are the roles of comparative and competitive advantages in the success of Pumpkin Patch?2 Illustrate your answers by providing specific examples of natural and acquired advantages that Pumpkin Patch employs to succeed in the global retail market of children’s clothing.3 Justify your answer with research literature and facts from the case.