Fashion crisis: more and more popular brands are struggling

The German textile industry is awash with bad news: well-known manufacturers like Gerry Weber, Tom Tailor and Esprit seem to fail to attract enough customers. And that's not just because of the record breakingly hot summer of 2018. A famous name is no longer enough in the fashion world to guarantee a secure future. More and more established fashion labels - no matter if Gerry Weber, Tom Tailor or Esprit - are painfully aware of this. “Established brands are under pressure”, observes trade journal "Textilwirtschaft".

Indeed, the bad news just kept coming from the German textile industry in the past few weeks. Example Gerry Weber: The fashion empire that includes the brands Hallhuber, Typhoon and Samoon shocked shareholders and its approximately 6,500 employees alike in mid-September with a double-digit sales decline and a doubling of its losses. When the fashion manufacturer then ordered a reorganisation report to support a drastic corporate restructuring, the stock market understood this as an alarm signal. The stock price collapsed - and reached its lowest level in 15 years at times.

But Gerry Weber is not alone with its problems. German textile company Ahlers, known for its brands Pierre Cardin, Baldessarini and Pioneer, wants to cut around 130 of its more than 2000 jobs in the next few months in view of decreasing sales. It also prepared its shareholders for the possibility that there may be no dividend for the fiscal year 2017/18. The management expects sustainable profit growth only “from 2020” onwards. Hamburg-based fashion chain Tom Tailor surprisingly announced a profit warning in September. And Esprit is deep in the red.

Almost all companies mentioned one reason for the current developments: the super summer of 2018, which spoiled the consumer's desire to shop. But that's only one part of the challenges many fashion companies are currently facing as Thomas Lange from the German fashion industry’s association Germanfashion emphasises. Because the triumph of online retailers and the success of companies like Primark or Zara that keep the most important steps from product design to sales under one roof has changed the industry dramatically.

Those who want to assert themselves today have to bring their collections to market faster than before. They have to handle expenses better und have to succeed in matching consumers’ taste precisely. According to industry estimates, there is 30 percent too much merchandise on the market, emphasises Lange. Those who do not meet customers’ tastes or whose products are too interchangeable risk that their merchandise will remain on the shelves. "The big challenge is to build a brand that appeals to the end user," says the Germanfashion CEO.

Esprit’s chief executive Anders Christian Kristiansen recently showed a bit of self-critical attitude. When the company which is headquartered in Germany and listed on the Hong Kong stock exchange announced a few weeks ago a loss of around 270 million euros for the financial year 2017/18, he did not just hold external factors responsible, but also a “lack of a clear brand identity as well as products that do not meet the expectations of our customers”. Trade journal "Textilwirtschaft " sees this as a common problem: Too many brands and retailers, especially in the mid price segment, lack this "magic".

The situation gets aggravated for many struggling manufacturers because of strategic mistakes of the past. Gerry Weber, Esprit and Tom Tailor overshot the mark by far, trying to set up their own store network and had to pay dearly for it in the end trying to get rid of loss-making stores. Simultaneously, many manufacturers neglected to build an attractive online portfolio and need to catch up in this area now.

Brands like Primark, Zara and Adidas show that it can be done differently: They are currently riding a wave of success while pursuing very different strategies. Textile discounter Primark positions itself as a price leader in fast fashion; Zara scores with a never-ending firework of ever new trends and Adidas builds up its own distribution on the Internet as consistently as hardly any other brand.

But there is something else that gives struggling traditional brands a hard time. The big German market still lures foreign brands. For instance, though so far in Germany only sparsely represented, Japanese fashion chain Uniqlo opened not one but two new branches in Cologne and Dusseldorf in October. And in Dusseldorf, Uniqlo takes over the former Gerry Weber store.(DPA)

This article was originally published on FashionUnited DE. Translated and edited by Simone Preuss