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New Study Finds Apparel Retailers in Danger of Extinction

It could be a short road ahead for many apparel retailers if they can’t find a way to regain relevance before the industry further falters.

In a new study titled, “The Retail Space: An in-depth study of where the industry stands now,” by rebranding company Stealing Share, researchers determined that the apparel retail market is in “denial” and “disarray,” and that many retailers are in danger of closing their doors.

Stealing Share strategists looked at several categories within the retail space including luxury, discount and specialty markets and studied competitive positioning, segmentation strategies and how the influx of Internet retailing has affected the industry.

Tom Dougherty, Stealing Share president and CEO, said, “This is an urgent call to all retailers.” He added, “What we see coming is the doomsday scenario for many retailers. The category seems to have lost its way. We’ve already seen store closings from many retailers. This study should be the fire alarm to any retailer that understands that its future is dependent on its ability to steal market share.”

According to the study, specialty stores are on the rise in today’s market because shoppers are more interested in the unique and unusual. Because margins have eroded, discounting has become standard. And the thrill of the hunt once found in stores can now be had online, and savvy consumers are in a constant state of comparison shopping.

Strategists set out to answer several questions: “How can any retail environment survive when most retailers are simply copying one another? At the end of the day, is price, discounting, and over-saturating the market the only game necessary playing? Are the department store websites eating their own young?”

The first, and most evident, issue is that store closures in apparel retail are rampant. J.C. Penney has announced thirty-three more store closings before this May and Abercrombie & Fitch plans to close 180 stores by 2015, according to the report.

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“Apparel retailers are in this pinch because they lack differentiation and their business models are outdated in a world of sea changes,” the report notes.

The problem with department stores, specifically, is that they have no idea how to position themselves. Mid-tier retailers like Dillard’s and J.C. Penney are aiming to steal market share from both the luxury and discount categories with both high-end offerings and steep promotions and sales.

But these retailers are playing in the middle, lacking any real identity, and ultimately aren’t known for anything.

“To gain that identity, and steal share, these middle-tier retailers must become owners of a tangible concept. On a macro level, luxury and discount do this with experience and value. But on a micro level, nobody but Walmart really owns cheap,” according to the report. “To break away from the set and highlight yourself as being different and better, each player within each segment must become known for something that is uniquely its own.”

When looking at the world of discount retail, Walmart dominates and all other competitors have been “a sea of nondescript imitators,” according to the report.

Among Target, Kmart, Marshall’s and Steinmart, for example, no one store has done much to differentiate itself from the other and they will never win against Walmart if price is their only competitive advantage.

Playing the price game alone won’t suffice; stores will have to be able to sell a concept.

“What if Target (or someone) added a “Great Gifts for Everyone” section in its stores? This could be a place where you could always find interesting, Target-selected goods that are perfect as a presents. Suddenly, Target now owns “Gift Giving,” which brings customers to the store. (Again, the emotional undercurrents of gift giving are what will make the brand),” the report suggests.

“Change has to happen soon in this category or demise is afoot,” according to the report.

The specialty stores market has so far been the best at standing for something and owning that space.

Some in the specialty segment have done well to position themselves as owning a space, like Urban Outfitters, Gap and Abercrombie & Fitch targeting the young and hip; L.L. Bean and Eddie Bauer making goods for the outdoor lover; and Men’s Wearhouse selling product for the formal male at a good price.

But most of what these retailers offer can be found in other places. And owning a segment that is too broad or overdone won’t necessarily translate to success.

“Right now, retailers are trying to own men’s clothes, young and hip, or outdoors. Young and hip, while having a relationship to fashion, is a cliché and, by itself, not that meaningful. Other demographics, like male or female, are simply reflections of what you offer,” the report notes. “Instead, you should own the reasons why your customers want to be young and hip, you would own an emotion.”

Brands should own a space the way David’s Bridal and Bridal Warehouse own weddings–these bridal outfitters own an event that happens more than 2 million times a year.

“Specialty shops are simply not that special anymore. They are lost in a quagmire of choices where everything blends into another. When that happens, sales fall short of expectations, stores are closed and irrelevancy sets in.”

According to Stealing Share, “The current players in the retail market are in trouble. Sales are down, consolidation is the name of the game and competition lurks everywhere. Retailers aren’t helping themselves by producing the same, worn-out messages that depend on sales and clichés.”

Consumer spending may have been up 0.4% in January, but the beginning of the year still saw weak sales for apparel retailers after holiday season same-store sales fell 14.6% across the industry.

Many may have blamed the shorter holiday season and unseasonable weather, but brands are still suffering and shoppers are running for the Internet, namely Amazon.

Brick-and-mortar retailers can hardly keep pace with the vastness of Amazon and its ease of use, where shoppers can search for a sale and order product from all over the world.

Because retail is changing at a much slower pace than today’s consumer is, competing with the Internet is becoming increasingly impossible. And if retailers continue down this path of mimicry without positioning themselves as unique, here’s what Stealing Share says will happen:

“The pace of closing stores will increase. We’ve already seen recently that Staples is closing 225 stores, RadioShack is shutting down 1,100 and so many others are bleeding money. 

To turn a profit, retailers will close so many stores they will become irrelevant and become simply suppliers to large retail sites (Amazon, Walmart). Or they will become the equivalent of a local specialty shop.

Amazon will continue to grow and retail brands will market their offerings as “available at Amazon.” CEOs will be fired. Companies will downsize and consumers will become even less interested in the brands themselves. All that will matter will be price, look and fit.

There will be further consolidation as companies look to share redundancies, cut costs and increase their market space.

Wearing something from Gap (or any other retailer for that matter) will mean nothing. The department stores will have these huge retail spaces that are empty of customers, especially customers buying product.

Basically, the doomsday scenario.”

To skirt this sad scenario, retailers have to make some major changes. Department stores should be known for a department; specialty stores need to remember that their specialty isn’t about a style or price or clothing brand but, rather, an event, season or point in someone’s life.

“This is a market that’s struggling to find any importance with a model that will soon be extinct,” added Dougherty. “That’s one reason why you’re seeing so many retailers closing stores. Even if the model was working, the retailers’ messages are just noise, all blended together to create a cacophony that consumers are deaf to.”

The full study can be found here.