Fast fashion retailer set for big Aussie debut

Australian fashionistas rejoice: H&M is coming. Next year, the Sweden-based "fast fashion" retailer will bring its ripped-from-the-runways apparel and ultra-low …

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australian fashionistas rejoice: H&M is coming.

Next year, the Sweden-based "fast fashion" retailer will bring its ripped-from-the-runways apparel and ultra-low price points Down Under. Already a compelling presence in the American and European markets, H&M joins other fashion retailers, from Zara to Topshop, who've lately entered the Aussie market.

The company released the news via its Twitter and Facebook accounts. "We are happy to announce that we will open our first H&M store in Australia, in 2014! Stay tuned for more details," read the statement.

While the company has yet to sign any leases, it's likely the first stores will be located in Sydney and Melbourne, which figure among the world's most desirable retailing sites.

Fast fashion or race to the bottom?

H&M is perhaps best known for collaborating with well known designers, from Stella McCartney to Karl Lagerfeld, to release their designs at H&M stores at H&M-style low prices. These special collections generate huge excitement among budget-conscious fashionistas and have a reputation for selling out within just hours — an example of how fast fashion just keeps getting faster all the time.

But who stands to win as the retailing game speeds up? Surely the appeal for consumers is obvious. Why not pick up a few Karl Lagerfeld designs for what it costs to buy lunch?

Yet for the retailers themselves, fast fashion can be more of a mixed bag. The business model boasts incredible unit-level economics — stores cost little to open, and the inventory turns over incredibly fast, with new merchandise brought in weekly or even daily. Yet, with its focus on low prices, the model also encourages consumers to be more loyal to price than brand or shop, leading to a race to the bottom in which retailers must constantly lower prices — and see their margins reduced.

There's also the question of where these cheap goods come from and under what conditions, and by whom, they're manufactured. In the U.S., where consumers buy on average 64 new items of clothing each year, the fast fashion industry has come under scrutiny and been the subject of books such as Elizabeth Cline's 2012 exposé, "Overdressed: The Shockingly High Cost of Cheap Fashion," which chronicles the possible environmental and social damage fast fashion can cause.

May the cheapest skirt win

For existing Australian retailers, there is a more immediate kind of damage to keep an eye on. H&M will compete directly with privately owned retailers such as Ice and Cotton On, and also with the likes of Country Road (ASX: CTY), as H&M offers similar office-appropriate outfits at far lower prices.

H&M stores also poses a threat to Premier Investments (ASX: PMV) which has lately seen success with its fast-fashion concepts Dotti and Portmans. That's to say nothing of older, legacy retailers such as David Jones (ASX: DJS) and Myer (ASX: MYR).

If history repeats itself, and H&M performs as well as it has in other markets, these retailers are right to be shaking in their platform studded booties.

Looking for some investment ideas not in the fickle fashion category? look no further! Get two under-the-radar ideas now, including names, codes, and a full investment analysis in our brand new FREE report, Two Small Cap Superstars. Simply click here to download your FREE copy.

More reading

Revealed: Best days to buy petrol

Brambles switches up Recall management

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »