The rise of the international apparel brands is hurting local chains. Credit:Dominic Lorrimer The storm clouds that gathered over Australia's apparel sector in the past 12 months weren't just the result of the unpredictable weather conditions. Winter arrived late on the eastern seaboard and then the chilly start to spring forced fashion retailers to cut prices again to move stock. For mid-market apparel brands like Malcolm Webster's David Lawrence and Marcs, which both slid into administration this month, the battle to grow sales had turned into a skirmish over a shrinking pool of shoppers in a market where no one wants to pay full price. Insiders suggest the unseasonable weather last year and resultant lumpy sales weighed on the two chains, and then when retail sales fell away in October it started to look terminal.

Myer has acquired two of its most popular brands, Marcs and David Lawrence, which collapsed in February. Credit:Tamara Dean International superstars International fast-fashion superstars like Zara and H&M have taken hundreds of millions of dollars in sales out Australia's apparel sector, leaving long-established brands subsisting on the thinnest of margins and vulnerable to even minor shifts in spending. JP Morgan analyst Shaun Cousins said the globalisation of Australian retail was most apparent in apparel and it had left domestic chains vulnerable to even relatively small market fluctuations. "Unlike the food retailers which largely use a domestic supply chain, apparel is a global supply chain where scale counts," Mr Cousins said.

"If the external environment is difficult, be it consumer sentiment or unexpected weather conditions, domestic apparel retailers are punished now more than in the past because of the presence of global competitors that have a scale advantage. "We are seeing a recalibration of market share, where global players take share and domestic players that are strong can survive and prosper, but those brands that are not 'match fit' are getting caught out." Mr Cousins said the supply chain operations behind these big international brands made them agile and able to respond quickly to sales trends. High-tech stock management Zara gets two stock drops a week and it tracks every garment through radio frequency identification technology, which means the business can follow an item of clothing from its logistics platform to its sale and understand in real time how much stock and what sizes are in every store.

Retail analyst Steve Kulmar said Zara was a world leader in supply chain technology and it leveraged this data to sell off unpopular lines and quickly restock stores with new or wanted products. He said the average domestic apparel retailer in Australia worked on about one major stock delivery a month and as a consequence was slow to react to sales trends and too reliant on discounting. Mr Kulmar said risk-averse domestic retailers had become timid with their design and collections and lost their sense of identify and connection with their customers along the way. The frequency of sales and deep discounting at specialty apparel chains in Australia has normalised the lower prices and shoppers now expect reductions all the time. Citi analyst Bryan Raymond said apparel retailers now ran promotions longer and often with deeper discounts but he said the growing popularity of international sales events was also influencing local retailers.

"If you wind the clock back five years or more, you would have seen some discounting in mid to late December if retailers were nervous they weren't going to hit their numbers," Mr Raymond said. "Now we've progressed to a longer period of discounting in December as well as the Black Friday and Cyber Monday sales, which are in November and getting bigger each year. "Next we will have Singles Day from China in early November, so there are these rolling global promotional cycles which aren't helping." Price battles futile Zara's sales in Australia have retreated from their initial "elevated levels", according to Macquarie Wealth Management, but along with Japanese giant Uniqlo and H&M these three brands captured $600 million in Australian apparel sales last year.

Macquarie reports that margins are under pressure at all three of the international chains, but they're still driving sales growth through new store openings and squeezing domestic chains out of the market. Ultimately, these large, international brands have the financial fire-power to hollow out Australia's apparel sector. And cutting prices is not the answer, according to Christoph Petzoldt managing director of pricing consultancy Simon Kucher & Partners. Loading He said trying to fight Zara or H&M on price was ultimately futile and exacerbated the challenges facing local apparel operations. But shoppers also had a role to play. "Consumers have to consider whether in ten years' time they only want to shop at stores like H&M, or whether they would prefer to have local brands as well," Mr Petzoldt said.