My baby, Zara

The Australian retail climate isn’t particularly strong at the moment, because bogans are Doing It Tough. Confronted with historically low interest rates, a strong dollar, a resilient economy and low unemployment, the bogan knows that it has to cut back on some things in order to get by. Its newfound love of online retail and Australian retailers’ inability to, you know, build a functional online retail site, has left us something of a retail wasteland. Until you realise that compared to pretty much every other developed economy, we are, in fact, a retail oasis.

International fashion retailers have long avoided Australian shores like the plague. The market is small, the logistics confronting, the seasons reversed, and the local providers far too adept at convincing the bogan of what it needs to buy next. However, this has overlooked a key aspect of the bogan retail landscape; one that, it appears, we are soon to see exploited on a grand scale.

Ordinarily, the bogan will vocally advocate the purchasing of Australian products (Thai manufacturing notwithstanding), as a means of stroking its throbbing nationalism gland and providing Australians with jobs. But the modern bogan has travelled a bit. It managed a two-week trek across seven European countries courtesy of that great international bogan bus, Contiki. And what it took away from its jaunt across such a cultured locale is class. The bogan, upon returning, now seeks Euro style. It needs Euro style. Cosmopolitan style. Like the cocktail. Yet because of the reticence and lack of awareness of foreign companies, this yearning has gone unfulfilled.

Zara, being the fashion behemoth they are, figured it out first. If a European company can come to Australia, sell the same clothes to bogans that it already buys at local outfits, but make them more cheaply, they will win the retail battle. Why? Because the bogan believes that Europe is cool. Once upon a time this may have been true, as Italian designers tended to be confined to Italy, and products that featured on the catwalks in Paris and Milan often were rarely sighted east of the Alps. Today, however, all of these products are made with the same material by the same South East Asian tweens, irrespective of the label slapped inside the hem. As seen on the below graph, the bogan’s level of demand is closely correlated both to howcheap AND how expensive a product is:

The notion of perceived scarcity is an important one to the field of marketing, and one that has clearly been closely studied by the folk at Zara. Convince the bogan that something is ‘unique’ or ‘classy’ or ‘exclusive’, and the bogan wants it. At any price. The perceived scarcity of Europe in Australia means that the bogan, by default, assumes that all things Euro are better than all things Oz. The result is that when a Euro brand opens up, this eventuates:

In this, Zara share a very close relative in none other than Krispy Kreme. The American doughnut kings set up shop in Sydney first and, importantly, Sydney airport. For years, office workers the land over were returning from their Sydney day-trips laden with dozens of fat-and-glaze dough balls, and Krispy Kreme developed a reputation among bogans of being some kind of super doughnut, one that could only be accessed by those who achieved the rarefied heights of air travel. Thus, when KK Melbourne opened up in the outer suburb of Narre Warren, bogans travelled from miles around to queue up for hours to access the thousands of empty calories available at inflated prices.

However, as soon as KK began its expansion into the general morass of Victorian suburbia, the bogan turned on the famed American doughnut as too unhealthy for its already burgeoning waistline. And proceeded to shun it like its own recalcitrant offspring.

In this, Zara are the vacuous fashion calories that the bogan has craved since Ed Hardy’s Australian stores shut their doors late last year. Reinforcing the Euro-dazzling effect that Zara has on bogans and bogans’ wallets is the marked lack of cattle-race-queuing bogans for the opening of GAP stores since the American chain opened up earlier this year. Because the bogan watches at least 17 hours of American television each weekday, our #1 ally is seen as familiar, comfortable and pleasing to the bogan; not something to be courted and paid for. Zara on the other hand, are seen as exotic, worldly and debonair.

Indeed, if Zara works the bogan right, we at Maxtreme Consulting confidently predict a forthcoming baby boom, all of whom will carry for life the dizzyingly alluring brand name Zara. In time, this will enable Zara (the firm), to redirect its marketing budget straight to the bottom line!

However, we caution, to achieve this margins Nirvana, limited expansion, unlike the bogan waistline, is the key discipline. As always, Maxtreme Consulting stands ready to assist, with its recently formed retail arm available for further details.

Comments

  1. Well, I’ll be….. Never heard of ’em – ’til now that is. What a dreary old bore I must be. Still, looks like the cognibogans are up there with it. All part of the Narrative – The Journey, I guess.

    The Skinny on Zara

  2. When it comes to fashion retails, garments are landed at $6 USD retails for $49.95 in the shops. The profit margin is enormous, however sales is down because of the very poor quality. In response, managements is looking at ways to reduce the cost to $5. Management still haven’t figured out that profit margin doesn’t matter if nobody is buying.

    Apart from the ‘buzz’, wearing clothes made from fabric costing more than $1.50 a meter matters.

    • Its one of the most amazing things I think is how Aussies have been brain washed into believing they are getting value for money when they are buying any article of clothing.
      Having lived in the US and witnessed first hand the ‘value’ of clothing, I laugh all the time when I see anything ‘Made in China’ commanding a premium price.

      For anybody going to the US, find the discount clothes chains that sell brand name items at cheap prices. For me Loehmanns was/is the place.
      While living in the US, I never spent more than $20 on jeans. T shirts $10-$15. One time I spent about $300 and fitted out my whole wardrobe for winter including a leather jacket, full length overcoat (made in Italy), 3x jeans, 4x jumpers (Italian) and 3x long sleeve shirts, socks, jocks and a few other things.

      Along with the bargains, US shops also do a huge amount of coupons and other savings. At the end of the day, its all based on turnover, not individual profit margins on every product.

      Brings a tear to my eye every time I go to the shops here, and make me cry like a baby when the wife picks up a $300 Made in China dress at Cue or CR.

      • You’re on the money with this Rob. The thing is that overheads and wages costs for a traditional store in AUS are significant, they need 100%+ mark-up to survive. I don’t think it’s fair to blame the retailer solely when alot more goes into it (think Westfield rents, super, sunday rates, etc)

        I wish I could buy a car for what they cost in the US!

      • Rich,
        I don’t blame the retailers, I blame the consumers. The retailer only charge what the customers is prepared to pay for any given item. At least with the internet, people are finding out the perceived value of an item isnt the real valve.
        I use my wifes Kitchenaid as an example. RRP in US for $300. RRP in Aus $730. Now did I spend $730 for it. No. Shopped every retailer and finally found it for $600 in Oz. Did I feel I got value for money, Not really. But at least I didnt pay the extra $130, Aus convenience fee.

        For prices to come down with anything, people need to be proactive when it comes to purchasing. Shop around, and never pay full price for an item if U think the real value isnt there.

        Personally, I now apply this to power companies. Every 2 months I shop around to get the best price. (Im a bit of a slut when it comes to power. I dont care who it is with as long as they have the cheapest price) Once a week I have a person at my front door trying to get me to switch to there company. In the past I would tell them “No thanks”. Today I ask them what their rates are, tell them my rate, and they walk. At least they write down “This person is paying 0.1775c kwh, our price is 0.1995c kwh” and hopefully their bosses see this, and realize the only way to increase business is to drop their prices.

        Need to be proactive with absolutely everything, these days. Unless we all get taken advantage of.

      • You can’t blame the consumers in a captive market! Those that do travel (not Contiki) particularly to Asia know how poor our retail market is in pretty much every respect – product, range, price and especially service. One solution is to “vote with your Qantas points” and get on a plane once a year to go stock up on clothes, but I suspect it’s not something the average bogan is going to do.

        Now we could say the same things about other sectors.. telecommunications for example. 10 bucks can last you a week in KL, and that’s making frequent international calls.

        Ignorance is certainly part of the issue, but are there real reasons why Australia is more expensive on a number of fronts? For example wholesale internet costs are 100x the US or Europe. Is this really a function of distance and isolation and market size? Or is it just captive market syndrome.

        Whatever, I will still be buying a budget ticket once a year and coming back with a full suitcase. Aussie retail market be damned!

      • Dont get me started on car prices Rich.

        In fact, I’m determined not to buy another new car or motorbike until we retire in NZ (If I can convince The Princess – she doesn’t like the cold).

        I would never buy a US car (maybe the BMW’s made there…) but yes, prices are ridiculous.

        My Porsche 911 affordability crisis moves onwards….$230K here, $80K in US.

      • What is bizarre to me is the seemingly myopic focus on made in China textiles only.

        My wife is of Indian heritage, a tamil.

        In feb 2010 we travelled to Tamil Nadu, and visited the city of Coimbatore. it is known as the manchester of India, i.e. being a centre for textiles in India.

        India, unlike China, has a centuries long reputation for textiles of world class quality, and the industrial age textile industry of Northern England eminates from textile technology (forcibly) exported by the Raj from India to England.

        Well, to finish the story, i went into the equivalent of say David Jones in Coimbatore. I bought a beautiful cotton shirt with ultra fine silk pin strips. Beautifully easy to iron, colour still rich after 12 months of washing, no fraying of hems or thinning of material.

        As a white guy in India, who will only receive the most paltry of discounts when attempting to bargain, I still paid only 350 rupees for it.

        At the time, roughly $AU8. Current exchange rate is $AU7.22.

        I’m sure I could land them here cheaper wholesale

      • I’ve found things in the past that compete and beat China on price but when considering shipping prices and time (2 weeks from China on ship)they lost out.
        A mate who imports product from China said I was right to be looking else where as in his opinion they are beginning to price themselves out.
        I would much rather textile from outside China for quality reasons, the majority of Zara’s finer items (coats, shoes, etc) comes from Portugal, western Europe, etc. My winter coat is from Morocco.

  3. Hilarious as always. Now we’ll have expensive looking, cheap dressed people acting like a million bucks. None of them realising what inflation may do to a million bucks.

    Are bogans unique to Australia? I have been to East Asia and Europe but everyone I meet had a smile and was always willing to help or chat.

  4. Hangs head in shame (queued in Narre Warren for Krispy Kremes and am excited by Zara coming to Melbourne). I’ll try harder, I promise.

  5. When you can buy something at the shops for $100 here but only $50 online, you know that Australian retail is in trouble. But you won’t find any sympathy from me, that’s the free market at work. If retail wants to do better here, they have to lower their prices.

    Now, I don’t know much about Zara (luckily my wife is away which will make it easier to keep it a secret from her). But if they are selling products that are of similar quality to, say, Myers, or some other retailer, at a much lower price, then they will do exceptionally well.

    Now for them to do it with music, games, cars (can’t buy online but they are way overpriced here) and anything else that sells retail.

  6. Zara sure ain’t a bogan flash in the pan like Ed Hardy, you only have to travel O/S with a few females to realize the power Zara can have… If they can keep prices on par with their overseas stores they will dominate competitors (country road, oxford, etc). It was one of the reasons I stayed away from PMV.

  7. SabreOfParadise

    Thanks to my g/f I’ve spent many a boring hour outside Zara’s in France, Germany, the Netherlands and China. Their stuff is no Ed Hardy though, and bogans that have been hitting the KK’s pretty hard are likely to be sorely disappointed.

  8. Don’t forget the corporate bogan. His penchant for yacht and polo-wear must have also increased the online sales of your Polos and Tommy Hilfigers too.

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