EU TRADE CHANNELS

IDENTIFY

OPPORTUNITIES

Introduction to the EU garment market CBI-Inexmoda-Proexport Medellin 4 August Cali 5 August Bogota 6 August By Josephine Koopman

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Agenda training session

1.   Trade channel structure 2.   Ratio’s 3.   Fashion cycle

Goal of this training session

Understand the trade channel structure

And

identify your potential businesspartners

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EU trade channel structure

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Clothing chains Private label chains -  Fast fashion -  Lead time reduction -  No stock but replenishment -  Avoid warehousing -  Own design and cut and marketing -  Lower quality and price -  Many delivery moments

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Clothing chains Single brand fashion chains -  Average/high priced and higher quality -  Higher percentage of basic clothing -  No stock but replenishment -  Avoid warehousing -  Own design, cut and marketing -  More delivery moments -  Sourcing mainly Europe for the high-end brands Specific clothing chains - Selected product groups Josephine Koopman , 8-2014, CBI 7

Department stores -  Private label and brands -  Contracted manufacturers and sub-contractors, others own production facilities -  Very wide range of clothing, basics to fashion -  Wide range of quality and price level -  Lead times are longer than clothing chains

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Hypermarkets - Supermarkets - Value retailers -  Subcontracting for private label -  Finished product buying for special promotion -  Basic items, low fashion level -  Fewer delivery moments -  Expected increased market share

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Factory outlets and discounters - Volume -  Discounted out dated articles -  Overproduced quantity -  Promotional items

-  Wide range -  Delivery time crucial -  Repeat orders

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Mail-order Companies

Web shops -  Growing market share -  Companies transfer to shop only on-line -  Additional to “brick” shops brands -  Virtual -  Pay online -  Margin

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Market segmentation bodywear High price luxury segment Market share 5-10% Armani, Donna Karan Intimates, Gucci, La Perla, Prada Upper middle price segment Market share 15-20% Chantelle, Gossard, Marie-Jo, Wolford, Wonderbra Middle price segment Market share 25-30% Triumph, Sloggi, Schiesser, Ten Cate, Dim, Fila, Esprit, Mexx Low to middle price segment Market share 35-40% Private labels, like Marks & Spencer, Hema, Etam, Zara, H&M Low or very low price segment Market share 10-15% No brands or fancy labels

Source: Fashion & Vision (2011)

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Different distribution channels in different countries

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Southern Europe: independent retail and franchise England: Few independent retailers The Netherlands and Germany: buying organizations

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Distribution channels differ per country

Order quantity indication Discounters: 3000- 5000 pcs per style. Branches: + 150 Private Labels: 300-1500 pieces per style; Branches: 50-100 Clothing chains: >300 pieces per style, Branches: +50 Department stores: 300-3000 per style depending on number

outlets Brands; best performing styles: 300-2000 pcs; selling in seasons Mail order companies: start with >300 and repeat orders Web shops: <300 Designer shops:

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Sources www.aedt.org (European Association of Retailers) www.fashionunited.com www.Sippo.ch market surveys www.CBI.eu market surveys

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Agenda training session Trade channels

1.  Trade channel structure 2.   Ratio’s 3.   Fashion cycle

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Exporting manufacturers

Importers/Wholesalers/distributors 1,3-1,7

Agents Salary Bonus 5-15%

Retailers 2-5

Department

Stores

Clothing

chains

Hyper/super

markets

Mail order

companies

Web

shops

Factory

outlets

Designer

shops

Distribution channel general mark-up

European manufacturers1,4-1,7

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Retail Ratio’s General (depending on customer)

Your margin: FOB selling price vs costprice Trends due to crisis: - Shift mid-prices to low priced segments (discounters hypermarkets etc) - Heavy markdowns, and promotional activities. ( 2nd one for free) - Growing importance bargain sales

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EU clothing retail prices: 5 clusters

1 High: Sweden, Denmark, Finland and Belgium 2 Above average: France, Luxembourg, Germany, Austria, Netherlands, Italy 3 Average: Portugal, Estonia, Latvia 4 Below average: Czech Rep, Slovenia, Lithuania, Poland, Ireland Spain 5 Lowest: UK, Malta, Hungary, Bulgaria Source Eurostat 2010

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EU body wear average consumer prices

What do you think are average prices? Ladies Bra’s Briefs Hosiery Men Underpants Socks

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EU body wear average consumer prices

Check your potential buyer

Segments

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Retail Ratio’s General (depending on customer)

Mark up 2,5-3 Sellingprice to consumer incl. VAT

buying price (buying price is your price incl transport,direct cost, import duty) Gross profit margin >51% incl sales Turnover excl VAT-buying price x100%

Turnover excl VAT

Retail Ratio’s General (depending on customer) Example Dress shop price= 120 euro Cost price 48 euro - Gross profit 72 euro (markup is 2.5) Gross profit 72 euro x100= 60% Shop price 120 euro

But during sales 50%-70% discount Dress shop price= 60 euro Cost price 48 euro - Gross profit 12 euro

Gross profit 12 euro x100= 20% Shop price 60 euro

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Ratio’s Retail Gross margin 2011 (source HBO)

Ladies 47% Men 46% Baby Kids 44% Body fashion 48%

Assignment Define a potential trading partner (not the type of trading partner you are working with already) based on the type of exporting company you are: Market segment Price Delivery time Minimum order quantity

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Agenda training session Trade channels

1.  Trade channel structure 2.  Ratio’s 3.   Fashion cycle

FASHION CYCLE: Buying periods Normally in garments at least 4 buying periods, Brands and Retailer Winter collection Summer collection Additional Flash collections Fashion groups constant flow of products every few weeks

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WINTER SALE

SPRING/SPRING

COLLECTION

PARTY COLLECTION

WINTER COLLECTION SUMMER COLLECTION

SUMMER SALE FLASHCO

LLECTION

CHECK WITH YOUR CUSTOMER

FASHION CYCLE: COLLECTION IN SHOPS

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WINTER SALE

SPRING/SPRING

COLLECTION

PARTY COLLECTION

WINTER COLLECTION SUMMER COLLECTION

SUMMER SALE FLASHCO

LLECTION

Total summer collection, more expensive items Delivery 1

Additional special Articles for Summer collection

High summer collection, Low priced items Short delivery, Special sale items

Total winter collection, more expensive items Delivery 1

Special articles

Low priced items Special sale items Short delivery

FASHION CYCLE: SPECIFICS COLLECTION

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WINTER SALE

SPRING/SPRING

COLLECTION

PARTY COLLECTION

WINTER COLLECTION SUMMER COLLECTION

SUMMER SALE FLASHCO

LLECTION

orders winter collection, more expensive items Delivery 1

Order High summer collection, low priced items

Orders summer collection, more expensive items Delivery 1 and additional articles

Orders Special articles christmas/party

FASHION CYCLE: Placing orders

Orders Low priced items Special sale winter items

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WINTER SALE

SPRING/SPRING

COLLECTION

PARTY COLLECTION

WINTER COLLECTION SUMMER COLLECTION

SUMMER SALE FLASHCO

LLECTION

DESIGNER STARTS DESIGNING SUMMER COLLECTION NEXT YEAR

DESIGNER STARTS TO DESIGN WINTER COLLECTION NEXT YEAR

FASHION CYCLE: SAMPLE OFFERING sampling

sampling

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Agenda training session Trade channels

1.  Trade channel structure 2.  Ratio’s 3.  Fashion cycle

Goal of this training session

Understand the trade channel structure

And

identify your potential business partners

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Thank you for your attention! Any questions?

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