Americans and Aussies alike should make room in their closets for some European style. Allsaints, ASOS.com, Topshop and Zara are sending shipments across the Atlantic and down under with a great sense of urgency sure to impact your wallet.
"European brands invented high street fashion," said Ari Goldberg, CEO of StyleCaster.com. "With the convergence of digital -- which has created an even smaller world -- and the impact of a global recession, now is the perfect time for brands with high quality, high deign and superior value to make a push to the U.S."
Technically, this started a few years ago. Back in 2006, BusinessWeek reported on the rapid growth of Zara's parent company Inditex and how the company's fast-fashion model had swarmed H&M's long-held lead in the European market. At the time, Inditex had just come off opening 448 stores in the previous year compared to 145 by H&M. Still, this only put the two retail behemoths at 19 and 91 stores in the U.S., respectively. Back then, fast-fashion was said to account for only one percent of the U.S. clothing market.
Those were the days.
The global economic recession, however, has lit a fire under the you-know-whats of these European retailers both offline and online. Sure, spending in American malls isn't what it used to be, but America's credit rating has always been nothing but stellar(-ish) and don't forget those stimulus packages and tax cuts that trickled down to put a few more dollars in our pockets.
Here's a rundown of the past two years: Topshop opened its flagship store in Manhattan in 2009. Allsaints spent 2009 getting familiar with Miami and L.A. residents, but backed it up with a Manhattan shop the following year. Just a few weeks ago both Allsaints and Topshop launched their Chicago outposts. Zara just launched e-commerce retail on its U.S. site.
Add that to the fact that Pablo Isla, chairman and CEO of Inditex, was quoted as saying, "The priority at this moment in terms of growth is Asia and Europe, but on a medium and long-term basis the U.S. market is also very important for us. In this sense the online launch is a milestone together with the opening of the New York flagship store" next year.
Meanwhile, ASOS.com launched its slightly Australian site not long after doing so in the U.S. Upon ASOS's Aussie launch, Sydney Morning Herald's Lucy Rickard wrote, "ASOS joins retail giants Topshop and Zara in targeting the booming Australian market, with Japanese brand Uniqlo expected to open next."
Speaking of Uniqlo, they may be based far east of Europe, but their long-standing retail prominence as a nation coupled with their ongoing economic concerns makes them much more Euro-like with regard to retail expansion. In 2006, the company opened its first U.S. store in SoHo district of Manhattan and recently announced October 14 as the official launch date for its two new New York stores. One location will reside on 34th Street and the other, located on Fifth Avenue, will become its largest store in the entire world.
"Our goal is to do $10 billion in the U.S. by 2020, so we have to open a lot of stores," said Shin Odake, CEO of Uniqlo USA. Forbes reported that Uniqlo plans to open 200 U.S. stores, including several at key locations on the West Coast.
The Fifth Avenue Uniqlo location was leased for $300 million, which sounds like a price for an NBA franchise not a retail location, but that's dwarfed by the $400 million Zara spent for 32,000 square feet on the same avenue. According to The Wall Street Journal, the deal is one of the largest retail real estate deals in New York City history.
Australia poses a similar high-priced entry for these European and Asian retailers as a recent study listed Sydney's Pitt Street ahead of both Bond Street in London and Champs Elysees in Paris as the most costly retail locations in the world. New York's Fifth Avenue, as expected, was first.
This all goes to show that these European (and Asian) companies may see brighter spending futures (and, quite possibly, better economic conditions) abroad than in their homelands. Chris Morton, the CEO and cofounder of style curation site Lyst, works with British brands like Burberry and Paul Smith, and seems to agree.
"The debt crisis in Europe is limiting growth in some countries for brands which already have good market share -- the US represents an untapped affluent market with non-luxury consumers which aren't too dissimilar to European ones," said Morton. "Big European brands want to diversify their revenue streams geographically to spread the risk in this uncertain financial climate."
Another element here worth considering will be how American brands and retailers do with their own expansion plans for Europe and Asia as their international competitors further encroach their markets. Broadly speaking, the results have been mixed thus far. Coach recently opened its first flagship store in London and I'm anxious to see how the Brits take to it.
While Coach seems bullish, others are on the more skeptical side as an article about Best Buy's likely exit from the UK market indicates. Anthony Chukumba is an analyst with BB&T Capital Markets and stated, "U.S. retailers have a mediocre to bad track record of expanding their concepts into Europe. I think part of it is different cultures and part of it is the fact that U.S. brands aren't as readily known in Europe."
Add that to the recent report that vacancy rates across the UK's top 20 shopping malls and those aforementioned high streets fell to a 10-year low in August, and you get the feeling that the locals are doing their best to keep the U.S. brands and retailers out. Or making them pay a high price to get in the market, as we've seen in New York.
"International retailers currently acquiring space in the UK, such as Forever 21, Hollister and Victoria's Secret, are focusing on the top ten or twenty locations before moving on to continental Europe and Asia," DTZ's Head of UK Retail, Hugh Radford, said. "We don't see the number of locations that international retailers are targeting increasing in the medium term."
Factors for U.S. brands and retailers being less focused on European expansion than their competitors across the Atlantic are on expanding westward include low brand recognition, cultural differences and dissimilar buying patterns, high rents and costs of doing business.
Or maybe us Americans are doing something we've always done when it comes to fashion; waiting to see what and how the Euros do first.
I’ll be the first to tell you that my background isn’t at all in engineering or software development. I’ve spent much of the last eight years in business advisory, communications consulting and operations roles. Still, one of the best things about working at Bazaarvoice has been working with and learning from highly-talented technology leaders. Mike Svatek, our chief product officer, Scott Bonneau, our VP of Engineering, and Jon Loyens, who leads BV Labs, are just a few of the people I’ve had the opportunity to work with in my first four months here.
But it’s not just the management team here at Bazaarvoice that has taught me plenty about the R&D functions of a tech company; last month I attended an event in New York (hosted by First Round Capital) where the CTO-turned-CEO of Etsy, Chad Dickerson, spoke about building a world-class dev organization. Going from CTO to CEO is not a traditional route even in today’s technology startup environment, but Chad stands out for making the transition amidst Etsy’s rapid growth. Under his watch, the company’s dev team grew from 20 to 80 engineers in around a year’s time and has seen page views go from 200 million to one billion per month. Talk about hyper-growth!
And what exactly did I learn from Chad’s talk? Well, for starters, he’s a big-time fan of Peter Drucker, one of the top business minds of the last century, who is credited with having shaped much of today’s common management theory and executive MBA programs. On several occasions, Chad quoted Drucker, including one of his most famous lines: “Culture eats strategy for breakfast.”
The culture Chad spoke of began with continuous deployment. He was very much in opposition of traditional “releases”, QA, lengthy and multi-layered “sign off” processes and having a single individual tasked with being the official release engineer. He cited each as reasons for delays in innovation and improvements to features that customers want more and more as the company grows, stating, “as you get bigger, the demands for new features goes up.” He shared that one of the job duties for every new engineer is to release code on their very first day on the job and agrees with Clay Shirky that, “process is an embedded reaction to prior stupidity.”
However, whether or not Etsy’s development policies and practices are directly related to the systems we have in place at Bazaarvoice wasn’t as important to me as the way Chad spoke about promoting an engineer-friendly, technology-driven culture. After all, our business models are very different. The culture piece, though, was of particular interest because here at Bazaarvoice we very much embrace many of the same concepts Chad spoke of when referring to Etsy.
At one point, Chad was asked a question about recruiting and he said, flat out, “Do what it takes to hire super stars.” Well, funny he should say that because every week it seems, we’re bringing on first-rate talent for our dev team, from proven technology business leaders to kick-ass coders. The culture here, the culture that enables us to be the perennial “Best Place to Work in Austin”, starts with people and top-notch talent. It also involves optimizing for developer happiness, something Chad mentioned, by finding ways to give our people the satisfaction of finishing a job. Drucker is the originator of that last statement, too.
As a self-described risk-taker, I loved what Chad had to say about this quality, again quoting Drucker:
“People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”
Chad said, “It’s better to be aggressive and make mistakes than be tentative and make mistakes.” Blameless post mortems, Chad said, was the key to creating an environment where small production changes are made daily will certainly lead to minor mistakes, but that small corrections typically address these issues. The tendency to pull back and slow things down was not their M.O., but rather to “roll forward” to progress. I’m a big fan of that mindset.
One of the last things Chad spoke about was doing things to make engineers heroes within the business, which is something customarily reserved for sales guys who bring in the revenue. He said that one of his 2011 goals as CEO is to have every engineer to blog for Etsy, significantly contribute to an open source project or speak at a conference to continue the company’s generosity-filled culture.
After having the privilege of hearing from Chad for two hours, I became doubly enamored with the technology leaders and the team they’re managing here at Bazaarvoice because many of these principles, even if not pulled directly from a Peter Drucker book, are applied in our business.
Faith in humanity
Informed risk taking
These were the four keys to dev team success listed by Chad. I haven’t had many sleepless nights since joining Bazaarvoice four months ago, and I’m comfortable saying the main reason is because the other three keys are top of mind every day.