Harvey Norman and IKEA to feel the heat from fast fashion homeware

By Rebeccah Elley ·

First it was fast fashion posing a threat to Australian retailers by offering trends straight from the latest runway shows, now global brands such as H&M and Zara are bringing their fast fashion business model to the Australian homewares market.

The research from IBISWorld predicted fast fashion homeware will challenge established retailers in Australia, such as Harvey Norman, IKEA and Freedom and expected fast fashion brands to enjoy double-digit annualised growth in homewares and furniture sales over the next five years.

According to IBISWorld senior industry analyst Lauren Magner established operators, such as Harvey Norman and Freedom, are likely to feel the impact of the aggressive expansion of these international entrants.

“The expansion of big-brand homewares in Australia, which follow the same high-growth, high-profit strategy as international fast fashion retailers, could encourage the exit or consolidation of some local operators that are unable to offer regularly changing collections at appealing prices.”

Magner explained that companies operating mainly in the Australian market will be put under strain due to a lack of scale, particularly in design and procurement, and the fact that they are often slower to bring on-trend items to market.

Another drawcard of fast fashion brands like Zara and H&M is the lower pricepoints and existing expertise in the sourcing of fabrics that have offered fast fashion retailers an advantage in the homewares market when producing soft furnishings such as cushions, throws and rugs.

IBISWorld also suggested the move to homeware for these fast fashion companies will be helped by the fact they have quickly developed a dedicated following in Australia.

“One of the advantages for brands like Zara Home is that they are not destination retailers like IKEA or Harvey Norman, which customers will often visit on a weekend or planned outing. Zara will benefit from people visiting and browsing during their lunch break, or while looking at fashion, and making impulse homeware purchases,” said Magner.

Meanwhile, fast fashion is expected to continue to expand into local retail markets in 2015 with a forecast to earn $20.9 billion in revenue in 2014-15. However, as it is a mature and relatively saturated sector, revenue has declined at a compound annual rate of 1.2% over the past five years.