Apparel retailers to launch major new chains for global markets

Jun 15

Womenswear fashion retailers like Cross Company, Pal, Baroque and Mash Style Lab are now medium-sized firms with sales as high as ¥100 billion, but all have recently announced new chains that will hopefully let them escape the confines and limits of young womenswear fashions and become genuinely big businesses. The solution is the mass market at home and global expansion, including Europe and the USA. All have come up with ideas on how to tackle both, with plans for as much as ¥1 trillion in sales.

Some of Japan’s fastest growing fashion retailers over the past 10 years will launch new chains in coming months, aiming to build platforms for even higher growth by capturing a share of the mass market at home and have a real go overseas, especially the US and Europe.

Baroque Limited, Cross Company, Pal Group and Mash Style Lab are all planning such moves. These are retailers that, in the last decade or so, have grown from tiny wholesale and small retail businesses into highly efficient chains with sales of as much as ¥100 billion. With their core markets increasingly saturated amid intense competition, they have all decided to set up entirely new businesses to break into either lower priced markets at home or expand overseas, or both.

Baroque Japan, operator of brands like Sly and Moussy, set up a company in Hong Kong called Frame Limited recently, and will now create a new eponymous domestic subsidiary. Through Frame, Baroque plans to launch three new chains over the coming year, targeting entirely different markets to its Baroque business, and designed to appeal both to home and foreign consumers, with a target of ¥20 billion in sales within three years.

Direction for two of the three new brands will be led by Eddie van Narc, formerly art director at Celux and Restir Holdings, with the aim to bridge the gap between the fashion and career apparel markets. The third chain will target the younger market by taking the essence of Japan’s ‘kawaii culture’ to create a global womenswear chain. The design and direction in this case is being led by Reona Nozaki, former art director of womenswear casual fashion brand Bonica Dot. The first collection is almost ready and Baroque plans an exhibition this month to give shopping centre developers a preview with the aim to open the first stores as soon as possible.

Baroque Japan has long had ambitions to expand overseas. It originally hoped to list on the Hong Kong Stock Exchange but slower than expected sales in Japan scuppered those plans. Baroque’s largest shareholder CLSA then sold its stake to CDH Investments and Asian footwear business Belle International last year, with the latter taking a 31.96% stake and CDH 23%. With its two powerful Chinese backers, Baroque hopes to develop into a major Asian-wide apparel, accessories and footwear retailer. Belle itself has long wanted to expand beyond footwear into apparel and accessories, as well as tap into the Japanese market for its shoes. Belle owns mid-range brands like Staccato, Joy & Peace and Millies, in addition to distributing foreign brands such as Nike, Clarks, Merrell, Adidas, Puma and BCBG. Given Belle’s reach in China – it reportedly has more than 100 DCs across China already – and access to funding, Baroque finally looks like having the backing to match its long-held ambitions to grow far beyond the young fashion market within Japan.

Osaka-based Pal Group has clarified plans for its own break out chain to launch this Autumn in Tokyo. Called Colony 2139, Pal says the chain has been designed to help Pal move beyond the select fashion market; Colony 2139 will be what Pal calls an ‘apparel supermarket’ or ‘IKEA of apparel’, offering quality contemporary apparel basics – 65% of merchandise – as well as accessories, travel goods, sportswear and home fashions, with a high level of design at reasonable prices. In essence the store, with a concept dubbed ‘Modern Home, Work, and Life’, sounds like a colourful, dynamic version of Muji with more emphasis on apparel and some of the fun of Pal’s own 3Coins chain.

While none of Pal’s existing chains other than 3Coins have sales of more than ¥10 billion, Pal Group is targeting minimum sales of ¥50 billion within five years for Colony 2139. There will be two store formats, a 400-600 sqm apparel only model and a 700-1,200 sqm full line store. Prices will average around ¥3,800 for apparel and ¥1,000 for accessories with a strong focus on cross merchandising. Like Baroque, Pal will operate Colony 2139 from an entirely separate company called The General Inc., given the very different operational requirements of a low price high volume chain.

Within Japan it sees a significant opportunity to compete against the prosaic and weakly presented apparel merchandise of GMS and supermarkets and the higher priced lifestyle chains of Point and others. While there has been a greater emphasis on value in recent years, Pal says there is little to delight the shopper. It is this gap which it hopes Colony 2139 will fill.

Pal Group has also designed Colony 2139 with overseas expansion in mind, particularly the US and European markets; it plans to open a showroom in the US this Autumn to test the market through wholesaling before opening stores there. It will also create a design office in California and has tied with US firm Townes to help with design direction and store roll out.

Pal Group is not the only retailer going after what is being dubbed as the ‘new basic’ market (fashionable contemporary basic apparel at reasonable prices). Mash Style Lab, operator of Snidel and Cosme Kitchen, also sees a gap in the market left by the waning enthusiasm for fast fashions, but continued demand for reasonable prices and good design. It just launched the first store for this market called Mila Owen (milaowen.com) in Lumine Shinjuku, with plans for 25 stores in Japan in the next three years and around 100 in China. Average price points have been set at a reasonable ¥7,000.

As previously reported, Cross Company also plans to build a mass market chain but this time focused on what it calls ‘fair supply chain’ principles – fair trade and ecologically sound sourcing, production and distribution. The chain will be called Koe (listen-to-my-voice.com). Cross Company has serious ambitions for Koe, targeting sales of ¥1 trillion in the long-term.

While all its current brands are designed in Japan, Koe will have a new team mixing Japanese talent with designers, planners and managers in London, New York and other key centres with diverse experience covering luxury brands to mass market chains. Koe will offer menswear, womenswear and childrenswear, with prices of around ¥7,000 for knitwear, ¥5,000 for shirts, and ¥17,000 for outerwear. The key branding element will be the fair supply chain moniker, sourcing from fair trade factories and using sustainably sourced materials. Information on factories and suppliers will be prominently displayed in stores and in its marketing and 1% of net profit will go to charity.

Cross will open three stores within Japan this year starting this Autumn and begin plans for rollout to Europe and the US in the near future, with a target of 25 stores through 2016 and growing rapidly thereafter. It expects Koe to be producing sales of ¥100 billion by 2020. Cross Company’s group sales rose to ¥100 billion in FY2013 from just under 1,000 stores.

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