A Right Positioning is Crucial to Success
No UK high street would be complete without a Topshop, the brand has firmly secured its place as a stalwart of teen and 20-something fashion. And, in recent years, parent company Arcadia has made no secret of its ambitions to replicate this success on high streets the world over. Since 2013, Topshop has brought its unique blend of cult cool and quirky designs to the US, Australia and China. In Japan, however, where Topshop first opened in 2006 with a goal of having 10 stores in the country, the brand’s bid to be a global player has suffered a setback. In January 2015, without an official announcement, Topshop closed its five Japanese stores. News filtered through from social media when shoppers posted pictures of closed stores.
Distracted by bigger prizes?
Topshop’s stores – two in Tokyo, plus one each in Yokahama, Osaka and Chiba Prefecture – were operated by franchise partner Mori Retail Systems. According to media reports, this partnership came to an end in May 2014. With its franchise agreement at an end, Topshop could simply be stepping back to reassess its approach to the market. This seems unlikely, however, given the seemingly hasty nature of the closures – some stores were left fully stocked.
The Japanese apparel market is a tough nut to crack and it’s possible that with one eye on the country’s more profitable neighbour, China, and the other keeping a close watch on its first foray into the US, Topshop’s Japanese operation fell down the priority list and suffered as a result.
Price positioning could be the culprit
There is no doubt that competition in the Japanese apparel market is intense. Established domestic brands such as Uniqlo and Shimamura are vying for share against an influx of arrivals from the West and all against a background of weak consumer spending and a fragile yen. But, while Topshop has floundered, rival international brands, the likes of Zara and H&M, have managed to make steady progress, gaining market share year-on-year, with the number of stores well into double digits.
With a more premium offering than its fast-fashion rivals, price positioning has perhaps proved a challenge for Topshop. Topshop’s quirky apparel places its target consumer at the younger end of the demographic, putting the store in competition with the likes of H&M and fast-growing local player Gu. Both H&M and Gu, however, have a more affordable price point, crucially making them accessible to the younger demographic. Meanwhile, Zara, which also operates in the higher price tier, targets a slightly older demographic with more money to spend on apparel.
What happens next?
Aside from saying it intends to maintain a presence in the country, Arcadia has remained tight-lipped over the closure of its stores and its intentions for the future. So, if the brand is intending to stay, what are the options?
One option would be to establish a new partnership and continue afresh as a franchise. Topshop likely entered Japan with this model to gain all-important local knowledge and minimise the risks of going it alone in new territory. The strategy is a sensible one, of course, and remains so, despite the recent closures. However, it must be acknowledged that the franchise model, with its additional layer of participants, can be difficult in terms of maintaining the required momentum for fast-fashion retailers when quick stock turnaround is everything.
Going it alone with company-owned stores is another possibility. The brand already has a presence in and first-hand knowledge of the market, so should be up to the challenge. However, with expansion in the US and China high on the agenda, and offering more in the way of rewards, there are questions over whether Topshop will have the resources to commit to making Japan a success.
In the US Topshop’s partnership with Nordstrom has proved a success – recent initiatives include a capsule collection specifically for the retailer. A similar store pairing in Japan would keep the brand in the country and allow it to take stock without the high overheads of going it alone. What’s more, a retail partnership would allow Topshop to maintain a strategic presence, while providing the breathing space to take stock and reassess long-term goals.
Online offering ties in with Chinese strategy
In the immediate future Topshop is continuing to trade online via Japan’s fashion retail giant, Zozotown, and the brand may well be content to continue online only for the foreseeable future. This would bring its Japanese and Chinese operations into line – in China the brand retails through Shangpin.com – and allow for a joined-up approach to the region.
While only time will tell what Topshop’s next move will be in Japan, on paper, at least, Topshop’s fresh fashion offering appears a good fit for the aspirational, trend-conscious Japanese. Despite the challenges of the market and this recent setback, to leave altogether would almost certainly be a misstep.
By Euromonitor International
Analyst Insight be Emily Potts - Contributing Analyst
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