Driven east by credit crisis

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Published October 3, 2008

Driven east by credit crisis

Designers are giving up on their home markets and trying their luck in Asia which is less affected by the financial downturn, writes MELISSA LWEE


AT THE recently concluded London Fashion Week, the buzz was not about which designer was going to be crowned the next 'it' label, but rather just how badly the global financial crisis was going to hurt the industry. The collapse of Lehman Brothers in the middle of the festival merely added gloom to an already under-attended event which saw disgruntled store operators wishing that they had not even gone.

It was no better a week before at the New York show, which several designers including Australian wunderkind Jayson Brunsdon decided to miss, even though it used to be a regular pilgrimage for him. 'With the crisis, they won't be buying much at all - believe me!' he says.

'I've been to Dallas and the suburbs of Washington, and seen the customers and the empty floors full of sales racks. It's very depressing,' he adds.

At the ongoing Paris show, even big American retailers such as Saks - which reported a larger-than-expected loss for the second quarter of this year - have been extra careful with their purchases as they try to guess what American consumers are likely to buy, given the current sentiment.

It's no wonder then, that many in the fashion industry seem to be giving up on their home markets and trying their luck in Asia, which they believe to be in less dire straits than the west.

Asian surge

In Singapore, a sign that there is still interest in Asia was evident during the just-ended Formula One race - when upmarket fashion houses saw a sudden surge in expenditure. One benefactor was retailer FJ Benjamin, which saw some of its labels enjoying a doubling of traffic into their stores.

Says Ben Benjamin, regional brand manager for Celine: 'Foot flow into our stores over the Formula One weekend was exceptional. Some stores reported a 30 per cent increase while others reported a 100 per cent increase.'

But is that a one-off fillip or does Singapore (and Asia) represent the light at the end of the tunnel for international retailers, as well as their local counterparts?

Industry players revealed that although they are hesitant to be too confident, Singapore's retail industry may emerge stronger after the dust has settled.

'I believe that the crisis will only serve to highlight how strong Singapore's economy really is and it will be seen as a safe haven for investors,' remarks property consultant Savills' new senior director Sulian Tan-Wijaya.

'That, coupled with the spotlight that Formula One and new property developments have cast onto Singapore's lifestyle industry will mean that more overseas retailers and F&B operators will want to join us when the dust has settled. I believe there is cautious optimism - but optimism nonetheless - that Singapore's lifestyle industry might actually benefit from the crisis.'

Recent practice

Mr Benjamin points out that although there is no denying that Singapore's lifestyle industry will feel the burn of a slower economy, he is confident that Singapore's retail industry will hold up.

'After the Asian economic crisis and Sars, Singapore retailers have had some recent 'practice' in dealing with slowdowns, whether prolonged or acute. I think most retailers are now adopting defensive postures to safeguard margins and reduce costs to compensate for slower growth in the coming months,' he says.

'Brand owners usually first look to Singapore, as a global city, to establish a presence when expanding to South-east Asia. Given the current economic climate, some will take a step back while some will hasten expansion plans to compensate for the slowdown in the US and Europe.'

Industry players add that although operators may have to make compromises for the bad economy by perhaps lowering rent, there is still much demand from overseas lifestyle companies waiting to enter the Singapore market. In fact, according to Ms Tan-Wijaya, there are ongoing requests from overseas investors looking to set up shop in Singapore's lifestyle industry.

She adds that a good mix of retail and F&B outlets that are both high and low end are interested in Singapore, thanks to F1, without which these investors would have chosen to invest in bigger countries like Malaysia.

Retail consultants Glamour Inc, which brings European labels into Asia say that labels know the importance of the Singaporean market.

'Most designers know that the Singapore market is small but it is an important showcase to South-east Asia,' says its spokesman.

For example, one European label which declined to be named has been looking to enter Singapore's market for the past year and does not plan to sit out the current crisis. If anything, they are only more keen to diversify out of the West now.

Thus, as Singapore basks in the glow of its first successful grand prix, showing that it is capable of producing world-class facilities, it will appear to be more appealing than ever before - to tourists and thus to overseas retail companies.

One designer who is banking on this is local designer Ashley Isham who is based in London: 'London Fashion Week has been quiet this season, and the economic crisis doesn't help. I am an optimist at heart so my fingers are crossed that our selling season in Paris will do a lot better. International buyers and press tend to skip London anyway as most London-based designers do their selling season in Paris.'

However, he points out that he is going to start paying more attention to the Asian and Middle Eastern markets.

'I have just opened a new and first stand-alone boutique in Singapore at The Fullerton Hotel. I believe in nurturing and making the boutique a success,' he says.

'I am planning to launch the first Ashley Isham eau de parfum for the ladies and eau de parfum for men soon, and it will be available exclusively at the boutique at The Fullerton Hotel. I believe that Asia is a new emerging market for me and it is time for me to go back to my roots more often.

'I think there will be a boom in the Middle East as the price of oil is going through the roof and Asia is becoming a force to be reckoned with.'

Other designers such as British designer Hannah Marshall and bag designer Claudine Abu-Sawan are similarly paying more attention to Singapore.

Says Ms Marshall: 'My brand is beginning to have an amazing reaction with press coverage and sales in Asia. In London, I am supported by the Centre for Fashion Enterprise, and they offer a lot of advice and business support, and we are currently working together on creating a strategy to build the Hannah Marshall brand internationally, with a focus on the Asian market.

'Due to the economy, more labels are starting to focus on these emerging markets like Singapore, including myself. My brand is 100 per cent British, with everything made here in Britain, which stands for high quality; and I find the response to this very positive, especially within markets outside of the UK.'

Focal point

Adds Ms Abu-Sawan: 'You will get more of an influx of labels to Singapore. I think people are looking for a place that will come through successfully. It is important to the designer's survival to find a buoyant economy to sell in.

'There is also a sense of the West's collapse. If the East becomes the focal point, it will be interesting to see how the designs themselves, as well as the marketing, and strategies would change.'

In particular, the worsening American economy has caused many labels to try and salvage the situation.

Local label AllDressedUp specifically made an extra sales trip to New York Fashion Week this year for fear that American buyers would not make their way to Paris Fashion Week where AllDressedUp usually has its sole showroom.

There are also others like Jayson Brunsdon who used to show at New York Fashion Week who have made the strategic decision to focus on Australasia instead.

Says Mr Brunsdon: 'We showed at New York Fashion Week last February and immediately felt the impact of the growing storm in the economy then. Buyers were nervous and their budgets were cut.

'The middle market, for example, clothes selling between US$500 and US$800, is the hardest hit by this crisis and that's where we sit, unfortunately. On the upside, Singapore has been doing very well for us. We are also pursuing other regions in Asia.

'Consequently, after having opened our store in Singapore, we made the decision not to show in New York this September, knowing in advance that the US economy was floundering.

'Singapore already has the prime pick of the luxury groups and the chain stores like Zara. But I think more lesser known labels will be looking to Singapore and Asia as potentially growing markets. The focus has shifted from the US to Asia.'