California Apparel News

Other cheap-chic stores scout U.S. as fast-fashion retailer bows in Pasadena

Call it cheap chic. Call it fast fashion.

A handful of overseas retailers that quickly produce and sell inexpensive, highly fashionable clothes have ambitious plans to expand across America. The latest beach-head is Pasadena, Calif.

Just a few months after Los Angeles–based fast-fashion retailer Forever 21 opened its 40,000-square-foot superstore in Old Town Pasadena, the Swedish fast-fashion retailer Hennes & Mauritz extended its global reach by opening on Sept. 21 its 108th U.S. store one block away at 60 W. Colorado Blvd.

The 9,000-square-foot store is H&M’s first in Southern California. By spring 2007, it will have at least eight more stores in the state. In the Southland, the stores will be built at the region’s most exclusive shopping centers, such as Beverly Center in Los Angeles, South Coast Plaza in Costa Mesa and Irvine Spectrum in Irvine.

Retail analyst George Whalin said Americans should prepare themselves for an invasion of fast-fashion stores, such as Spanish companies MNG by Mango and Zara; Topshop of the United Kingdom; and Tokyo-based Uniqlo.

“It’s coming big-time,” he said. “It’s going to be a big deal in the next five years.”

Whalin, president of Retail Management Consultants in San Marcos, Calif., said the popularity of fast-fashion retailers stems from their ability to stock their stores with fashion-forward styles weeks after they hit the runway, instead of a season later. They’re also a reaction against stratospheric price tags, he said.

“Consumers are tired of overpaying for clothes,” Whalin said. “They want fresh stuff, but they don’t want to pay a lot for it.”

MNG by Mango operates more than 800 stores around the globe. It has taken out ads in national publications proclaiming plans to open more than 15 stores in the United States. The press-shy Zara has opened stores in South Coast Plaza and Las Vegas, among other locations. Top Shop is reportedly scouting U.S. real estate. Uniqlo is scheduled to open a flagship store in Manhattan in November; it also runs three boutiques in New Jersey.

H&M spokeswoman Lisa Sandberg said the company anticipated that the United States would be the largest market of the 24 countries where it does business. It had been scouting Southern California real estate for more than two years. But finding the right place proved tough.

“We just don’t want the best street,” she said. “We want to have the best storefront on that street.”

The number of H&M stores in America will increase slowly, Sandberg said. However, store growth has been healthy. It’s an estimated 20 percent over the previous year, compared with the retailer’s global store growth rate of 15 percent in 2006.

At the end of its 2005 fiscal year, H&M reported earning $7.6 billion in sales, excluding value added tax. The retailer’s U.S. sales were $521 million in fiscal 2005.

H&M’s expansion into California began Nov. 19, 2005, when it opened a 35,000- square-foot store in San Francisco’s fashionable Union Square. The store offers the retailer’s entire selection, which ranges from basic jeans and T-shirts to men’s fashions and officewear. That same day, it also opened a smaller store, which offers women’s and young women’s clothes.

Sandberg said H&M would prefer to introduce itself with its big-concept stores, which offer its entire line, rather than open smaller neighborhood stores that offer single concepts, such as men’s fashions or beauty products.

However, the tight California real estate market did not allow for H&M’s classic expansion model. Southern California’s first H&M will offer only women’s and young women’s clothes, with price points ranging from $9.90 for a T-shirt to $39.90 for trousers and $79.90 for a mixed-wool jacket.

H&M’s expansion into California has been highly anticipated by consumers; scores of women waited in line for the Pasadena store to open, as they did in San Francisco. However, Forever 21 Senior Vice President Larry Meyer said he was not worried about the competition.

“We’ve been competing with H&M on the East Coast and in Chicago,” Meyer said. “Our sales are doing fine. I guess they are doing well, too.”

Meyer said his company could often serve the California market faster and cheaper. About 50 percent of its production is done in Los Angeles. “The fact that we’re in L.A., we can get to market fast,” he said. “We can do it in a couple of weeks.”

H&M manufactures 60 percent of its apparel in Asia and the rest in Europe. In 2004, it opened a production office in Mexico City. The Mexico suppliers will eventually produce a significant portion of H&M clothes sold in the United States, Sandberg said.

The core H&M customer is a woman age 15 to 25 looking for trendy items, the company spokeswoman said. However, other big reasons for the burgeoning popularity of H&M and other cheap-chic stores are their production of basic jeans and T-shirts and a reasonable price, according to Mercedes Gonzalez, director of New York–based buying office Global Purchasing Group.

She forecast that they would be a direct challenge to San Francisco–based Gap Inc. “Everything H&M, Zara and Mango does is one notch better—better styling, better quality and better price point,” Gonzalez said. Gap did not respond to requests for comment.

Yet there may be room for every retailer, according to Jeffrey Van Sinderen, an analyst with B. Riley & Co. of Los Angeles. They just have to dominate a certain niche, he said. “If there’s not enough differentiation on quality, you compete on price, by default,” Van Sinderen said. “You end up in a price-war scenario. The only goal is who is going to be the lowest; that doesn’t help anyone’s margins.”