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U.S. fashion brands need to adapt their strategy if they want to compete in the U.K. market.
American retailers such as Forever 21 are losing space in the U.K. with shoppers preferring home brands. This is because British brands are more client focused, offer better shopping experiences and are likely to have a more loyal supply chain, analysts told CNBC.
Data from Kantar WorldPanel showed earlier this month that almost 75 percent of British clothing and footwear are bought from British brands. In the remaining 25 percent, European retailers take 20 percent of the share – meaning that American stores are at the bottom for British consumers.
"U.S. real estate is shrinking with British shoppers preferring home grown brands," Kantar WorldPanel said in its research.
"As shopper become savier to deals, price comparison and value for money, American retailers face tougher challenges such as passing on the cost of high store rents and U.S. to U.K. supply chains to consumers," the research group said.
But the list of problems for U.S. brand stores in the U.K. is larger: online shopping allows consumers to buy American goods cheaper than in stores; and American brands are focused too much in London flagship locations, where rent is higher and the average consumer is a tourist.
"London shoppers, however, are actually not the most lucrative; they are ranked fourth in average highest annual spend per shopper, spending £758, behind Scotland, the North East and Lancashire," the research noted.
"By only catering to these shoppers, an imported brand is virtually unknown outside of the capital and therefore bases its success on a selected group of British shoppers," Kantar WorldPanel said.
Forever 21, for example, stormed the U.K. market a few years ago but it ordered a retreat last year, ordering reviews of its Oxford Street, Liverpool and Birmingham stores and closing down spaces in Glasgow and Stratford (East London).
Beth Pickens, managing director of consumer and retail at William Blair, told CNBC that U.S. brands are struggling but not only in the U.K.
"Retail-based U.S. brands suffer in the U.K. right now for the same reason that they suffer in the US: the most attractive customer, the fashion-addict, is not a one-time tourist visitor to an expensive flagship store with limited product availability. The customer is dynamic, prefers experiences to shopping, and lives online," she explained.
Keith Richardson, head of retail for Lloyds Bank, told CNBC that U.K. brands are doing well at home, but also in the United States.
"The U.K. fashion industry is one of the best in the world. They're doing well even in the U.S. The main reason being they're tuned to their customer base and are more flexible in what they offer," he said over the phone, mentioning ASOS, Primark and Topshop as examples of brands doing well at home and overseas.
In the case of Topshop, apart from having all sorts of clothing and accessory items, shops often have live music and offer food experiences.
"U.S. retailers aren't as quick in recognizing trends," Richardson noted. He mentioned the Spanish brand Zara as an example of a retailers' ability to drop something different twice a week, making it hard for a shopper to leave an item behind expecting he or she can purchase it later.
But there seems to be other issues facing U.S. brands, including getting the right tailoring.
"U.S. product also may have recently become relatively more expensive, factoring in both the cost of operating an international retail infrastructure, as well as the recent volatility between the pound and the dollar. Relative price and channel aside, there certainly is always an interest in strong U.S. product: the reputation for innovation and quality endures, just not to the exclusion of the benefits of a global assortment of alternatives," Pickens from William Blair told CNBC.
This seems to be the case of Victoria's Secret, which has grown 20 percent year-on-year and is opening stores across the country. It is set to open its eighth U.K store in Manchester in early 2018.
The key to a successful brand, in the eyes of Richardson, is: tuning to customers, having good products and providing a good shopping experience.