As a stakeholder in the OFT’s investigation of the school uniforms market, I thought I might give an alternative view to the spin of the major supermarkets.
Firstly, the OFT is not conducting a full-blown inquiry (as has been reported), but in its own words a, ‘fact-finding review’. The catalyst for the OFT's interest can only be surmised, but the suggestion made by Guardian correspondent, Fiona Miller, that it was a result of, ‘the supply chain which has become a racket', seems ill-informed and pejorative at best. Interestingly, her comments support the OFT's view that the reporting surrounding the issue has been ‘blown out of all proportion and is inaccurate’!
The official line from the OFT talks about ‘parents' complaints about high prices and poor quality’, as well as references to, ‘complaints from rival retailers that they were being shut out of a market worth about £450m a year’. Angela Spindler, who heads Asda Wal-Mart's George clothing range, was reported as saying, ‘We are always getting bad reports from customers who say their school is telling them they can't buy their uniform from us, forcing many parents to pay over the odds’.
Now that Asda Wal-Mart have proclaimed their interest in the OFT investigation it is perhaps time to more closely scrutinise these complaints.
In 2004, the total UK schoolwear market was £450m (Mintel); Asda Wal-Mart's sales (estimated at £50m) made them the market leaders. So, supermarkets and major high-street retailers already have 70% of the total market.
The market segment that Asda Wal-Mart chooses to ignore is embellished garments, i.e. those with school logos. Schools generally leave the purchase of non-embellished items to parents’ discretion, and normally only make recommendations about style and colour.
The embellished market is supplied via small retailers and companies who supply direct to schools. Mintel estimate this segment is worth £90m, just 20% of the total market. Large retailers generally try to avoid the manufacturing and stock implications of embellished schoolwear ( M&S experimented briefly in the 90s and got their fingers burnt). So it’s clear that Asda Wal-Mart and other major retailers, far from being shut out the schoolwear market, dominate it and only choose to avoid embellished clothes for their own commercial reasons.
The next alleged concerns of parents relate to high prices and poor quality. Specialist schoolwear retailers and direct-to-school suppliers live or die by the quality of their offering. Most buy from specialist schoolwear manufacturers, such as Jerzees, Trutex and Rowlinsons, which compete feverishly for their business. Some of the larger specialists like School Trends produce their own branded products. These companies commit huge resources to ensuring quality and compliance standards are met - if they didn't they wouldn't survive a season.
Low barriers to entry mean there are literally hundreds of small companies competing in the direct-to-school uniform market. Price competition is intense, with most school administrators and governors regularly reviewing prices to ensure parents get a fair deal. In this market even successful companies have customer churn of around 10%, so there is no room for complacent suppliers.
Schools generally mark up prices to cover the cost of administration. Typically this is between 50p and £1 per garment, resulting in a sweatshirt with logo being sold for between £6-£8. Such prices are generally viewed as acceptable by both schools and parents. In such a competitive market any specialist supplier who is over-priced soon incurs the wrath of the market and adapts or suffers the commercial consequences.
Now there is no denying that Asda Wal-Mart, being one of the world’s largest low cost retailers, can with its huge buying volumes and low wage policy, sell a basic, non-embellished sweatshirt at a considerably lower price.
Smaller specialist companies simply cannot compete on price alone and only survive through their ability to add value in other ways. Embellishing garments may be the main means of differentiation, but there are many others from customised styling to service innovation.
This diversity allows schools and parents much greater choice than would be available if the supermarkets and major retailers controlled the whole of the schoolwear market.
Asda Wal-Mart's £50m schoolwear sales are a tiny fraction of its £14bn UK sales, so it doesn’t live or die on its schoolwear offering, nor does it employ many staff in the UK to service or support this market, unlike local suppliers.
I’m not going to pretend all specialist schoolwear suppliers are beacons of virtue and integrity. There are examples of retailers taking advantage of their preferred status and over-charging. I would strongly argue they are a tiny minority and should not be used to characterise the whole industry.
When the OFT reports in 2007, it will be left to the DfES to decide whether to change its policy guidelines to schools regarding the provision of schoolwear. Given their strong advocacy of school uniforms, they would be wise to consider the implications of any significant changes.
Should Asda Wal-Mart and the other majors get their way, schools will actually have less choice and the visual impact and unifying effect of school uniforms will suffer.
Those of us within the specialist schoolwear sector must trust that the OFT and DfES will see beyond the PR hype of big retailers and ensure that schools and parents continue to benefit from the choices that currently exist within the UK schoolwear market.
· www.schooltrends.co.uk
