Spanish fashion brands coincide in pointing out that the shareholder crisis that the department store chain is going through doen’t have a direct impact on commercial negotiations. However, they admit that pressure on profit margins has increased in recent months.
Spain’s biggest storefront for fashion. The key touristic destination for shopping among tourists visiting the country. The player that marks the beginning of selling seasons. The gatekeeper of international brands. Or the magnet for consumers in Spanish secondary towns. All these statements were valid to describe El Corte Inglés a few years ago. Despite they continue to be true partially, the department store group loses ground among fashion businesses. What is at stake for fashion with El Corte Inglés internal crisis?
According to the latest available data, fashion, accessories, beauty and jewelry account for more than 50% of the retailer revenues, exceeding 4,000 million euros per year. These categories posted an 11.6% sales increase in 2015, the last year for which data is at hand. Fashion grew at a faster pace than leisure products (electronics, books, music, toys and sporting goods), which went 9.6% up, or food, where El Corte Inglés turnover fell by 1.8%, according to estimates from the Confederación Española de Comercio (CEC).
Over the past few years, similarly as other department store chains worldwide, El Corte Inglés has been transforming its business model, moving from a relationship with brands with firm purchases to a commercial space manager, with more and more shop-in-shops directly operated by brands.
El Corte Inglés is in the midst of an internal war among key shareholders but, for the time being, this had no impact on its commercial ties with fashion brands
This formules reduces risks for El Corte Inglés and transfer them to the brand, although sources consulted by Modaes.es in menswear, womenswear, footwear and childrenswear agree that “pressure on profit margins has increased progressively”.
“I’d be lying if I said that it’s directly linked to the shareholders’ conflict, but it’s true that they’re much more demanding and negotiations with the group buyers are getting rough”, explains the chief executive officer of a children’s fashion brand. “The stuff avoids talking about this matter”, explains another executive. “There’ve been internal changes for a long time, but the current situation doesn’t reach brands”.
“In such a large organization, what happens in the highest sphere doesn’t have to impact the consumer, as long as commercial policy doesn’t suffer on the way,” says the CEO of a Spanish men’s brand CEO. In his opinion, the appointment of Jesús Nuño de la Rosa and Víctor del Pozo as CEOs “has allowed to put a wall between the shareholder and the executive issues”.
Several businessmen agree that the group’s bet on their own-labels has been a mistake
According to different brands, El Corte Inglés is going through plummeting traffic in stores. “It’s clear that retail as a whole is suffering and El Corte Inglés, of course, too,” says the founder of a men's fashion brand. “The market today is very hard and every time they transmit more pressure to us in all senses”.
“Although it’s a great storefront for fashion, department stores are a retail model questioned around the world and the truth is that today it’s hard to find elements to negotiate with brands,” says the executive of a premium accessories firm. “Years ago they had a dominant position when negotiating with brands, especially international ones, but this is no longer the case,” he adds. “The situation in Spain is scary so it’s very challenging for them to attract international brands.”
In spite of this, El Corte Inglés continues to be one of the main options for foreign brands that want to test the Spanish market. In fact, only so far this year the group has introduced nearly one hundred new brands in the sales floor, including international ones such as All Saints, Elizabeth&James or Victoria Beckham, among others.