Industry Deep Dive: Clothing Industry

Bryce: [00:01:48] Welcome to another episode of Equity Markets, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help you break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you [00:02:03][14.7]

Alec: [00:02:03] going? I'm very good Bryce. I'm looking forward to this episode. We've done a couple of industry deep dives recently. There are a lot of fun. And now we're going to a venture into a area that is well outside my circle of confidence. The fashion and clothing, right? [00:02:20][17.6]

Bryce: [00:02:21] Yes, I'm going to be doing a deep dove on clothing here. Apparel and accessories, not footwear, but [00:02:27][6.0]

Alec: [00:02:27] not excess or maybe not accessories. [00:02:29][2.0]

Bryce: [00:02:30] Anyway, you're right. It's not without you're not in your circle of competence at all [00:02:34][4.1]

Alec: [00:02:34] unless we're talking about black shirts with equity markets, logos. That is right in my wheelhouse. [00:02:41][6.5]

Bryce: [00:02:41] Right in your wheelhouse. You're right. So we're going to get stuck in we're going to talk about the industry. We're going to establish establish the stats, talk about how big it is, a couple of quickfire questions and then, yeah, trends. And then obviously finish, as we always do, with how you can invest in the industry. So stick around. There's plenty to get through today. It's going to be a great episode before [00:03:06][24.8]

Alec: [00:03:06] we do two quick pieces of housekeeping committing. The Economist is on a real tear at the moment. If you're unfamiliar there, the Equity Markets Media Macroeconomics Show hosted by Thomas and Ex Reserve Bank economist and Adam, a former professional comedian. Recently, they've covered commodity prices. Janet Yellen policies in the US, the Suez Canal, non fungible tokens. They're going to be talking budget this month. So there's a lot going on on that show. So if you want to understand the world of macroeconomics, head over and give them a listen. One other escaping from you. [00:03:41][34.4]

Bryce: [00:03:41] Yes, we we love making markets accessible and giving people the opportunity to better their own investing journey. And the Australian Shareholders Association Investors Conference is coming up on the 31st of May and the 1st of June. It's going to be an epic opportunity to see some of the biggest chairmen and chairwomen and CEOs in the country. You're going to see the chairman of BHP, Telstra, Woolworths CEO, Fortescue, Origin Energy, Sonic, just to name a few, all speaking. And you'll have the access to to ask plenty of questions. It is a paid event. But the good news is for the first 50 equity mates, the Australian Shareholders Association are not only offering you a free membership to the Australian Shareholders Association for a year, but they're also offering discounted tickets. So head to Australian shareholders dot com slash equity meit's. That's Australian shareholders dot com slash equity mates for more information. [00:04:34][52.6]

Alec: [00:04:35] Yeah, pretty cool that you get to ask questions of all those senior business leaders. If if you weren't dragging us away that weekend for your 30th, I would be going to the Fortescue CEO and asking some follow up questions on hydrogen. They're obviously trying to trying to make a big push into that space we talked about in our Deep Dove episode. So if you have any questions from our episode, go straight to the source and ask Fortescue's CEO at this conference. [00:05:04][28.8]

Bryce: [00:05:04] Yeah, awesome opportunity. So the industry, deep dove clothing, we've already we've already made mention that it's not in your circle of competence Ren and that we are going to be talking about apparel and not footwear or Mosso. Not also not in your circle of confidence. Yes. But with a real focus on the retailing side of things. We will touch on on the production and wholesale side. But there's some pretty phenomenal companies that play in the retail space. [00:05:33][28.6]

Alec: [00:05:33] There are. There are, including two that we used to work for. Yes. [00:05:36][2.6]

Bryce: [00:05:37] So let's set the scene. Let's set [00:05:38][1.7]

Alec: [00:05:39] the scene. So did you know that today we consume five times more clothing than we did twenty years ago? Yes, you did know that. Yeah. Cool. You must write the note. So let's [00:05:50][11.3]

Bryce: [00:05:50] go. Let's go. [00:05:51][0.4]

Alec: [00:05:51] Fast fashion. Yeah. Approximately 80 billion new pieces of clothing are produced every year. So this isn't a small industry globally. The market is worth one point five trillion dollars a year. That's projected to grow to two point twenty five trillion dollars in five years by twenty twenty five. Globally, e-commerce was four hundred and eighty six billion in twenty twenty. So that's about one third of that. One point five trillion is now e-commerce, which surprised me. One third eye. I knew, I knew it was growing. I didn't think it would be that high again not within my circle of competence. So the US is a little bit behind the rest of the world. Surprisingly, e-commerce accounted for just under 30 percent of industry sales in the US. So what you're saying there and what you will continue to say across so many industries when we talk about. Commerce is that China is ahead in terms of e-commerce penetration. China is generally ahead of the U.S., so that's globally in Australia. So globally, the market's one point five dollars trillion in Australia, 16 billion between 2015 and 2020. It actually was down a little bit, um, and it was down eight point five percent in 2020 due to covid. So not really a fast growing industry overall. But I think what that obscures is that within the industry, like the pie not may not be getting bigger, but from the individual slices of those pies are moving around and people, you know, fighting tooth and nail for market share. And there are some big people being disrupted and some small people becoming big. So, yeah, I think well, while the pie isn't getting bigger, there's plenty of investing opportunities within that pie. [00:07:40][109.7]

Bryce: [00:07:41] It's getting its two point twenty five trillion by 2025 from a one point five billion globally. [00:07:46][5.1]

Alec: [00:07:47] It's getting bigger. Yeah, yeah, yeah. In Australia it's [00:07:50][2.9]

Bryce: [00:07:50] certainly [00:07:50][0.0]

Alec: [00:07:50] growing. But I mean, you wouldn't I mean, I wouldn't I'm not going to speak for you or for anyone listening, but. I like to think globally, like it's just as easy to invest in global companies as it is Australian companies. [00:08:02][12.1]

Bryce: [00:08:03] Absolutely. Yeah, the USA is the largest market, China the second and then Japan the third. And then the Asia Pacific region is actually the fastest growing around the world at four per cent a year between 2015 and 2020. And if you compare that with the US, they've been growing at an average of two percent over the same period. So double the growth rate in Asia-Pacific also. I don't think any surprises there. [00:08:28][25.7]

Alec: [00:08:29] So I got some quick fire questions for you. Yeah. What is the most valuable apparel brand worldwide measured by, like, brand value? [00:08:38][8.2]

Bryce: [00:08:38] I actually haven't looked at the questions for this one. So most valuable apparel brand worldwide, measured by brand value like Ralph Lauren. [00:08:49][10.6]

Alec: [00:08:49] No surprising that you go there, but actually not that surprising because that's right up your alley and it's not [00:08:55][5.5]

Bryce: [00:08:57] I should have known [00:08:58][0.6]

Alec: [00:08:58] Nike, Nike, Nike. And then second quickfire question for you. What's the larger the global lingerie market or the global second hand apparel market? [00:09:07][8.5]

Bryce: [00:09:09] It's definitely lingerie. [00:09:10][1.1]

Alec: [00:09:11] It is lingerie, but not by that much, thirty eight point five billion compared to twenty eight billion [00:09:15][4.2]

Bryce: [00:09:16] second hand apparel. I'm surprised that was the comparison with lingerie. [00:09:19][3.3]

Alec: [00:09:20] I just thought their numbers were pretty similar. All right, dude, we had a we had a business idea. While we're where you need to buy a shipping container of second hand and sell it, we could have contributed to that. But this [00:09:29][9.7]

Bryce: [00:09:30] is true. This is true. Well, look, before we jump into looking at the industry in a bit more detail, we'll take a short break and hear from our sponsors. [00:09:37][7.7]

Alec: [00:09:39] Bryce, you're a man that moves to the beat of his own drum, actually literally moved to the beat of his own drum when you studied drumming back at uni. [00:09:47][7.9]

Bryce: [00:09:47] Yes, he's true. Got booted out. Yes. [00:09:49][2.1]

Alec: [00:09:51] And after you study drumming, you had a short lived but highly successful career as a Canberra nightclub deejay. So you're all about moving to your own date. And that's great, because our sponsor to kick off today's episode is all about banking to your own beat. And that is Virgin Money. [00:10:09][18.5]

Bryce: [00:10:09] That's right. Ren banking with Virgin money has never been more rewarding. You can earn rewards on your everyday spending and pay zero monthly fees with the Virgin Money Go transaction account [00:10:20][10.6]

Alec: [00:10:21] and with points, perks and epic experiences tailored to you. You can manage your money easily on the go, smash your savings goals, get money fit and be rewarded for it. So, Bryce, are you ready to back to your own beat? [00:10:34][14.0]

Bryce: [00:10:36] OK, I'm ready to bank to my own Bayit Ren bank to your own Bayt Virgin money terms [00:10:41][5.2]

Alec: [00:10:41] and conditions and monthly criteria apply. Now let's get into the show. All right, so let's talk about how to conceptualize the industry, so first thing is this industry is truly global, like there's no real country where there's just a domestic apparel industry that isn't impacted by global forces. So in terms of the supply chains and where I guess a lot of these clothing is starting and where it's finishing. Do you want to talk through some of the biggest exporters, [00:11:14][32.6]

Bryce: [00:11:15] some of the biggest leading exporters in the world? No surprises that China is the largest at one hundred and fifty two billion dollars, followed by the EU, European Union. One hundred and thirty six billion Bangladesh. I mean, if you think about a lot of the clothing, this fast fashion where they're made, I guess from a supply chain and a cost point of view, you start getting into these Asian countries, you've got 34 billion. Bangladesh, Vietnam, thirty one billion, India, 17, and then Turkey at 16 billion. So, I mean, that sort of makes sense. [00:11:56][41.9]

Alec: [00:11:57] I was surprised by Turkey, to be honest. But yeah. So the exporters a lot of these clothing is starting in South East Asia, Bangladesh, Vietnam, China, India or Asia more generally. And then in terms of the importers like where a lot of it is ending up, the biggest consumers of this, I mean, not a lot of surprises there. Do want to tell us where they go. [00:12:21][23.9]

Bryce: [00:12:22] Yeah. So the leading importers, you've got the European Union importing the most. So they're second on the list for exports, but still import more than they do export at one hundred and eighty billion. The US importing 96 billion, followed by Japan, the UK, China and Hong Kong importing 11 billion, and then Canada and South Korea [00:12:42][20.3]

Alec: [00:12:44] all equal [00:12:45][0.3]

Bryce: [00:12:46] to 11 billion. So, yeah, interesting that the EU at the top [00:12:50][4.4]

Alec: [00:12:50] of that, I would say that the EU is they're exporting to the second biggest exporter. It would be a lot of that high value, you know, those like high fashion European brands, France, Italy, that kind of stuff. And a lot of that export would be going to the US or China. But then the fact that they're top of the imports as well would be a lot of the lower value, not so much branded stuff being made in especially Asia and then being imported back in would how I'd expect those trade flows. So, yeah, first thing in terms of how we're talking about conceptualizing the industry is it is truly it's characterized by global supply chains with global supply chains come global companies. And with what this business or this industry, I guess, is really characterized is by these global companies becoming conglomerates and really rolling up brands. If you think about most of the brands that you're aware of that you're buying on shelves, likelihood is that they're not a standalone company, that they're part of a fashion and clothing conglomerate. We've got a list of some of the major companies and actually some of the companies that you can invest in and some of the brands that they own. So we just rip through [00:14:07][77.2]

Bryce: [00:14:08] some of them. Let's do it. [00:14:08][0.8]

Alec: [00:14:09] Elvia owns also basically every major champagne brand. They own Fendi, Givenchy. Also, forgive me if I mispronounce any of those, because I guarantee you I will. Bulgari, Tiffany and Co.. Marc Jacobs. So a lot of that high fashion stuff. [00:14:26][17.3]

Bryce: [00:14:27] Inditex I've actually never heard of Inditex. [00:14:29][1.6]

Alec: [00:14:30] This is this guy is like the third [00:14:31][1.7]

Bryce: [00:14:32] richest in the world. [00:14:32][0.5]

Alec: [00:14:33] No, no, that's that's the LVMH guys that [00:14:36][3.5]

Bryce: [00:14:37] I thought was the Zahira guy. [00:14:38][1.0]

Alec: [00:14:38] Is it? Oh, I thought so. Probably wrong. You're probably right. All right. Yeah. [00:14:42][4.1]

Bryce: [00:14:43] So Inditex own Zahraa, Masimo Duty, Birka Eisho Pullen Bear. Never heard of any of them, to be honest. [00:14:54][11.0]

Alec: [00:14:54] No, I've heard Izarra sort of Zawia even even companies like Gap Gap. So it owns Gap, but it also owns own that Old Navy, Banana Republic, Athleta, VF Corporation, one of the big US companies, owns dickeys Jansport, Kipling, The North Face, Timberland, Vann's Supreme. When people buy subprime stuff and they reckon there are, you know, being pretty nonconformist. Yes, they're just buying from a massive US corporation. Yes. Also, this company owns fifty five percent of the US backpacker market. Wow. Strange market. But hey, good to good to be number one. Yeah. [00:15:33][39.1]

Bryce: [00:15:35] Caring, caring. They own Gucci. Even Saint Laurent Valencia. Valencia, Alexander McQueen. Certification, then we have PVH, they own Van Heusen, Van and Tommy Hilfiger, Calvin Klein, Izod. [00:15:54][19.1]

Alec: [00:15:54] Yeah, yeah. Look, we could keep going through this, but I think the point is, if you think about a lot of the fashion brands, the consumer facing fashion brands, the conglomerate. So when we're conceptualizing this industry, it's truly global. All of these businesses have global supply chains. And with that comes global companies that are rolling up all these brands. And then finally, the third way to conceptualize this industry is traditionally the supply chains were pretty straight. You would you know, you would make it in a cheap export country, send it to wherever you buying it, send it to a retail store, and then you would buy it. And that was that. But now we're just saying a much more complex industry, but a much more, I guess, dynamic industry. We're saying traditional retailers has disrupted. We're saying e commerce come along, but we're also saying things like a commerce move into bricks and mortar and disrupt bricks and mortar. That way we're saying e commerce be disrupted by like Instagram and Facebook and those kind of like next level of e-commerce and like social and social commerce platforms. We're saying like, you know. The whole role of the wholesaler is being disrupted by platforms like Alibaba and just like the Internet in general, cutting sort of cutting out that middleman a lot of the times, and retailers can deal directly with manufacturers. So what was a pretty straight producer to a wholesaler, to retailer, to customer supply chain is now incredibly fragmented. But that's really the industry. Yeah. [00:17:34][99.9]

Bryce: [00:17:36] So let's have a look at some of the trends and themes that are emerging and worth considering as an investor. There's no doubt that global markets are now very much expanding, particularly outside of Western countries. So, you know, you've got these countries now that are being driven by an emerging middle class with a fair bit of disposable income. You think about China, you think about India. You think about [00:18:03][27.4]

Alec: [00:18:04] Indonesia. [00:18:04][0.0]

Bryce: [00:18:06] Yeah. A couple of other Southeast Asian examples where traditionally markets, particularly on the higher end, you know, we've spoken about those conglomerates, wouldn't be, I guess, setting up shop and trying to sell a bunch of their their brands there, but are now finding growth from these emerging markets and as we said, driven by disposable income. So great. I guess if you're an investor in some of those companies or run these companies as new new markets are opening up. [00:18:32][26.4]

Alec: [00:18:32] Yeah, if you're an investor in any of those conglomerates that we talked about earlier and they don't have a China strategy and an Asia strategy, you've got to seriously question like where the next leg of growth is coming from. Yeah. Um, second trend rise of e-commerce. We've already touched on a little bit. Everyone kind of knows that. So let's not talk about it too much. But obviously it's driven by the increasing online access and smartphone penetration, which is particularly important, not so much in the West where the Internet has been around for a while, but where in emerging markets every new smartphone user like that's a new Internet user. Um, and so that's where it's having a really profound effect on e-commerce. Um, six out of 10 shoppers say the possibility to shop via mobile is an important factor in deciding what brands to choose from. Are surprised by that because I honestly don't care. But obviously, again, outside my circle of competence, China is leading the way in fashion. E-commerce, five largest markets. Have you looked at the numbers [00:19:32][59.6]

Bryce: [00:19:32] know [00:19:32][0.0]

Alec: [00:19:33] how much bigger do you think China is than the US in terms of fashion? E-commerce three. Three? Not, not. It's about double. Right. There's still that surprised me. Um, and then so China's six hundred and seventy billion. The US is about three hundred and forty billion. UK one hundred billion. Japan 80 billion. Germany 70 billion. So their top five markets. You can just say how big China is. Yeah that's e-commerce. It's sort of we got more we know. Yeah. [00:20:02][28.2]

Bryce: [00:20:02] The other trends that is really taking off and helping these brands is the power of celebrity and influence our culture. Massive. We know what is happening online. Social engagement rates for fashion brands. Facebook zero point zero three percent. Um, Twitter zero point zero three percent. Instagram zero point six eight percent. Interesting. [00:20:25][22.2]

Alec: [00:20:26] Are you looking at me like that? Because it's like, what do these numbers mean? Yeah, yeah. It's like the is it stat stuff. Yeah they did. I think they looked at like the amount of posts that fashion brands were posting on these platforms then like the level of engagement with those posts. The point of those numbers is purely nothing purely. Well how much are you engaging with like business posts as well. [00:20:50][24.2]

Bryce: [00:20:51] Yeah. Yeah, never. Yeah. [00:20:53][2.1]

Alec: [00:20:53] But I think the point is that we talk about the rise of celebrity and influence a culture impacting fashion. We're really talking about Instagram, like Instagram has just been this massive driver of meaningfully like billion dollar brands emerging. We, you know, everyone knows, like Kylie Jenner, Kim Kardashian, a lot of those brands. But there are there are so many fashion brands that are Instagram native and have become real disruptors through micro influencers, big influencers, a whole bunch of stuff on Instagram. But that that platform is [00:21:28][34.6]

Bryce: [00:21:28] the one the one it'll be interesting to see where Tick-Tock is in a few [00:21:32][4.0]

Alec: [00:21:32] years. Yeah, relative if tick tock, they may already do, but if they had a swipe up to shop, [00:21:37][4.6]

Bryce: [00:21:38] surely it's coming. [00:21:39][0.8]

Alec: [00:21:40] So if it's not, it'll come. Now that they listen, they've heard this, it'll come [00:21:45][5.0]

Bryce: [00:21:46] back to my spot. I guess a good example of that Ren is the fashion nova. It's the fastest growing women's apparel brand. It was Instagram driven. It has twenty million followers, partnerships with the likes of Cardi Bay, Kylie Jenner and an army of over three thousand micro influencers. And you can't underestimate the power of micro micro influence. So they've they've been able to harness that and and grow pretty well on Instagram. Some other driving factors and somatics within the clothing is the we're changing what we're wearing. There's that been this massive rise of athleisure started by Lululemon. Now you see everyone walking around in gym [00:22:26][39.7]

Alec: [00:22:26] gear despite [00:22:27][1.0]

Bryce: [00:22:28] not even going to the gym. [00:22:29][1.0]

Alec: [00:22:30] You actually did that yesterday in our office. [00:22:31][1.2]

Bryce: [00:22:31] I went to the gym. This. [00:22:32][0.7]

Alec: [00:22:32] Morning, walking around in athletics, you know, [00:22:34][1.9]

Bryce: [00:22:35] not not bloody tired, that's for sure. We're seeing the decline of department stores driven. We know that e commerce is kicking in and specialty stores. So the likes of Myer here in Australia and David Jones as well. And I'm sure there's equivalents overseas if you are listening from overseas. But department stores didn't didn't [00:22:55][19.6]

Alec: [00:22:55] really say Big W was worth zero dollars at one stage. Yeah, yeah. That's another one. Myer has fallen. I just I look at their share price since I must have relisted in 2009, it's fallen over 90 percent. [00:23:07][11.5]

Bryce: [00:23:07] Yeah. Yeah, it's been phenomenal. [00:23:09][1.5]

Alec: [00:23:09] Imagine if you don't own it. Know it's like a slow moving Slater and Gordon. [00:23:14][4.0]

Bryce: [00:23:14] Yeah. It's it's not good to be in department stores, that's for sure. They've both Myer and David Jones have also tried to go through a big phase of redoing their stores and trying to be more hip and cool and make everything look good and better customer experience. But at the end of the day, you can buy everything online that you can buy and store or buy it from specialty stores. So, yeah, Sellitto. [00:23:38][23.5]

Alec: [00:23:39] Yeah, it's like, what are those brands stand for nothings anyway. Are we said Big W is struggling. A business that isn't struggling is Kmart, one of its major competitors, Kmart and then also Amazon have really went lente into the rationalized their range have a super simple like basics that they make themselves um try and vertically integrated supply chain as much as possible. Or if they don't actually own the supply chain like, you know, have a lot of control over it. And so we're seeing like a really Chape own brand trend emerge, I guess, Amazon, BASIX, Kmart, a lot of that stuff. Not that interesting, to be honest, though. Maybe just not that interesting to me are two more trends that I think are worth paying attention to. So first, the first one is the business model innovators. And we're saying that in a number of different spaces through covid, we have seen the rise of like smart fitting technology and at home virtual fittings and a whole bunch of stuff to try and replicate the best bits of the in-store experience to e-commerce. We're also seeing businesses like Institue in Australia, a bunch of others who are like looking at these global supply chains and saying, how can we do it better? How can we strip cost out? How can we give a better customer experience in situ, for example, have been like there's all these tailers over in Asia that if we cut out a lot of the the sort of middlemen company, we can get stuff delivered to Australia cheaper than the major brands, but still give Tyla like custom suit and stuff like that. There are other business model innovators that are looking at these somewhat inefficient supply chains and saying, how can we do it better? Or looking at these brands and saying, how can we disrupt them? So it's a pretty interesting business because it's in many cases very low margin and it's incredibly cutthroat. If you're interested in business model innovation as a form of disruption, it's a really interesting industry to watch. Last one. This is one that I'm particularly interested in from a sustainability perspective, the move to fast fashion and then the rejection of that and the embrace of, I guess, ethical or slow fashion. So Zara, HLM, those kind of brands are they are fast fashion. What they change their lines every six to eight weeks rather than a traditional retailer which would have seasons of clothing, and that that was an incredibly powerful business model to get customers to come back in the store over and over again. What's new, what's new, what's new, and also to pull underperforming lines really quickly. But it's an incredibly resource intensive and wasteful business model. I've pulled some numbers. So did you know this? I had no idea. Fashion industry accounts for eight to 10 percent of overall greenhouse gas emissions. Wow. Yeah, that's what globalized supply chains do, I guess. And they also are the apparel industry is also the world's second largest consumer of water. Again, I was surprised. And the fashion industry is accountable for twenty four percent of insecticides used globally and eleven percent of pesticides used globally. [00:26:55][196.1]

Bryce: [00:26:55] Not a great industry, no. [00:26:56][1.0]

Alec: [00:26:57] Well, just a massive industry. Um, yeah. With a great resource intensive, um, but also a lot of waste is created. So all that resource is used in the input side water, insecticide, pesticide to keep, you know, like cotton and stuff growing well and then eight to 10 percent of the overall greenhouse gases to grow it and then to get it to these places, all that resource goes into it. But then on a whole bunch of it's wasted in the end. So in Europe, as much as 15 kilograms of textiles is wasted per person. And in a. America, that number is thirty seven kilograms. I'm pretty sure those are both annual numbers. So a heap of resources going in, a lot of wasted resources coming out. Fast fashion wasn't the cause of a lot of these things, but definitely accelerated and accentuated a lot of these things. So what we're saying is a rejection of desires and the EMS and the fast fashion brands and a move to ethical or slow fashion globally. In 2020, the fast fashion industry saw a 12 percent decline, which, like covid, had a role, but that that 12 percent was deeper than the industry as a whole. Thirty five percent of millennials, 36 percent of GenZE consumers prefer buying sustainable and environmentally friendly clothing. And then this trend was accelerated by the pandemic in Britain. Twenty eight percent of those surveyed started using reused clothes more than Prae pandemic. And 35 percent of women surveyed plan to buy fewer clothes in the future in general in another survey. Thirty seven percent of buyers said they find environmental protection crucial when buying clothes, and 33 percent stated they only bought clothes from brands that paid workers a living wage. And so what we're really saying is that consumers are leaning into examining their choices when it comes to fashion and thinking about the implications of those choices and what their brands stand for and also what the brands supply chains look like. And for me, that's a really that trend is only going to increase. [00:29:03][126.7]

Bryce: [00:29:04] I wonder if Zara has done anything about it, you know, in terms of changing their offering, reducing the frequency that they are changing their lines. It'll be interesting to see how they having they react [00:29:16][11.4]

Alec: [00:29:16] to having done no research on how they respond. Let me guess, they're not changing their whole business model of fast fashion, but they're finding ways to, like, donate the wasted clothes or like they're finding ways to. In some ways, brainwasher don't come out miserable, but not actually change the core underlying business model. [00:29:36][20.4]

Bryce: [00:29:37] So before we jump into some of the major companies that you can invest in and some of the ETFs as well, we will take a quick break to hear from our sponsors. [00:29:46][8.8]

Bryce: [00:30:56] So major companies and how we can, I guess, grouped them together, Ren, let's start with suppliers and manufacturers. We've got The Wire K.K group, which is one of the largest 40 percent market share for Zipper's things. [00:31:13][17.4]

Alec: [00:31:14] I used to think that have more maybe they did and someone disrupted them, but they used to be like the only guys in the world that made zipper's or something. [00:31:20][6.1]

Bryce: [00:31:21] Something like that. Yeah. Anyway, it's just one of those massive companies that specialize and then they have 40 percent zippers. Then there's Shen's, our international. If you listen to our podcast with Chamar, she pitched it for one. It's that massive textile manufacturer who have companies, you know, like Nike, Adidas, Unico, Puma, they're enormous. And she was pretty bullish on on the way that they were running their management. So a massive player over in the manufacturing landscape. [00:31:54][32.8]

Alec: [00:31:55] I mean, there's so many other companies in this section around the world, but it's just like the first group, I guess, if you're looking to invest is the suppliers in the manufacturers, the people with factories who are producing this stuff for export. [00:32:09][14.3]

Bryce: [00:32:10] And then if you go beyond that, the next stage would be who are they producing for? And you've got the brands that they're producing for, obviously Nike, Adidas, LVMH and many of the others that we spoke about at the top there. [00:32:23][13.0]

Alec: [00:32:24] Yeah. So, yeah, second second category, as you said, who are the brands that are overseeing the production and getting this stuff produced for? I guess then the third thing that flows naturally from that is where are these clothes being sold? And we can probably talk about the bricks and mortar first in Australia, some of the bigger names. So Woolworths owns Big W, Wesfarmers owns Kmart and Target. Mosaic Brands owns Mila's Rockman Noni B, Rivers' Cady's autograph again, big conglomerates with lots of brands underneath, this time on the retailing side. But same thing. Another one, Premier Investments, Solomon Lew's investment vehicle, I guess just Jain's Peter Alexander Gyges Jackie a Portmans Doddy again with a lot of brands. [00:33:17][53.2]

Bryce: [00:33:18] I'd also slip in shopping malls somewhere within there. [00:33:21][3.1]

Alec: [00:33:21] Yeah. Would you invest in them? [00:33:22][1.2]

Bryce: [00:33:22] No, I wouldn't invest in a lot of these. [00:33:24][1.8]

Alec: [00:33:25] Yeah, but that is a very fair point. But you are right, shopping malls is a good one too, including that. I mean the main one is Westfield and that's [00:33:34][8.8]

Bryce: [00:33:35] I can't even remember it. [00:33:35][0.8]

Alec: [00:33:36] It's it's uni reddam. Westfield. Yeah, that's it. And then there would be other ones. Yeah, there's [00:33:42][6.8]

Bryce: [00:33:43] a few overseas. But anyway, let's keep moving. So we've spoken about bricks and mortar. The flipside of that is obviously the e-commerce disruptors. You can't go past Amazon and then if we go a step further on the e-commerce train, it is thinking about the picks and shovels analogy and you're thinking about businesses that have built around the format of e-commerce. PayPal is is one example and then Shopify, another great example of how you can invest in the e-commerce thread and but not try intended. Yeah, but not directly in an e-commerce platform such as Amazon actually [00:34:26][43.2]

Alec: [00:34:26] was it wasn't really a pun was it needs to be more like fashion thread would have been the palm tree. So look, we obviously have only scratched the surface of the major companies, but we're talking about a global industry. I think the main point is just how we conceptualize the different place market and how they interact. Suppliers and manufacturers, big brand names, those conglomerates that we talked about earlier, the retailers, both bricks and mortar retailers and e-commerce disruptors, then like the picks and shovels of the industry for especially the e-commerce side. And then you could also talk one final category around the business model innovators. A lot of them aren't public yet, though. So not not a lot of investing opportunities in the the Instagram driven businesses or the institutions of the world or stuff like that. They're private as like they'll be coming. They'll be coming. All of them especially. I mean, clearly, Genoa's business was, what, a billion dollars when it got sold? Yeah. You could IPO a billion dollar business. [00:35:24][58.1]

Bryce: [00:35:25] We will. [00:35:25][0.2]

Alec: [00:35:28] All right. Let's talk about investing in the industry as a whole. [00:35:30][2.2]

Bryce: [00:35:30] Yeah. So obviously, we have all the specific company companies we just mentioned. No surprises there. But in researching this, it's evident that there are plenty of ETFs out there. [00:35:41][10.6]

Alec: [00:35:41] Yeah, not a lot in Australia, though. [00:35:43][1.2]

Bryce: [00:35:43] Well, that's not surprising. [00:35:44][0.6]

Alec: [00:35:44] Yeah, somewhat. [00:35:45][0.7]

Bryce: [00:35:45] Come on, guys. Here in Australia, hopefully you're listening. So let's start, General, you've got your general retail ETFs that are all us listed, so. [00:35:54][8.7]

Alec: [00:35:55] These aren't just clothing, right? Like when we say general, we [00:35:58][2.5]

Bryce: [00:35:58] mean general, yeah. So fire up your broker. If you don't have a US broker, perhaps thinking about getting one [00:36:04][5.7]

Alec: [00:36:05] or Australian brokers perhaps think about expanding your offer aren't [00:36:08][2.9]

Bryce: [00:36:08] true. So we'll rip through a couple. You've got your SPDR S&P retail that's listed on the New York Stock Exchange. Its ticker is exacty it is one of the cheapest you can get, zero point thirty five percent fe on that one, same as the Vannak Vector's retail. Its ticker is 8H. Amazon is 20 percent of holdings, Wal Mart, 10 percent. Home Depot about the same as well. Three of the big hitters over in the States from a retail perspective [00:36:39][30.9]

Alec: [00:36:39] and not scared to go. [00:36:41][1.1]

Bryce: [00:36:41] Concentrated love concentrated. [00:36:42][1.1]

Alec: [00:36:43] Yeah. Yeah I respect that. I do respect the conviction. [00:36:45][2.4]

Bryce: [00:36:46] Yeah. Yeah. First trust NASDAQ retile its ticker is LFT Day. PowerShares Dynamic Retail Ticker is PAMA. And then if you're looking to really go long on retail, which is right up my alley, you've got the direction daily retail bull three times leveraged. It is a retail buyer beware on that one. It is a little bit expensive and also it's a daily leveraged. So without going to date, there's risk of slippage over a long period of time. So be aware of that. But look, I think the message is that there are plenty of options if you want to go broad on retail. [00:37:25][39.4]

Alec: [00:37:26] General retail is boring, though. Let's talk about some of the more thematic ones. So there's three online retail specific ETFs. Also, all US based ProShares Online Retail ETF Ticker is owned land. All of these management fees are a little bit more they're in the point five point six range. So I'm not going to say you can do your own research after. Also amplify online retail ticker. I buy, interestingly, three biggest positions, Covena, PetMeds and Wayfair. I feel like there's a big online retail name that's missing from the top of that list. [00:38:05][39.7]

Bryce: [00:38:06] Amazon. Yeah, well, I get it in the wow. [00:38:09][3.5]

Alec: [00:38:10] And then another one. So amplify online retail US focused, amplify international online retail, obviously globally focused. Speaking of online retail, there's a category that I quite like that I imagine you're going to like is the retail whisperer ProShares Long Online Short Stores, ATFP, Lava Tica CLX and then another one, ProShares Decline of the retail store ETF Ticker. Amte why that's a [00:38:42][31.2]

Bryce: [00:38:42] short bricks and mortar. [00:38:43][0.9]

Alec: [00:38:43] So one is long e commerce, short bricks and mortar and the other is just short bricks and mortar. [00:38:48][4.3]

Bryce: [00:38:48] Wow I love it. OK and then to close out there's the pressure has petcare called pause the global x MSCI China consumer discretionary. That'd be an interesting one. And the emerging markets Internet and e-commerce ETF, which would also be an interesting one given the conversations we've been having over the last couple of weeks about the role that Indonesia, India and China playing in the global landscape. So, look, plenty going on, plenty of industry, massive industry, a lot to think about, a lot of investment opportunities from suppliers and manufacturers all the way through to and consumers and then and then bricks and mortar and online retailers. [00:39:31][42.4]

Alec: [00:39:31] So, yeah, I've got one final thought. If you're going to invest in individual company in this industry, just really think long and hard about this sustainable competitive advantage. You know, we often talk about Moat's think about the Moat's in this case, because there's one big one that brands have, one big one that companies have, which is brand. You know, Nike have a really strong brand moat LVMH who own a lot of those like really premium brands, have a really strong brand moat. But outside of brand, you're not going to find a lot of really enduring, like competitive modes. You might get a minor cost advantage from scale. You know, if you're producing 100 million shirts a year rather than a million, you might get a small increment, cheaper unit price. But really, people are going to be able to flex how much they spend on clothing and apparel based on things like brand and who's endorsing it and, you know, all that stuff. You don't find a lot of moats in this industry and that's why there's so much disruption constantly happening and so much like business model changing and all this stuff happening. The industry is characterized by fickle customers, low barriers to entry and next to no switching costs for customers. So that would be my final thought on fashion. Sorry to end on a down. [00:40:55][83.6]

Bryce: [00:40:55] That's fine. Well, that's all we have time for, we'll have to leave it there. Hopefully you got something out of that that will help you on your investing journey, but Ren will pick it up next week. Sounds good. [00:40:55][0.0]