Castro isn't buying Hoodies because of Bar Refaeli. This morning, Castro announced a major deal for the Israeli retail fashion industry, whereby it is buying all the shares it does not already own in the Hoodies group. The deal consolidates Castro's standing as one of Israel's largest fashion groups, and strengthens its hand in negotiations with malls and commercial centers.
Unlike other fashion groups, which hold concessions on international brands, in this case there is no dependence on an international corporation such as Nike or Adidas, but rather reliance on local Israeli brands. This offers a substantial advantage when it comes to speed of action and decision making, and strategic moves.
Fashion groups need multiple brands, and in the past five years we have seen a process of consolidation in the entire fashion industry, with major groups seeking to expand their portfolios, making them more robust in the face of changes and a weakening of one brand or another, and in the balance of forces vis-a-vis the big malls. This is happening around the world, and in Israel as well. On the one hand, small players are disappearing, or are selling out to major groups; on the other hand, the major groups are becoming stronger thanks to their ability to bring new brands to Israel.
A further advantage of large groups lies in the growth of online buying. Competition in the fashion market has become fierce in the past year, among other things because international online commercial platforms like Asos and Next, on which purchases are tax free, have become established locally, alongside the further development of local online sales sites, such as the Fox group's Terminal X and the Azrieli.com site.
In ecommerce, a wide range of brands is important. The merger with the Hoodies group will enable Castro to set up a site for all its brands (unlike the existing individual brand sites), or will enable it to deal with a platform that it does not own from a stronger position.
A further factor is the future advent in Israel of online marketing giant Amazon, with its ability to shake up the local market. Will the infrastructure that the major local fashion groups have been building in the past few years enable them to stand up to it?
All this is against a background of bankruptcies of fashion chains that failed to contend with the changes overtaking the local fashion market, such as Honigman and Celio, which were defeated by these challenges. Castro's move is a continuation of the trend of consolidation, this time willingly and not forced, and there will probably be more mergers and acquisitions in the future.
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2018
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