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Jimmy Choos cheaper at home, thanks to Aussie dollar

The Age logo The Age 1/05/2014 David Fickling
a © Richard Shotwell/Invision/AP a

Emily Collie used to spend $2,500 a year buying accessories from overseas websites to take advantage of prices as much as 40 per cent lower than in her hometown of Melbourne.

This year, she's ordered about $160.

"I was looking for a bracelet or a bangle and realised the price was very comparable to Australia," the 31-year-old fashion blogger said, noting the local dollar's 11 per cent drop versus its US peer in the past year. "What's the point of buying something overseas?"

Collie's return to local retailers is just the transition the Reserve Bank of Australia is seeking as it signals the need for a lower currency to spur domestic demand. The nation's biggest department stores David Jones and Myer Holdings say online sales are booming as foreign competitors lose their advantage.

Jimmy Choo's "Evelyn" peep-toe heels cost $659 from David Jones's online shop with free delivery, less than the $710 with shipping on Nordstrom's website in the US.

"Part of the logic behind a falling currency is it sends a signal to people to buy locally rather than offshore," said Shane Oliver, head of investment strategy at AMP in Sydney.

"If the currency can go down around the same time as interest rates, then effectively you've got two policy levers."

Spending at local companies' online fashion stores rose 36 per cent in the 12 months ended January, while overseas peers saw a 3 per cent decline, Andrew McLennan, an analyst at Commonwealth Bank of Australia in Sydney, wrote in a March 31 note.

Companies such as Vancouver-based Lululemon., London-based Asos and New York-based Borderfree, who expanded their online presence in Australia's $265 billion retail market in 2011 and 2012, are reporting tougher trading.

Regaining share

"We're starting to steal some of that share back," Bernie Brookes, chief executive officer of Myer, the country's largest department store by sales, said in a conference call in March.

Online sales will double in the fiscal year ending July, the company said.

The Australian dollar rose more than 80 per cent against the greenback from a five-and-a-half-year low in October 2008 to a high of $US1.1081 in July 2011 as Chinese demand for the nation's resources drove a record $US66 billion of inward investment and interest rates hit 4.75 per cent.

The currency has since fallen as the central bank slashed rates to a record-low 2.5 per cent and unemployment rose to a decade high in February.

The Aussie slid about 9 per cent on a trade-weighted basis in the past year amid a slowdown in mining investment and cooling demand for commodities from China.

It touched US93c in local trading today.

Balanced growth

The currency's decline will help with achieving balanced growth, RBA Governor Glenn Stevens said in a statement accompanying the bank's April decision. A 10 per cent drop may boost Australia's gross domestic product by between 0.5 percentage point and 1 percentage point over about two years, the RBA estimated in an August monetary policy statement.

Retail sales rose for a tenth straight month in February, the longest stretch since 2007, while low borrowing costs spurred record gains in house prices in March. The stronger data has fueled speculation about when the central bank will begin raising rates with a Credit Suisse Group AG index indicating 13 basis points of increases over the next 12 months.

Competitive prices

Local retailers had already been working to counter foreign competitors.

David Jones, whose board has recommended a $2.15 billion takeover offer from South African retailer Woolworths Holdings Ltd announced in April, won't sign new deals with brands unless they agree to make Australian prices competitive with those available offshore, according to a company presentation.

It's brought existing products into line as well. Sales of Paul Smith menswear jumped 55 per cent by volume since the department store cut local prices about 17 per cent to match overseas peers, the company said.

Overseas competitors are feeling the pinch.

At Asos, the UK's largest online-only fashion retailer, sales in the region dominated by Australia grew just 3 per cent from a year earlier in the two months through February, compared with a 35 per cent annual pace in the year ended August 2013 and 94 percent in 2012.

"The currency has really worked against us over the last year, and we have seen quite a dramatic slowdown there in growth terms," London-based chief executive Nick Robertson said. "Our products are 15 per cent to 20 per cent more expensive than this time last year."

No argument

Sales to Australia fell 2.2 per cent between Borderfree's 2012 and 2013 fiscal years, trailing group revenue that grew 36 per cent, according to a March 11 share prospectus. The company provides international web store and parcel services to US retailers including Men's Wearhouse, Macy's and Neiman Marcus Group, and counts Australia as its biggest market after Canada.

"I used to almost exclusively go international," said Kaitlyn Ham, a 25-year-old freelance fashion writer from Brisbane who spends about $3,000 a year on clothes and apparel.

"Recently it's about 70 per cent locally and 30 per cent international."

One of her more recent purchases, a pair of black Alexander Wang "Antonia" heeled sandals, cost $495 at Green with Envy, a Melbourne-based fashion boutique. That, she said, was cheaper than the $495 US dollar price she was offered on international sites like Amazon.com-owned shopbop.com. The sandals sell for $US675.86 on Net-a-Porter, a fashion website owned by Cie.

"It was free shipping as well," Ham said. "You can't really argue with that."

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