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NEXT STOP AMERICA?

Mango mulls stores in New York, Chicago and San Francisco

BY SUSAN THORNE

European fashion retailers have driven much of the novelty and excitement in North American midprice apparel of late — witness the arrival of H&M, Mexx and Zara. Now Spanish apparel chain Mango will join them.

Barcelona-based Mango, one of the Continent’s hottest midmarket women’s clothing chains, says it will begin offering its smart mix of classic and trendy fashions to American shoppers next year. (And it’s about time, some would say; the chain already operates in 72 countries — including Croatia, Kazakhstan and Tunisia — and is about to open stores even in Algeria and Azerbaijan.)

“Mango would be a very good addition to this retail landscape,” said Faith Hope Consolo, vice chairman of Garrick-Aug Associates Store Leasing, New York City. “They’re well priced, with a European attitude, and they’re dynamic and exciting.” As a leasing broker, Consolo has already been instrumental in bringing Zara to North America.

To be sure, Mango has considered the United States before. The chain, which offers casual and dressy fashions and accessories, sleepwear and sportswear for women 18 to 40, has wanted to come for years. But because half its merchandise is made in China, U.S. import quotas on goods from that country held things back, says Isak Halfon, Mango’s director of international franchising. Now that China’s entry into the World Trade Organization is removing that impediment, “we are thinking of opening in 2005,” he said.

Halfon envisions initially opening flagship stores in Chicago, New York City and San Francisco, followed by mall units, but the details of the strategy will not be firmed up until closer to the launch date; they don’t have to be, executives say.

“Mango is such a small company that decisions usually only take a few hours,” Halfon said. “So we won’t start planning until sometime later this year, but once we make a decision, we can go ahead within six months.”

Mango will probably open first in Canada and then in the United States, as Mexx did, says Halfon, explaining that he is negotiating with a Canadian party with a view to opening 25 stores within five years.

In Consolo’s opinion, when Mango does come to the United States, it will be a hit with shoppers there who are hungry for new retail concepts.

“American consumers are in love with the panache of anything European,” she says. “They’re all ‘Gapped’ out, and they’ve had enough of the Old Navies, Talbots and J. Crews. Mango’s styles are on the cutting edge, and they offer cheap chic, which excites the customer.”

Mango shares some of those qualities with the other European fashion players in America, Consolo points out, but there are differences in price; Mango’s merchandise is less expensive than Zara’s but costlier than that of Mexx and H&M, she says.

The quality of the company’s store design and decor are worth noting too, Consolo says.

“They build beautiful stores, and that makes a big difference,” she said. “Even though they’re selling inexpensive clothing, they put it into a very sophisticated atmosphere.”

Mango started out with 99 stores in Spain in 1984. It began expanding internationally in 1992, first branching out into Continental Europe and then into four other continents; there are 704 Mango stores worldwide today. In addition to its presence in such major markets as Russia, Mango has ventured off the beaten path into remote or developing countries — it has a store in Honduras, for example.

The company’s 2003 sales totaled €1.002 billion ($1.24 billion), a 5.4 percent increase over 2002. Nearly three-quarters of that came from operations outside Spain.

Mango is notable as one of the “fast fashion” chains whose advanced logistics have shortened manufacturing turnaround time; the company claims to be able to deliver new fashions to its stores 20 to 25 days after an order is placed. Zara and H&M also boast fast conception-to-rack turnaround times.

Coming to a U.S. mall soon? Fashions, dressy and casual, for women 18 to 40.

“Like Zara, they’re very much the fashion leader rather than follower,” said Ray Cliff, general manager of Touchwood, a 645,700-square-foot (60,000-square-meter), 90-store shopping center in Solihull, in the north of England. “Both pride themselves on picking style off the catwalk and rolling them out very quickly.”

Touchwood opened in 2001 with a 12,000-square-foot Mango as part of the original tenant lineup. Because the chain was new to Britain at the time, it helped set the center apart, Cliff says. “Because they’re international, they bring a slightly different style.”

Mango’s sales at Touchwood have slipped slightly since then, something Cliff attributes in part to the opening of other Mango outlets in the region. British fashion players, too, are starting to imitate the Mango style.

“I think a lot of other people have started to compete more directly with the Mango offer,” he said. “It’s a very, very competitive marketplace here in the U.K., particularly in young ladies’ fashion, where I believe there are more players than in the U.S.”

For all Mango might have in common with its European fellows, there is an important difference: It is a private company with limited capital resources, relying on the income from franchising stores to finance further expansion. Of all its stores, 463 are franchised rather than company-operated.

One result of this is that Mango’s international presence has more breadth than depth, points out Richard Perks, director of retail research at Mintel International Group, a London-based retail market analysis firm.

“In many countries they have only one store,” Perks said. “Mango has opened only 15 stores in the U.K. since 1999, still a fairly small number, so its presence isn’t strong like that of Zara or H&M.”

There’s a risk to expanding through franchise licensing, which can threaten the quality and consistency of outlets, Perks adds.

“Franchising is easy to do initially and a shortcut to rapid growth,” he said. “But the big problem is control.”

Cliff shares that concern.

“If you have management in place it’s OK, but once you’ve lost that, it can undermine a strong brand,” he said.

Halfon defends Mango’s quality-control process for franchised units, insisting that nothing has slipped, and nothing will; each store is visited once a month by one of Mango’s 70 supervisors to make sure it is maintaining the brand’s standards, he says.

How many of the stores will be company-run or franchised in the United States has yet to be determined.

“There are many ways of entering the market,” Halfon said. “We have not decided yet.”

Whatever the company decides, it knows it must arrive in force for a country where the competition is tough. Having a critical mass of stores is important if the chain is to make an impression on the American shopper, Halfon says.

“We would prefer to go big,” he said. “There are so many European companies that sell in the U.S., but some have been bankrupt like Benetton. The U.S. is so big and so important. We want to go there, and we want to do it right.”

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