Naumy's success story: Behind the scenes of a rising fast fashion powerhouse
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Naumy's name is on everyone's lips. The French fashion budget retailer, offering a wide range for women, men, and children, has made a notable entrance into the market by daring to compete with Shein and Primark. With the ambition to open 100 stores in France and the recent inauguration of three stores in Belgium, Naumy eventually intends to expand across Europe and potentially globally.
Who does Naumy target?
Although Naumy's online presence seems focused on women's fashion and accessories, its physical stores offer a wide array of products catering to women, men, and children, alongside a dedicated makeup section, enriching their product range. Despite this, Naumy sets itself apart in the fast-fashion landscape with its definitive style and business approach. A glance at their website reveals a distinct target audience, diverging from that of Shein, which primarily targets the Next Gen and Gen Z demographics. At Naumy, the models, poses, and clothing designs adopt a less overtly high-fashion focus, instead prioritising discreet, essential styles that align with the rapidly changing trends of the fast-paced fashion market.
According to Lin Can, Naumy's managing director, in an exclusive interview with Actu.fr, Naumy boasts a diverse range of products within its stores, characterising it as "a mix of everything typically found in a shopping mall”. He stressed that the company “strives to offer something for everyone at affordable prices", while highlighting Naumy's commitment to targeting various styles, socio-economic and age groups. A perusal of Naumy's website confirms this diversity, with offerings ranging from 10 euros for skinny jeans to 24.90 euros for cargo jeans. Dresses are priced at 15 euros, while long-sleeved tops hover at around 11.90 euros. Additionally, the selection extends to more upscale items priced between 100 euros and 150 euros, providing options for different budgets and preferences.
How does the French fast fashion player maintain low selling prices?
The fast-fashion chain, also present online like Primark and Shein, offers new pieces to its customers every week, just like the fast-fashion giants. It aims to quickly follow fashion trends and make them accessible at affordable prices. This agility is made possible by the fact that 60 percent of its clothing is manufactured in Europe, mainly in Italy, setting Naumy apart from its competitors. Importantly, this proximity between production and retail locations allows for minimal in-store stock and promotes shelf sales.
Lin Can emphasises the importance of offering customers a wide range of choices, highlighting that Naumy stores have a family-like identity and mainly succeed in suburban and mall settings. Despite numerous store closures, this offering meets genuine demand, with Naumy standing out by providing an alternative.
The managing director insists that the company's goal is not to directly compete with Primark. In an article by Gondola, Can stated: "We have created our own identity and built customer loyalty. Unlike Primark, we manufacture a large portion of our products in Europe, resulting in slightly higher prices, but we are also more advanced in terms of fashion.”
Although Naumy does not explicitly state its ambition to compete with the low-price brand, it seems to be adopting a strategy similar to Primark's, with massive store openings and tailored offerings at each location to suit local clientele. According to Hélène Janicaud, a fashion expert at Kantar: "By the end of September 2023, while Primark only had 24 stores, the brand ranked seventh in volume with a market share of 3.1 percent. With the opening of these additional stores, Primark now has every chance to enter the top five in volume in the textile market." The cost of each store opening operation represents an investment of 16 to 17 million euros for Primark, according to LSA, the French magazine specialised in analysing trends in the food industry, retail, and consumption.
How does Naumy perform financially?
Talking about the cost associated with store openings, Naumy is significantly expanding its presence across France and now, Belgium. The brand initiated its expansion in the Île-de-France region back in 2014, inaugurating its first store in Fleury-Mérogis, Essonne. Nearly a decade later, Naumy boasts close to 40 stores in France and an extensive inventory of over 100,000 items on its website. Notably, Naumy recently unveiled a sizable 1,500-metre square store in Paris, near Bastille, with Lin Can stating: "The objective is to establish a strong presence in the heart of the capital and attract Parisian clientele." This strategic move might indicate the brand's transition from provincial locations to major urban centres and European capitals. A shift which might be confirmed by Naumy’s expansion into Brussels, the capital of Europe, in early 2024, occupying a 1,700-metre square in the Galeries Saint-Lambert, alongside openings in Liège and Namur. Approximately 15 additional openings are slated for 2024 in France alone. However, Naumy is not content to stop there, setting a significant goal of reaching 100 stores nationwide. "It's going to happen rapidly, within two or three years, but we'll strive for more if feasible," Can shared with Actu.fr.
What's behind this remarkable success? According to insights from Manchester-based supply chain company 5 Stars Trading, who’s director recently revisited the Naumy Group in Paris, the retailer’s resilience and ethos is impressive. Despite the formidable challenges confronting the global retail market, Naumy Group has not only weathered the storm of the pandemic but has also continued to thrive, now boasting 42 stores with plans to add 60 more by 2024. The CEO of the company, Chaowen Ni, attributes its success to two pivotal factors: a robust supply chain and the offering of cost-effective products. Examining their financial performance breakdown, the group indeed appears to be financially robust, with resources not reliant on credit or fundraising. According to Verif, an organisation providing information on companies worldwide, Naumy France, with a share capital of 20,000 euros, was established in 2014 and is chaired by Chaowen Ni. Operating in the sale of clothing in the specialised shops sector, it employs 39 people. As per its latest balance sheet published on December 31, 2021, Naumy France reported sales of 5,692,294 euros, thus maintaining its SME status.
Evolution of Naumy’s financial revenues
Rubypayeur, an online debt collection agency, takes an extra step by providing an analysis of Naumy's financial health. According to this assessment, the financial indicators for the 2020-2021 fiscal year appear highly favourable, with an EBITDA of 396,505 euros in 2021, representing a positive variation of 32.91 percent from 2020. To recall, a positive EBITDA indicates that the company's operational cycle is profitable, generating earnings before interest, tax, depreciation, and amortisation. Additionally, the company's cash flow was 315,034 euros in 2020 and 307,666 euros in 2021. And its financial autonomy reportedly increased from 35.4 percent in 2020 to 40.5 percent in 2021.
In terms of operational efficiency, Naumy required 7.8 days of turnover to finance its operating cycle in 2020, which increased to 13.7 days in 2021. It's worth noting that the proportion of salaries relative to turnover appears to be low-margin, with salaries accounting for 13.1 percent of turnover in 2020 and 14.5 percent in 2021. While there is no universally ideal ratio, some consider the overall salary burden in the retail sector to be around 66 percent, whereas Naumy's stood at 36.9 percent in 2021. However, despite producing approximately 60 percent of its items in Italy, Naumy, like many of its peers, appears to fall short in ensuring fair living wages for its employees.
"[These] large companies do not create any jobs on European and French soil, they export 100 percent of their products by plane and do not respect our environmental, social and even sometimes health criteria. This is unfair competition vis-à-vis all French textile manufacturers..."
Nevertheless, it's essential to note the absence of data from 2021-2022 and 2022-2023, encompassing the two years during which Naumy executed its extensive plan of store openings. Consequently, the impact of the company's extensive expansion, with multiple physical stores launched across France and Belgium, remains undisclosed.
In conclusion, another potential edge that Naumy might hold over its rivals lies in its potential leadership regarding ESG financial performance. With its workforce employed in Italy, the company may align with Organisation for Economic Co-operation and Development (OECD) living wage standards, although verification is recommended given the low salary weight (36.9 percent) indicated in its balance sheet by Rubypayeur data. Moreover, manufacturing in Italy ensures compliance with EU product requirements, and proximity to its European customers adheres to the principle of "circuit court", addressing environmental concerns.
However, a newly introduced bill in France could potentially alter the landscape. A French Member of Parliament has put forth a proposal to impose a 5 euro levy on Shein fashion products and other ultra-fast fashion brands, aiming to tackle issues of unfair competition and environmental impact. "[These] large companies do not create any jobs on European and French soil, they export 100 percent of their products by plane and do not respect our environmental, social and even sometimes health criteria. This is unfair competition vis-à-vis all French textile manufacturers. (...) What we recommend is a bonus-malus system so that the 'Made in France' is cheaper and 'Made in China' is more expensive. You buy a T-shirt on one of the big online platforms that does not have shops in France, it is a T-shirt that pollutes enormously so we will put a penalty on the principle of ‘the polluter pays’," claimed the MP Antoine Vermorel-Marques. The bill aims to impose stricter standards on imported fast fashion items, with the hope of promoting domestic manufacturing and reducing pollution. This move marks a significant step in addressing similar issues faced by European fashion retailers, mirroring ongoing discussions in the US regarding cheap fast fashion imports from China.