Just as Australia’s Fashion Week kicked off on Monday, a study has revealed that local fashion retailers will continue to suffer in another difficult financial season.

IBISWorld has forecasted the fashion industry will experience a slow 0.5 per cent growth this year, bringing total revenue to $12.1 billion – with an annualised growth of just 1.2 per cent for the next five years.

Karen Dobie, IBISWorld general manager, said nervous consumers are swapping designer purchases for more low to mid-range clothing as a reaction to global economic uncertainty.

“Discounted fashion lines are certainly outperforming luxury lines and this trend is not expected to slow down any time soon,” she said.

As a result, the high-end of Australian fashion recorded flat growth in the past financial year on the back of a dramatic 11.2 per cent fall in 2009 at the peak of the global financial crisis.

“Needless to say, the designers in the front row this Fashion Week are desperate for some good news. While there is some brighter news on the horizon, it’s nothing to get too excited about,” Dobie said.

However, IBISWorld believes retail spending will improve later in 2012 and beyond as consumers finish paying down debt and being to loosen their purse strings.

“Strong job security and a steadier global financial outlook will support future consumer sentiment, which has declined by 5.6 per cent from last year. As a result of wariness around international finance and an ongoing disdain for debt-fuelled spending, consumer sentiment is still just below 2007 levels.”

Meanwhile, online shopping breaks new ground as Australians become more comfortable to purchasing from online retailers either domestically or internationally. This is being supported by the soaring Australian dollar.

“The increased competition arising from the growth in e-commerce is pushing down profit margins, which is something many in the industry can ill afford right now,” Dobie said. ‘

Nevertheless there are retailers like Zara, Topshop and Gap who are posting positive results and are bucking the trend, along with online players positioning themselves as designer discount shopping clubs, including OzSale and BrandsExclusive.

In response to this changing retail environment Dobie noted many retailers are moving towards the ‘multichannel’ retail model, whereby retailers focus on developing a competitive online presence coupled with reinvigorated bricks and mortar shopfronts.