South Africa's major clothing retailers, already having to compete with an influx of retail giants from abroad, are also falling victim to the growing diversity of the retail ecosystem. Clothing importer 32 Clothing, which sells global brands for up to 70% less than the retail offering, has come under fire for its unusual - but legal - business practices.The off-price retailer buys its clothing directly from manufacturers of some of the world's leading brands, which "have inventory stock to remove, including overstocks, cancelled orders from brands and garments that did not sell in store", said founder and CEO David Fine.The retailer, which opened its first store in South Africa just over a year ago, sources international brands such as Tom Tailor, Diesel, Zara and H&M, the new inductee in the South African retail space.story_article_left1"Our business model is based on the ability to understand how stock moves ... what happens when brands clear their warehouse is very sensitive ... because they don't want people to know what happens with their excess stock," said Fine.The practice has raised the ire of some leading fashion retailers that have just planted their flags in South Africa. Amelia May Woudstra, the communications manager of H&M South Africa, said its legal department was looking into it.The discount retailer also sells Banana Republic clothing, a brand that has an exclusivity agreement with one of South Africa's oldest department stores, Stuttafords. The agreement prevented "the direct supply (by the brand owner) to other retailers in South Africa", said Stuttafords CEO Robert Amoils.Johan Riekert, an economist at research group Quantec, said that although parallel importing laws allowed for non-counterfeit goods to be imported without the permission of the intellectual property owner, "if goods are being sold under their brand, this has broad implications for the perception and value of that specific brand, which may translate into financial implications for the owner".He said that when clothes were imported they usually underwent classification related to the type of product - but not to the brand."The implication is that this undermines the importers and retailers who have been authorised - if such authorisation exists - by the brand owner to import clothing branded with that specific intellectual property owner's brand," said Riekert.block_quotes_start Parallel laws are there to protect people like me... government wants everybody to get things they want at the price they can afford block_quotes_endAccording to the South African Revenue Service , clothing imports accounted for just over R22-billion of the R1.08-trillion in total imports last year.Fine said brands would always try to portray off-price retailers in a negative light."H&M has got 3900 stores globally, they have a huge excess value of the stock that they don't sell in their stores and most of the stock has to go somewhere. Most businesses have to get rid of their excess stock and what better than off-price retailers?" he said."That's why parallel laws are there, to protect people like me, because the government wants everybody to get the things that they want at the price that they can possibly afford ... a licence holder being the only person who can sell that product means its a very protected market."Fine said 32 Clothing catered to the middle- and lower-income consumer, but "we are not competition for the brands, we invest in the same ecosystem and they need us because we clear stock".story_article_right2Stuttafords's Amoils said he did not believe the low-priced retailer posed a threat to Stuttafords, given its "location, target market and brand positioning".32 Clothing's four stores, all in Gauteng, are in Brakpan, Westgate, Southgate and the Pretoria CBD.The company also has a franchise store in Botswana and trading partnerships in Angola, Tanzania, Ghana, Kenya, Zimbabwe, Mozambique, the Democratic Republic of Congo and Namibia .Michael Lawrence, the executive director of the National Clothing Retail Federation of South Africa, said this presented an opportunity for international retailers "to tidy up their supply lines because it's obviously leaking products, and to enforce the legal rights in terms of trading".In the US, New York Stock Exchange-listed TJX , using a similar business model, recorded $30.28-billion (R480.54-billion) in revenue in the second half of 2015."This is a cat and mouse game that needs to be played, but as far as South African consumers are concerned parallel importing is legal ... when your goods are not counterfeit," said Fine.tshandup@sundaytimes.co.za..