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Topshop has recently been named a cool brand leader in The Brand Council's annual survey. It has carved a powerful niche between the mass market and the cultish independents and in fashion terms, it can do no wrong. It's also a keen stockist of licensed clothing, accessories and some home-wares. Just don't go letting your character drop out of fashion.

Topshop is part of the Arcadia Group, the UK's largest clothing retailer. Arcadia Group was founded in 1900 when Montague Burton borrowed £100 to set up his own menswear shop. Within ten years he had 14 shops and by 1941 he was supplying uniforms to the armed forces. In 1946, six years before Montague Burton died, Burton made its first move into the womenswear market and in the mid-60s the first Topshop was opened. Now the Arcadia Group comprises seven retail brands, namely Topshop, TopMan, Evans, Wallis, Miss Selfridge, Dorothy Perkins and Burton, each targeting distinct market segments.

Of all the Arcadia brands, Topshop is the one most feted by the fashion community. Its flagship shop at Oxford Circus in London is the world's largest fashion store and stocks 300 new designs each week. This is just one factor that helps sustain Topshop's reputation as being consistently ahead of the fashion pack. Other factors include its quick response to what's going on on the catwalks and its ability to attract top name young designers. A favourite with celebrities as well as trend-conscious shoppers, Topshop is the high street's most 'fashion forward' destination.

Topshop offers an array of licensed characters on all manner of clothing: jersey tops, t-shirts, nightwear, underwear, denim, accessories and, increasingly, homewares. The defining characteristic of the properties Topshop stocks is that they fit into a fashion theme. Fashion stalwart Hello Kitty has been there for a number of seasons; a Powerpuff Girls line designed by Marcus Lupfer is moving into its second season and Pucca was in Topshop last autumn before most of us had even heard of it. But it's not always the newest characters that make the grade. This summer, denim jeans and skirts carried distressed treatments of Mickey Mouse to give a vintage impression. Later this autumn Popeye and Swee' Pea get the same rough, vintage look on t-shirts and tops.

Caren Downie, Topshop buying director, suggests the key reason for the increased fashionability of the character world is down to the influence of the Japanese and the number of kitsch properties imported from the Far East. Hello Kitty's appeal to both the hip and the young typifies this trend.

Caren explains that the way the Topshop design and buying teams find and select the next new properties is an informal process, informed entirely by trends. 'The fashion demand for characters ebbs and flows and we go with that. We travel a lot. In the case of Pucca, for example, we brought it back from a trip to Tokyo.'

Licensed products are highlights of the accessories, stationery and homewares categories in Topshop. Caren explains they make a strong statement in store and are popular at specific gift-giving times of the year. The lower priced categories are very price-sensitive, but work well if they feature licensed properties.

Licensors need to move quickly in this heady fashion environment. It can take just eight weeks for Topshop to get jersey items from drawing board to hanging rail. That's a swiftness licensing isn't often associated with, particularly in the gift and home sectors.

It's hard to say what sort of characters work best for Topshop but Caren says what the designers look for is the ability to take an ordinary character and turn it into something interesting. This is one of Topshop's defining traits. 'The key thing is that we have to make the licence fashionable. As the fashion leaders on the high street we can't do ordinary t-shirts or predictable stuff. We have fresh eyes on things at every stage.'

Once in store, each product has a carefully monitored life span. Hello Kitty, for example has been very successful but will eventually make way for the next thing. Fashion takes no prisoners and when your time is over, Topshop is onto the next thing as quick as a flash. Be there, or be square.

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