The US is the worlds largest apparel market

The US is the world's largest apparel market

North America may no longer take centre stage in the global apparel market, but the recession has by no means sounded the region's curtain call, according to Euromonitor International.

Valued at US$400bn, it was the world's third largest regional apparel market in 2012. This was on account of the US, which still plays the protagonist role as the world's largest apparel market.

Recovery has been fragile but positive, placing it ahead of Western European markets. Canada's growth trajectory has paralleled that of the US, but its market size remains diminutive in comparison.

North American apparel markets 2012:

  Market size, US$ billion % Growth 2011/2012 Sales per capita, US$
USA 362.6 2.2 1154.9
Canada 37.3 3.5 1071.9

Source: Euromonitor International
Note: Retail value RSP, current prices, fixed 2012 exchange rates

Star-spangled allure for international brands
A number of international apparel brands which have so far succeeded in targeting other markets are turning their attention to US consumers, acknowledging the fact that winning them over plays an integral role in progressing globally.

There has by no means been a one-size-fits-all approach to tackling this hefty, heterogeneous sales base.

In its bid to become the world's largest retailer by 2020, Fast Retailing (operator of the Uniqlo casual clothing chain) has favoured limited but impactful moves. These have taken the form of large-scale flagship stores in prominent city locations teamed with the launch of its US e-commerce platform.

H&M, on the other hand, has adopted a full-speed approach to store expansion, bringing its US store total up to over 260 (as of February 2013), although it has delayed the launch of its internet site for a second time.

Inditex has opted for a multi-brand strategy. While its Zara brand is far from reaching saturation point with a mere 45 stores, the retailer introduced its second label, Massimo Dutti, in New York in October 2012 to chase a more affluent demographic.

Home-grown brands change their tactics
The infiltration of fast fashion has inevitably changed the competitive landscape for domestic players, forcing them to revise their strategies. Change has been most evident at The Gap, which has effectively reversed its declining sales by streamlining its North American operations and investing in marketing and trendy products to regain fashion credibility.

While some are swimming, others are sinking. Abercrombie & Fitch has been struggling in its home market as its ubiquitous and pricey wares are no longer deemed "cool" by its target market of teens and young adults. As a result of this, the company has made the decision to tighten control over its distribution through store closures. Although this has led to some improvement, overseas consumers remain the key drivers of its growth.

Cross-border activity heats up
Canada's economic stability has also been a source of magnetism for international brands, particularly US ones.

Perhaps no one issue has impacted the Canadian market more than the anticipation of the entry of US-based mass merchandiser Target Corp, which is expected to open as many as 120 stores in the coming years.

In preparation for Target's entry, Canadian retailers have been reassessing their strategies, seeking to either grow their presence in the market prior to Target's arrival or look inward and focus on their key strengths, products and consumer base.

A key issue for US brands entering Canada will be managing price differentials. This emerged as a point of contention for J Crew when it entered the market in 2011. Excessive price differentials encourage Canadian consumers to take shopping trips to the US.

However, the Canadian government's recent decision to remove existing tariffs on baby clothing and sports equipment heralds a step towards closing this gap.

Price-sensitivity remains a legacy of recession
Despite a positive growth trend, the North American apparel market remained polarised in 2012 as consumers continued to gravitate either towards lower-priced, value-oriented apparel or higher-priced, strongly branded options.

In their hunt for value, consumers have fostered the growth of outlet stores and speciality apparel discounters, both of which sell excess inventory from regular-priced retailers at heavily discounted prices.

Discount concepts such as Ross, TJ Maxx and Marshalls led sales in the apparel specialist channel, and saw consistent growth in value sales over the review period. In 2012, Burlington Coat Factory opened a flagship store in New York City, highlighting the growing profile and social acceptance of these channels.

The widespread reach of off-price retailers and an extremely price-savvy consumer base have placed pressure on department stores. Many have engaged in heavy discounting and frequent promotions, or growing their own off-price outlets. The ongoing tribulations of US national chain JC Penney are testament to shifting consumer preferences.

Private label in vogue
Private label ranges have assumed new importance. In Canada, growth is being led by Loblaws' Joe Fresh line, which successfully operates standalone stores across Canada as well as five in New York. In the hope that some of the line's popularity will help flailing sales, JC Penney has launched Joe Fresh 'shop-in-shop' concepts across 700 of its US stores.

In the US, department stores have been investing in private label and exclusive collections as a means of regaining sales lost to the internet retailing and apparel specialist channels.

High-end designer collaborations have been a well-used tactic, but complexity does not always pay. This point was illustrated by premium department store Neiman Marcus's collaboration with Target and 24 American designers for the 2012 holiday season, which ended up on sale only three weeks after its launch.

Premiumisation of sportswear
One category which has emerged as a key driver of value sales in North America has been sportswear.

In the US, sportswear sales grew by an impressive 8.3% in 2012, compared to 2.2% for apparel overall. Success can be attributed to the booming popularity of individual sports such as running, cycling, yoga and pilates.

While price remains an important consideration, sportswear consumers are more conscious of product quality, innovation and performance level than in other apparel categories.

This increased willingness to pay more has supported the sale of premium brands such as Nike and Lululemon. Many brands have also turned their focus towards female consumers, who desire the same level of high-quality sportswear as male athletes but with a fashion aspect.

North American market retains strategic importance
According to Euromonitor International, growth in North America will continue to outpace that in Western Europe, with the region marginally overtaking its contemporary by 2017.

While China will finally overtake the US to become the world's largest apparel market by 2017 in terms of sales, the US will remain a hub for retail innovation and fashion development.

Apart from a retail push from international brands, the increasing sophistication of the online channel, notably through the advancement of m-commerce and s-commerce (social commerce), is expected to characterise the future apparel market landscape.