just-style management briefing: Global clothing retail trends
For some it was a total disaster, for others a bump in the road, but the recession left no part of the clothing and textile retail sector unscathed. But now, as the economic recovery accelerates, global clothing retail trends are showing great diversity.
World Trade Organization (WTO) statistics from 2009 show that while globally important manufacturing jurisdictions such as China and the European Union (EU) suffered 11% and 15% drops respectively in clothing exports, countries such as India, Vietnam and Bangladesh lost just a couple of percentage points and, in India's case, exports remained stable.
Local demand also slumped in Europe, the United States, Canada, and even in smaller western markets like Australia, as analysts declared 'sobriety is the new black'.
One study by the International Council of Shopping Centers showed that 45% of American and Canadian shoppers cut back on all kinds of retail purchases in 2009, and more than 50% did so as a precautionary measure or for an economic reason.
And the recovery has been anything but robust: recent Eurostat figures show just a 1.3% increase year-on-year in December 2010 clothing retail sales for the EU, which actually represents a backward slide after the improvements of mid-2010, when a turnaround in consumer sentiment appeared more evident.
A different story in Asia
Egged on by government encouragement and subsidies, China radically increased its domestic apparel consumption to compensate for the drop in exports, with sales following the trend of the last two years and increasing over 22% year-on-year in the first two months of 2011 according to the Chinese National Bureau of Statistics.
The Hong Kong Retail Management Association reported a 17.1% increase in apparel sales year-on-year at December 2010, and Indian super retailer Pantaloon posted a 22% jump in value fashion sales last year.
However, demand in the region's key mature market Japan slumped, with the Japanese Statistics Bureau reporting a 3.7% drop in local expenditure on clothing and footwear in 2010.
Multinational retailers also weathered the recession reasonably well. Swedish retail giant Hennes & Mauritz (H&M) last year increased sales by 15% and made a profit of SEK25bn (US$3.9bn), while Spain's Inditex (owner of Zara) posted a 14% sales increase in the first nine months of 2010, and a gross profit of EUR5.3bn billion over the same period, an increase of 20% on the previous year.
In the United States, Gap fared less brilliantly, increasing sales last year by just 3%, which nonetheless represents a positive change on previous years' losses.
Rapidly changing landscape
While Asian retail markets - including smaller markets such as Vietnam and Indonesia - appear to be significantly more optimistic than Europe or north America, retailers worldwide are faced with a rapidly changing landscape.
Rising raw materials prices and wages pressure are set to have an important impact on manufacturing countries this year, while political unrest in Arab countries and the ensuing speculation on oil prices, not to mention the devastating Japanese earthquake and its knock-on effects, will almost certainly have an impact on markets, sourcing and prices.
As traditional markets struggle to return to pre-recession trade, BRIC emerging market giants could offer viable supplements, with China's irresistible growing middle classes topping the list. India is also proving an attractive option despite caps on foreign ownership, with expanding industries such as telecommunications laying the foundations for a fertile retail environment.
According to Pantaloon's 2010 end-of-financial year report: "Middle class proportion is expected to rise from 6.4% in 2005 to 25% in 2015 and 46% by 2025, controlling between 44% and 58% of total disposable income in the country by 2015 and 2025 respectively."
Inditex opened its first Zara store in New Delhi in May 2010 and currently operates four stores across the country, while H&M, Gap and Benetton all have a presence.
Sue Dean, brand strategy and international development consultant at The Chambers retail consultancy has worked extensively in Asia and Europe and says she has observed clear differences in the recession recovery underway in many parts of Asia as opposed to the UK and Europe.
"Shanghai for example is a very buoyant market and things are growing fast. Brands like H&M are really popular there because they are great value for money," she said.
Ms Dean added that the recession has altered consumer habits. "In all parts of the world there has been some kind of recession and the customer does come out feeling differently. I think it's about value for money. Which doesn't mean luxury is not value for money for some people, but there is now a different appreciation for quality and well-made garments," she said.
Meanwhile, online retailers have gone from strength to strength, with asos.com and yoox.com just two apparel retail portals that posted consistent and high year-on-year profits despite the recession.
And in the tangible world, technology is being utilised in traditional store retail as never before, from touch screen shop windows and RFID garment tracking to mobile phone apps and viral 'blogospheres' used to indirectly create brand awareness or fidelity.
Clicks and bricks - making e-commerce and technology work together with traditional storefronts - appear to have finally evolved into something to which retailers understand and customers respond.
The Bocconi University (in Milan), the Benetton Group and Telecom Italia wound up an study last year called 'The Future of Retail' using data from China, the US and Europe to analyse the convergence of technology with traditional retail models.
Professor Margherita Pagani of the Bocconi University said that the study showed a significant trend in the use of social media by both mass-market and luxury brands, channelling social conventions such as word-of-mouth recommendations and even exclusivity into successful (and lucrative) e-commerce.
Examples considered by the study include Ruelala.com, an invitation-only website akin to an exclusive country club where members must be introduced by other members to have access to the site. It is used by even the largest luxury brands as a showcase for special offers and direct sales.
"Both well-established brands and unknown brands can use these democratic kinds of technology to grow their brand awareness...we know that social media count in purchasing decisions, and if the competition is present, you need to be there too," said Prof Pagani.
"It can be a double-edged sword however, because you cannot always control the information that is being put out about your brand."
Brand participation is becoming an increasingly important factor for wired consumers according to Prof Pagani. Facebook pages and Twitter posts to build brand fidelity and interaction have been extensively deployed by sites such as express.com, but some have taken it even further, using online consumers to drive production.
This approach was pioneered by threadless.com, a site established in 2000. The site is a user-driven or 'crowd-sourced' T-shirt factory that allows artists to submit their T-shirt designs on-line. Web-site users (and potential customers) rate the designs, and the most popular are printed.
Artists receive a one-off fee of US$2000 plus a voucher if their design is printed and a smaller fee for every re-print. The site sells more than 1m T-shirts a year, it is claimed.
By Lee Adendorff.
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