The UK is expected to see positive retail sales growth in the next five years

The UK is expected to see positive retail sales growth in the next five years

From the home of haute couture to a hotbed for disposable fashion, Euromonitor International assesses the recent performance of the Western European apparel market.

After being dethroned as the world's largest regional apparel market in 2009 by Asia Pacific, Western Europe continues to slide down the global rankings in terms of value sales.

2012 saw a deepening divide between Western Europe and North America. While the former showed a return to growth, the latter remained weighed down by the eurozone crisis. Western Europe's growth was virtually static in 2012 at 0.6%.

Yearly growth was led by Turkey, where rising prosperity and an associated shift towards branded products facilitated a strong value sales gain. The UK also stood out as a strong performer in 2012 on account of buoyant tourism inflows.

While four of the world's top five markets in terms of per capita apparel sales in 2012 were Western European, all suffered from sluggish growth as cash-strapped consumers remained hesitant to increase their spending on discretionary categories.

Western Europe: Top five apparel markets 2012:

  Market size,
US$ billion
% growth 2011/2012 Sales per capita,
US$

Germany

82.1

2.0

1,003.7

United Kingdom

75.1

3.6

1,191.7

Italy

62.8

-1.6

1,031.4

France

53.7

0.2

845.6

Spain

29.5

-3.9

639.2

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

Prices on a downward spiral...
Arguably, the most definitive aspect of the Western European competitive landscape has been the proliferation of cheap clothing.

The region's fragile macroeconomic conditions and increasingly price-savvy shoppers have supported sales of fast fashion and grocery private label lines. In the UK, a fifth of total apparel sales came from private label. A clothing line is now part and parcel of the supermarket offering and in February 2013 the last of the UK's four largest supermarkets, Morrisons, made its entry into childrenswear.

However, despite a heavy media backlash against cheap clothing brands and growing ethical and environmental concerns, "fast fashion fatigue" remains more of a hypothetical notion than a reality.

This is best illustrated by the superior performance of leading cheap chic purveyor Primark. The brand's sales show no sign of cooling as it progresses with retail expansion in continental Europe, with its first stores in France set to open in 2013.

The success of value formats was coupled with intensifying price competition, with off-season discounting and promotions becoming an almost permanent facet of the retail environment.

In France, where sales were once state-regulated, the government has been allowing additional periods of sales called "soldes flottants" (floating sales) in light of the weak economic conditions.

...but signs of fatigue materialise
However, this "race to the bottom" in apparel prices remains unsustainable in the long term. In many markets, such as Sweden, discounting strategies have reached a point of exhaustion, with growing signs of consumers suffering from so-called "sales fatigue" as their consumption habits become immune to ongoing promotional activity.

There are also signs that consumers may be prioritising quality over quantity when it comes to clothing purchases. After all, alongside the value segment, the "affordable luxury" category also benefited from the recession as consumers sought out high-quality investment items at relatively accessible price points.

In a bid to cater for this mindset, H&M launched premium label & Other Stories in early 2013 in seven markets across Western Europe.

Moving forward, higher-end brands are likely to benefit from the region's demographic shifts.

Western Europe is ageing faster than other regions of the world. The 50+ age group will see the largest expansion across the region's major apparel markets. With higher disposable incomes, these more mature consumers are likely to invest in higher priced and higher quality apparel, with brands and retailers adjusting their strategies to cater for this demographic.

Tourists keep the cash tills ringing
Western Europe's historical and cultural richness continued to lure travellers worldwide. For many brands, a physical presence in key fashion capitals like London, Paris and Milan serves as a hallmark of style credibility.

While domestic consumers have boosted sales of economy brands, tourism inflows have been the saviour for luxury labels. In fact, designer apparel has been generally outperforming the overall apparel market, due in large measure to cash-rich tourists shopping for luxury. For example, in Italy, designer apparel grew by 4% in 2012 while the overall apparel market declined by 1.6%.

London in particular remained a magnet for tourists in 2012, with the dual events of the Queen's Jubilee and the London Olympics providing a lift to retail sales. Rents are escalating in the shopping meccas of Oxford Street, Regent Street and Bond Street as brands vie to secure stores in these prominent locations.

Sportswear received Olympic boost
As in North America, sportswear in Western Europe outperformed the overall market, registering a 1.4% growth rate in 2012.

Growth was led by the UK, where the media fanfare surrounding the London 2012 Olympics fuelled interest in mainstream and niche sports. However, this heightened interest is evanescent in nature, with the lift in performance sportswear sales being a temporary spike rather than an enduring growth curve.

Western Europe's price-conscious environment has also opened up the sportswear market to high street apparel brands. These include H&M, which opened two dedicated sportswear pop-up stores in the UK in time for the Olympics, and Uniqlo, which entered the fray by signing a five-year deal with leading men's tennis player Novak Djokovic.

While they are yet to take on sportswear titans Nike and Adidas in terms of technological expertise, their widespread retail presence and established brand equity hold them in good stead to capitalise on the growing demand for sports-inspired clothing and footwear.

Future prognosis
Moving forward, the Western European apparel market is expected to contract by US$2bn over the next five years, with North America overtaking it in terms of market size by 2017.

While a number of markets, including the UK and Germany, will witness positive sales growth, overall regional performance will be dragged down by the ongoing woes of Italy, Greece and Spain.

However, in spite of the region's weak prospects, ageing demographics and price-sensitivity, it will retain its strategic importance on the global stage due to its established position at the forefront of fashion design and tourism.