The trade struggle between the US and China coincides with a changing apparel market that is getting more complicated and confusing to navigate, writes Robert P Antoshak, managing director of Olah Inc.
With all the talk of trade wars and anaemic global growth, I think it’s important to step back, take a breather, and re-examine our market. What are our customers – by that, I mean shoppers – doing these days? When viewed from the inner-workings, the buying and selling of apparel, higher tariffs can appear as an abstract concern. What matters most, said the store owner, is what’s sold today!
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Even so, I don’t mean to imply that the effects of the trade struggle between the US and China are inconsequential. Far from it, but I think it’s useful to understand the trade fight in the context of the marketplace for clothing. Indeed, the trade fight is adding to the overall slowdown in global economic growth. But in fact, global performance has been slowing for some years. So, if anything, the trade wars have only accelerated what had been an already weakening global economy.
Which brings me back to the core apparel market: How are retail sales these days? For some stores, sales are good, while others are struggling. On balance, however, overall apparel sales, at least in the US, are flat, if not declining. There are several factors at work contributing to the slowdown in sales. But the major ones include changing consumer demographics, competition from non-apparel products (such as consumer electronics), a homogenisation of product offerings and, finally, the impact of online shopping. Let’s take a look at each factor.
Consumer demographics
For affluent Millennials – the so-called Bridge Millennials – 30% switched or tried a new merchant in the last 30 days. That’s a lot of movement
The shopper of clothing in recent years has changed. She’s younger, a bit more careful with her money than her “Baby Boomer” parents. And she’s more inclined to use the internet to research and purchase products directly. It sounds like I’m describing the infamous “Millennial” demographic. Gosh, I’ve seldom seen so many analysts spend so much time trying to understand Millennials – so much so, that I hear it may become an Olympic sport!
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By GlobalDataA recent study by the analytical group PYMNTS.com, sheds light on “the shopping experiences of modern apparel and consumers of all ages, providing a detailed account of how their favourite shops are adapting to an evolving commercial landscape.” Here are some interesting facts from the study: Millennials make an average of 19.3 purchases every year, which compares to 15 on average for other groups. Next, 25% of “Bridge Millennials,” more affluent consumers aged 30-40, that buy online, prefer Amazon. Moreover, 50% of consumers prefer omnichannel shopping experiences. Additionally, 71% of consumers shop online for apparel and accessories.
Perhaps not surprisingly, 50% of consumers cited selection or price as an essential in-store feature in their purchasing decision-making. Most interestingly, however, was brand loyalty. For affluent Millennials – the so-called Bridge Millennials – 30% switched or tried a new merchant in the last 30 days. That’s a lot of movement, for sure. Previous generations of shoppers exhibited higher brand loyalty, often purchasing their clothes from a limited set of brands and stores – something that stands in sharp contrast to many of today’s younger consumers.
Competition from non-apparel products
The importance of changing consumer tastes on what they spend their money on is a watershed moment for our industry
What’s the most significant challenge to apparel sales? Mobile phones followed closely behind by other consumer electronics like computers, TVs, etc. The list goes on and on. I’m far from the first person to comment on the impact consumer electronics has had on clothing sales. But the importance of changing consumer tastes on what they spend their money on is a watershed moment for our industry.
There was a time when clothing purchases dominated consumer expenditures. But that is no longer the case. There are more things to attract the attention of consumers. Take a look at the following graph, and I think you’ll get the idea:
It’s not that clothing sales have disappeared, but their share of a growing consumer market has gotten smaller compared to overall consumer spending.
In a recent article published in Bloomberg, entitled “The Death of Clothing,” the problem is well expressed: “The apparel industry has a big problem. At a time when the economy is growing, unemployment is low, wages are bounding, and consumers are eager to buy, Americans spend less and less on clothing.”
The homogenisation of clothes
No wonder so much so-called fashion these days looks the same. It’s an essential moniker of fast fashion. Oh, and did I mention that it’s cheap?
I’ve heard from clothing aficionados that fashion has become homogenised. Clothes look the same. Jeans are jeans; T-shirts are T-shirts, and so forth. There’s nothing special. So many products, regardless of brand, are made in many of the same factories, shipped under similar design and production guidelines, and merchandised to consumers the same way. Everything is the same; change a colour here, a hem there, but so much clothing looks alike to consumers. There’s a sameness that makes shopping uninteresting and unexciting.
There’s a name for this model of mass production and sameness: “fast fashion.”
Fast fashion is an answer to flat or declining sales. As has been well-documented, the middle class in the developed world has taken quite a hit over the past few decades. Despite that, much of the industry adopted the rapid replenishment scheme to keep consumers buying clothing. At the same time, however, a strategy that was developed to improve sales at brick-and-mortar stores has played into the hands of online retailers such as Amazon.
Indeed, fast fashion functions on a high-turnover, low margin, mass-produced model of production – much of which is perfect for many online retailers. And it’s cheap. No wonder so many physical stores are getting crushed in this market! Fast fashion has resulted in a cheapening of clothing – in effect squeezing sales from consumers who have less disposable income for clothes than was the case as recently as 20 years ago.
No wonder so much so-called fashion these days looks the same. It’s an essential moniker of fast fashion. Oh, and did I mention that it’s cheap?
The impact of the internet
The internet represents an existential threat to physical retailing. How will traditional stores respond? To date, not too well. To cite the Bloomberg article mentioned above: “The woes of retailers are often blamed on Amazon.com Inc and its vice-like grip on e-commerce shoppers. Consumers glued to their phones would rather browse online instead of venturing out to their local malls, and that’s crushed sales and hastened the bankruptcies of brick-and-mortar stalwarts.”
Although it’s undeniable the internet has altered our market by changing consumer attitudes toward how and where they buy clothing, “that’s not the whole story. The apparel industry seems to have no solution to the dwindling dollars Americans devote to their closets,” says Bloomberg.
Without an adequate way of competing with online offerings, “apparel has simply lost its appeal.” After all, as Bloomberg goes on to explain, “who needs fashion these days when you can express yourself through social media [instead]?” It’s an interesting question with scary implications for our industry.
So where does this leave us?
Well, sales of apparel have slowed. There’s no getting around that, while the products offered by many retailers in our industry look alike. The only real differentiator is price – which has been typified by a race to the bottom. Apparel has become commoditised. At the same, however, shoppers have changed: they’re younger and more cautious with their money. Many of them actively shop at fast-fashion retailers, but they also tend to spend more of their carefully earned money on mobile phones than clothing every year. Talk about a mixed bag!
Which brings me back to the trade wars. The trade fight between the US and China weighs on our market in several ways. There’s uncertainty, rising costs, and unforeseen consequences – hardly the stuff of proper business planning. Sourcing has changed, and if Trump proceeds to add consumer goods to his tariff offensive, more and more companies will feel compelled to look elsewhere for production. As though our market wasn’t complicated enough and confusing to navigate, now we have trade wars with which to contend. It’s ugly.
And then there are the environmentalists asking our supply chain to clean up its act. Yikes! What’s next?
