5 min read
This story originally appeared on ValueWalk
After COVID-19, clothing retail will never be the same. The industry is facing one of its most aggressive transformations driven by the stinging growth in online sales, and is now poised to devise its own strategies to keep up with the soaring e-commerce trend.
From data analysis and cost reduction to omnichanneling, how is the apparel industry adapting to the new reality, and what are the strategies they are implementing to succeed?
Online shopping soaring
According to statistics, the apparel market in the U.S. was valued at roughly $368 billion U.S. in 2019, with leading retailers such as TJX and Macy’s reporting over $20 billion in sales each. The same year, global retail sales of apparel and footwear topped $1.9 trillion and were expected to rise to above $3 trillion U.S. by 2030.
And the healthy predictions in the U.S. are certainly backed by the enormous soar of e-commerce.
As reported by Retail Dive, the trend grew 30% in 2020, the fastest rate since 2002. Clothing, accessories, and footwear seized 19% of all U.S. e-commerce sales growth, even as overall apparel and footwear spending declined during 2020. According to estimates, digital sales in the clothing category will reach 47.5% by 2024.
There is no denying that the fashion industry continues to have positive growth, especially in emerging markets within the Asia-Pacific and European regions, with the former forecasted to achieve a 38% share of global apparel demand by the end of this year. In the U.S., the trend is certainly no different.
Apparel giving more way to e-commerce
According to Paul Martin, head of retail at KPMG, the disruptive nature of COVID-19 has only accelerated existing e-commerce’s upward tendency. “In fact, the pre-pandemic change can be easily illustrated in just a few statistics: e-commerce retail sales are expected to increase by almost 17% CGAR between 2010 and 2024.”
Before the pandemic exploded, almost 16% of sales took place outside of stores, so KPMG asserts that the shift towards digital channels was already well advanced. Analysts predict that a significant share of last year’s growth will stick among consumers, who have become more used to purchasing online.
In the case of the clothing industry, statistics show that e-commerce sales of fashion apparel, footwear, and accessories represented around 29.5% of the industry total, with an estimated revenue of $110.6 billion.
Further, fashion e-commerce sales are projected to grow to almost $153.6 billion by 2024. The trend is already locked on as electronic shopping and mail-order house sales of clothing and clothing accessories in the U.S. in 2018 topped $75.4 billion.
Big data to analyze consumer trends
With such an outlook, clothing retailers are now scratching their heads as to how to cope with the disruptive growth, and be able to meet apparel consumers’ new purchase expectations.
According to Retail Dive, since 72% of all retail purchases will continue to be offline by 2024 –including apparel– those retailers able to offer consumers the best of both digital and physical shopping worlds are the ones to meet the greatest success.
“Those retailers able to quickly embrace emerging consumer and worker trends will have a competitive advantage in this age of accelerating disruption,” says KPMG’s Paul Martin.
According to Baby Outlet CEO Huyen Vu, “apparel retailers should get hold of big data applied to all scales to understand the new consumer habits. Big data will give retailers insight as to how many times consumers visit a store, both physically and online, know their tastes, and make tailored offers that respond to their needs.”
Vu asserts that “while consumers are looking for more immersive situations and the product range is becoming a critical differentiator among retailers. More interesting is the fact that despite 71% of consumers say they are concerned about data privacy, 66% are willing to share it.”
Paul Martin asserts that those retailers considered non-essential during the lockdowns may need to reduce costs by 20% to 50%. “Even those considered essential in the pandemic will have to reduce costs by 10%. and 20%.”
How could this be achieved in the apparel business? Clothing retailers must review their product range to strategically select the right assortments to increase efficiency and profits. Further, “apparel retailers should rethink real estate assets given the boom in online shopping and the trend towards showrooming –where consumers can try products before buying online.”
In mid-June, real state Washington Prime Group, owner of 102 malls in the U.S including the Polaris Fashion Place mall, filed for bankruptcy citing the failure to adapt to the rise of e-commerce.
In the last year, the pandemic brought down several of its fashion retailers such as Brooks Brothers, J. Crew, Aldo, Stein Mart, and New York & Company, which underlines retailers’ need to “rethink their physical footprint and the value these assets offer to the organization and customer experience.”
A good example of this is Inditex, in Europe. The Spanish giant announced the closure of 1,200 stores worldwide –300 of them located in Spain– to implement Open Platform, a program with which the retailer plans to sustain its digital development to offer consumers the best online and in-store experience.
The reality is that apparel retailers are not going to give up to retail giants such as Amazon Inc (NASDAQ:AMZN), and should dash into implementing omnichannel strategies to preserve their operations and avoid the store becoming a collection of delivery points.
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