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Can the clothing sector break the deadlock? [Research]

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The analysis of the statistics of the clothing sector in France allows us to understand the basic trends and anticipate the future. Under pressure from the increasingly digital Covid, the clothing sector is dominated by fast fashion giants whose model threatens the survival of independent shops. The forthcoming period of declining purchasing power is likely to widen the gap even further. In conclusion, we have identified 3 specific points to question the sector’s future.

Statistics on the clothing sector

  • 13 years in the red: the clothing sector has lost value every year for 13 years
  • 38%: the effect of confinements on the sector’s turnover
  • Between 2019 and 2021, traffic in clothing stores fell by 17%: this is more than the drop in traffic experienced by all stores over the period
  • +13%: the ratio between the number of sales realized and the number of people entering clothing stores is up 13%. This is primarily due to the lower footfall in sales outlets.

Summary


Clothing, hard hit by the crisis Covid … except for the fast-fashion giants

Even before Covid, the clothing sector was suffering. The domination of fast fashion giants such as H&M and Zara had already driven down the value of textile purchases for 11 years. Their strategy has allowed them to take over a large part of the market share and widen the gap with the competition. Zara’s turnover in 2021 will be 27.72 billion euros, an increase of 36% compared to 2020.

This success of fast fashion is well reflected in the frequentation and spending of Millennials. Research conducted on 50,000 customers showed that Zara was their favorite brand. Millennials come on average 7.1 times a year and spend 42€ per visit. This is much more than for the competitor H&M (5.9 visits/year and 27€ of the average basket.


Millennials go to Zara on average 7.1 times a year and spend €42 per visit.



The situation remains difficult for multi-brand independents

On the other side of the spectrum, independent multi-brand stores are suffering. While the 2022 figures are rather good for specialized chains such as H&M and Zara (+3% on a like-for-like basis), independents have still lost 5.6% over the same period.

The gap continues to widen and is not likely to stop. The trend is to save money because of the loss of purchasing powerRecycling and second-hand goods are, therefore, on the rise. We can also think that, despite its drifts, fast fashion will reinforce its advantage over the independents in 2022, aggravating the rate of their disappearance.


Clothing stores located in train stations saw their turnover plunge by 13% in 2021.



What are the best locations for clothing stores?

Comparing sales figures by location holds some surprises. Despite the strong recovery in 2019, the location of the sales outlet seems more decisive than ever. Judge the effect of location on the evolution of clothing outlet sales. While outlets and retail parks grew by 8% between 2019 and 2021, clothing stores in train stations saw their sales plummet by 13%. The impact of the shift to telecommuting is evident here. The transition to destination retail is even more brutal than what could be expected before the Covid crisis.


What will the clothing market look like in the future?

It is, of course, difficult to predict the future of a sector as large as clothing. Nevertheless, we can still venture some predictions based on the trends detailed above.

What future for the mid-range?

As in other sectors, the mid-range is also under pressure in clothing. On the one hand, there is the steamroller of fast fashion groups. On the other hand, a drop in purchasing power encourages customers to unconsciously renounce their good environmental conscience to give in to the sirens of consumerism. In the coming years, we expect to see the gap between the low-end and the high-end become even more expansive. Brands that are trapped between these two extremes are likely to suffer.

Will there still be independent stores in city centers?

The title may seem exaggerated. But given the decline in the number of visitors to city centers on the one hand and the disaffection for independents on the other, the question deserves to be asked.

In our guide to choosing a retail location, we highlighted the concentration of sales outlets around major arteries. With rents rising, it is possible that independent stores will be pushed out of the market in the medium term and will no longer be able to afford to be present anywhere other than in unattractive secondary locations.

Digital competition

E-commerce has, of course, taken advantage of the Covid crisis to expand its footprint. But does the growth in food retail herald what the clothing sector can expect? We don’t think so. Clothes are not a commodity like food can be. It is still, and above all, an impulse product that must be discovered and tried on. It has a particular experiential dimension that protects it from the competition of 100% online.

However, we must not delude ourselves. Clothing stores must integrate this digital dimension and be phygital. The customer doesn’t want to wait anymore. The sales outlet must therefore be a showcase rather than a stockroom. It must become a “bridgehead”; Zara is thus implementing an integrated stock strategy that turns each store into a mini data center connected to its IOP (Inditex Open Platform). This interconnection between the real world and e-commerce explains why Zara already realizes 25.5% of its turnover from online sales.

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Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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