Apparels: Industry Analysis
The Apparel and accessories retail industry is fragmented and includes clothing stores for men, women, kids, jewellery, accessories, footwear, luggage, and leather products.
The apparel, luxury goods and accessories industry accounts for over 55% of the overall global market, might generate $3,180 billion in 2015. The Compound annual growth rate of apparel market will be 4% by 2020 with an increase in the online sales and the revenue might show a modest increase and reach US $1,369 billion in 2017.
After several years of strong revenue growth, the global apparel industry has started to suffer due to less demand since 2009. High-priced apparel lost demand in European, the United States and Japanese market. The demand for apparel in emerging markets like China still had growth but didn’t have much impact on the overall growth. The annual revenue is continuously declining at the rate of 0.2% till 2013. It is estimated that the overall apparel industry revenue will be US $577.5 billion this year.
It is estimated that the medium term GDP growth rate for the major contributors will be less than 5% except for countries like China and India.
It is found that the key industry participants are now shifting their manufacturing operations to low-wage countries to minimize the cost of production. They have also started sourcing products from independent contractors. China has emerged as the primary source for apparel and accounts for 38% of total industry exports. Countries like India and Bangladesh, are being considered as the key manufacturing regions.
Population growth, increasing middle class population, double income families, and urbanization will help in driving growth.
Growth in Online Apparel Industry
The start of eCommerce has made clothing and accessories readily available at your doorsteps in just few clicks. This effect is pronounced in countries like China, where the online apparel shopping almost doubled from 3% in 2011 to around 7% in 2012. Internet continues to rule the apparel industry causing brick and mortar retailers switching to online stores. Lots of online apparel companies continue to start, increasing the overall competitive pressure on small retailers. The ease of purchase, best deals and offers has helped in this quick boost in online revenue. The online apparel channel is stealing the market share, due to which apparel retailers and stores have started investing in creating online eCommerce portals to rebuild their appeal.
Some of the top online apparel websites are shown below.
The global kids wear market is estimated to exceed $186 billion by 2014, and menswear industry is expected to cross $402 billion. The leading market for men segment is clothing and footwear, with around 58% of the overall market. The women wear industry will beat $621 billion in 2014. The leading market sub segment is clothing retailers.
The apparel industry is now shifting its hold to East and to South. It is found that the spending power in developed countries is constant, while it is growing at a significantly faster rate in the emerging markets. Companies will now have to re-organize themselves to understand the new market trends, and serve customers in the emerging markets.
Something for the beginners
The best thing about the apparel industry is that initially is does not require large capital. Anybody can set up an independent apparel retail store. It is much easier to set up such stores in countries like India and China. Industry entrants may face problems like retaliation from existing players. Based on the market segment retailers selling apparels can try offering diverse products. Those emphasizing mainly on clothing only might face some rivalry, since the overall industry performance is just moderate and might continue the same trend in the coming years too.
The biggest challenge faced by the apparel industry in 2014 is sourcing and need for improved visibility in supply chain. The instability is continuously increasing in the apparel retail.
Other issues include sustainability, compliance, and product safety. Cost continues to be a major problem with issues like minimum wages, increasing inflation, currency exchange and utility cost.
Another problem facing apparel industry is the ready availability of raw materials and securing their raw materials base.
There is an increase in the number of manufacturing supply as compared to demand thus increasing competition.
Retailers are also facing the challenge of keeping customer excited to buy new apparel, now for every festival shopping, people focus on buying tech toys than apparels. Retailers will have to find ways to attract customers in an innovative way, offers and discounts will not do much anymore.
The figure below shows the present and future trends of the supply chain for apparel industry.
Recent Mergers and Acquisition in Apparel Industry
This year we can see a lot of merging and acquisition in the apparel industry. Recently, apparel maker Phillips-Van Heusen, the holder of Calvin Klein, has made a deal of $ 4.1 billion to buy the US brand Tommy Hilfiger. This year will have better hopes for apparel industry. Fashion executives of Paris and Milan state that orders have started to make pace strongly since January 2014. Emerging markets are showing interest in European markets. Big players of China have bought shares of big profits European luxury companies. Big players are following fashion house Gianfranco Ferre and Malo, which have been put on sales by Italian group IT Holding. A cash-rich player Richemont, which makes Lancel handbags, is finalising deal with the online fashion retailer Net-a-porter.com. It is found that big apparel industries are also targeting the US jewellery group Bulgari and Tiffany, which are two medium-size companies having great potential to prosper.
In future we will see more of sustainable apparel industry. The problem of shortage in raw materials will have to be addressed. There is every chance that technology might influence fashion and apparel industry in production and sales. The issues related to reuse and re-manufacturing of clothing will be developed based on demands and prices. Wearable Computing is catching steam and we will see a lot more apparels tagged with embedded chips and intelligent fabric (chips and computing embedded in the fibre... read nano tech).
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