London - As competition intensifies in global apparel and footwear, market leaders are moving away from traditional business models and mature developed markets; seeking new kinds of growth from new sources. Ethical fashion is thus to grow into one of several mainstream tools that rivals use to stand out from a growing crowd of increasingly agile competitors. As ethical fashion moves out of a niche product segment, innovative ethically and sustainably produced brands will see far greater opportunities for growth than at any point previously.
Growing demand for fashion globally
The world’s second largest consumer goods industry, apparel and footwear, recorded retail sales values of 1,786 billion US dollars in 2018. Despite its maturity and sheer size, rising global demand for fashion saw the industry record 1.8 percent in retail value growth in 2018, up from 1.4 percent in 2017. Global retail value sales are forecast to expand at a 2 percent compound annual growth rate (CAGR) between 2018 and 2023, to reach a value of 1,983 billion US dollars by 2023.
Asia Pacific driving global sales of apparel and footwear
Asia Pacific remained the largest regional market in the world by a significant margin. Regional sales were valued at 653 billion US dollars in 2018, representing 37 percent of global apparel and footwear sales. Asia Pacific also recorded the fastest growth of any region, as its retail values expanded by 4 percent in 2018. The region is expected to continue to lead the way, with a value CAGR of 3 percent over 2018-2023. Led by India and China, rising populations and a rapidly expanding base of increasingly wealthy and fashion-conscious middle-class consumers will continue to support apparel and footwear sales in the region.
Ranked by the size of their value growth between 2018 and 2023, the top 10 apparel and footwear markets, with combined sales of 1,039 million US dollars, accounted for 58 percent of global sales in 2018. After outpacing the US to become the world’s largest single market for apparel and footwear, China is forecast to continue driving global sales. China is projected to grow by 65 billion US dollars over 2018-2023, compared with growth in the US at 29 billion US dollars. Following China and the US, India has expanded into a markedly more attractive market for apparel and footwear businesses. India is expected to grow by 36 billion US dollars over 2018-2023. This market will record the fastest forecast growth at a 9 percent CAGR, overtaking Germany, Japan and the UK to become the world’s third largest apparel and footwear market by 2023.
Competition to intensify in fragmented global apparel
While several overarching global trends shape the direction and size of apparel consumption, the industry is also defined by a vast array of diverse consumer lifestyles, preferences and attitudes to fashion across markets. This has allowed space for a multitude of brands to cater to different consumer segments and niches. As a result, across all regions the market for apparel and footwear remained highly fragmented: no single company accounted for more than 3 percent of retail sales value in 2018. With the sales of the top five ranked companies accounting for just 8 percent of the market, Asia Pacific was home to the highest degree of this market fragmentation in 2018.
The largest players in the industry tended to be those with a leading market position in a specific product category like sportswear or jeans or a business model such as ‘fast-fashion’. Nike Inc maintained its top ranking by value sales over 2013-2018, followed by the Adidas Group. As the world’s most recognisable sportswear players, both companies had recorded significant growth on the back of rising popular interest in more casual sports-inspired apparel and footwear among fashion-conscious shoppers. Following this were Inditex owner, Industria de Diseño Textil SA, H&M Hennes & Mauritz AB and Uniqlo brand owner Fast Retailing; accounting for a combined 4 percent of global apparel and footwear sales in 2018.
While rising global demand for fashion will continue to create new growth opportunities, competition for shoppers’ attention is expected to intensify markedly over the forecast period. The world’s leading fast-fashion players have faced a more competitive environment as competitors have adopted their more agile business model of multiple ‘mini-cycles’ in a year, moving away from the traditional two-season cycle of sales.
In Asia Pacific in particular, domestic players have become increasingly credible threats to the efforts of international brands to expand their presence in the region in order to offset weaker growth in mature markets like Western Europe. As a result, companies such as Anta, HLA Corp, Semir Group, and Li Ning ranked within the top 10 fastest-growing companies over 2013-2018. For example, Uniqlo brand owner Fast Retailing Inc has faced increasingly stiff competition for market share in China, where the company has sought to offset flagging growth in its home market of Japan. After rising in global sales rankings from seventh to fifth over 2013-2018, the company’s performance has been restrained by pressure from agile domestic rivals like Me&City and Peacebird which have begun to outpace the Japanese retailer in terms of both store expansion and adaptation to local trends.
Ethical and sustainable fashion to take on rising competitive influence
As competition in apparel and footwear has intensified, players have been drawn into a particularly fierce spiral of competition to bring products to market faster and at lower cost than rivals. The ongoing decline in unit prices that has characterised the fashion industry for over 10 years, has hampered the profitability of even the most efficient and agile players. Recognising this, brands across the globe have sought to reintroduce products at previously neglected mid-range price points; reducing the emphasis on price-competition and more towards a differentiated product and service offerings. As evidence of this, after years of consecutive contraction, average prices per unit of both apparel and footwear are forecast to stabilise through to 2023.
More fierce competition for growth has also encouraged changes in procurement and production as major players move to shorten traditionally long and dispersed supply chains. From leading fast-fashion brands such as Zara to UK multibrand retailer ASOS and UK luxury brand Burberry, a growing number of players have moved to locate production in domestic or ‘near-shore’ sites closer to the markets they serve. This has been driven in equal parts by a need to become more responsive to consumer preferences, reduce turnaround times and exert greater control over quality in order to remain competitive. With memories of the 2013 Rana plaza garment factory collapse, companies have also sought to mitigate against potential reputational risk from long and hard to monitor supply chains.
More accommodating competitive landscape for ethical fashion
These trends coincide with growing consumer awareness of the impact of their ever-expanding fashion consumption. In 2019, 64 percent of respondents agreed with the statement “I try to have a positive impact on the environment through my everyday actions”. This has seen consumers and regulators place mounting pressure on fashion’s leaders to address the industry’s effect on people and the environment. Thus, as competition shifts away from a focus on price, players are increasingly likely to promote the origins, ethics and environmental impact of their sourcing in order to differentiate themselves from equally agile and responsive rivals in the eyes of consumers. As leading players seek to wean consumers off continually falling prices, smaller ethically-minded brands may face gradually reduced pressure from the market to cut costs themselves.
Combined, these dynamics are likely to produce a competitive landscape that is much more favourable to brands with strong ethical and sustainability credentials. Notably, as globally recognisable brands compete more open with claims of ethical and sustainable production, an initial benefit will be the general growth in consumer education and awareness brought to these issues. With greater public scrutiny on ethical and sustainable production, brands that can claim to add tangible benefits to the communities and environments they source from will stand in stark contrast to those only seeking to reduce reputational risk. Smaller players like US sportswear, jeans and footwear manufacturer Origin USA, which produce domestically with strong claims to investment in the development of the local area and its craftspeople, are thus likely to attract new consumer interest.
There is further potential that as more companies seek to move away from production concentrated in traditional outsourcing markets like China and Bangladesh and closer to local markets, the supply of high-quality suppliers with transparent production processes will rise to meet the growing demand. As this develops, ethical brands may be able to choose from a greater number of suppliers at closer proximity and at lower cost than has been the case historically.
New challenges and opportunities shaping ethical fashion
As ethical and sustainable production takes on a greater role in the competitive landscape of apparel and footwear, smaller ethical brands seeking to exploit these trends will need to remain wary of new threats to their growth. Chief among these is that there is little evidence to suggest that most consumers will significantly change their spending based on claims of sustainable production alone. In Euromonitor’s 2017 lifestyles survey, when asked which apparel product features they would be willing to pay more for, 42 percent of consumers cited “Comfortable” followed by 33 percent of respondents citing “High Quality”. “Sustainably produced” came in markedly lower at 6 percent of respondents. This suggests that despite rising attention being paid to ethical fashion, unsurprisingly most consumers are unwilling to compromise on the core features that have traditionally attracted them to apparel and footwear brands in the first place.
Tangible Consumer Value
Thus, players seeking to capitalise on the growing influence of ethical and sustainable fashion must continue the core task of innovation to combine aesthetic appeal and function in the clothing and footwear they produce, with promotion of the ethics of their supply chain coming in second. Consumers have shown far greater willingness to make practical changes to their spending where ethical or sustainable production also has a tangible impact on their experience of the product. For example, ethically produced jeans made by skilled local craftsmen, or trainers made from a recycled material that produces a distinct look or added durability. As a result, ethical players operating in technical categories, such as sportswear, outerwear, jeans and footwear where quality differences are more clearly visible to the consumer are likely to perform better.
Tell the total sourcing story
Additionally, in promoting the ethics and sustainability of their production, many ethical fashion brands have failed to tell a detailed and compelling story of the work they do to bring products to market. Commonly, brands in this space seek to promote an abstract idea of ethics and sustainability. This sees brands missing out on the opportunity to draw consumers into a brand identity or a mission they can readily be a part of with their purchases. Beyond just ensuring good practices in sourcing and production, ethical players would do well to highlight the individual stories and motivations of their suppliers, their facilities and even the local communities from which they source. Origin USA for example, provides a compelling narrative of their mission to revitalise manufacturing in the United States going into detail on every aspect of their production using new digital media such as podcasts to involve consumers at every level.
A particularly innovative example of a total sourcing story comes from Dutch online pre-order service Unrobe. Offering capsule collections available for pre-order for 30 days, the brand uses organic materials, and ethical suppliers. This direct to consumer service provides a detailed breakdown of the price of every aspect of each garment’s production including raw materials, labour costs and transport. Consumers are then kept up to date on the progress of their order with regular updates throughout the production process leading up to a home delivery. This level of detail not only educates consumers on how much work goes into their garments, and provides a compelling, tangible story they can buy into.
While the challenges of standing out amongst the vast range of apparel and footwear brands shows no signs of easing, the changes occurring in the competitive landscape suggest that as ethical fashion moves out of a niche product segment into the mainstream, ethically and sustainably produced brands with an innovative proposition may tap into far greater opportunities for growth than were previously open to them.
This article was written for FashionUnited by Miles Agbanrin, senior analyst in Euromonitor International’s fashion industries research team. Euromonitor is a global market research company providing strategic intelligence on industries, companies, economies and consumers around the world. Euromonitor is scheduled to release an update to its apparel and footwear market data on January 2020.
Miles Agbanrin joined Euromonitor International in 2015. A 2014 Edinburgh university business school graduate, he has an academic and professional focus on corporate strategy, microeconomics, and competitive analysis.
Images: Homepage photo courtesy of Unsplash; All graphs courtesy of Euromonitor; Waterless jeans label courtesy of Levi Strauss & Co.