Apparel, Textiles & Fashions OVERVIEW
Plunkett Research estimates the global retail clothing and footwear market at $1.75 trillion for 2017.
This includes sales by ecommerce and other non-store retailing methods.
In America, during 2017, retail sales at clothing, shoes and accessories stores in the U.S.
totaled $226.1 billion (not including jewelry sales of $34.6 billion), according to the Bureau of the Census.
In addition, Plunkett Research estimates that 80% ($124.3 billion) of sales at department stores, as well as 60% ($26.0 billion) of sales at sporting goods stores were for apparel and shoes.
Assuming that 17% ($77.7 billion) of the goods sold via e-commerce in America consist of apparel, shoes and accessories, this would put the total retail and online clothing, shoes and accessories market in America at $454.2 billion.
While Asia, particularly China, has enjoyed a dominant position in shoes, apparel and household textiles manufacturing for several years, makers of these items located in developed nations such as the U.S.
and Canada have suffered a long period of decline.
For example, roughly 98% of the shoes sold in America each year are imports, and the majority of these imports come from Asia.
To consumers in Europe and North America, this growing reliance on Asia as a low-cost producer has meant very low retail prices for goods of reasonable quality.
However, recent increases in the cost of doing business in China, including rapidly rising labor
Plunkett Research estimates the global retail clothing and footwear market at $1.75 trillion for 2017. This includes sales by ecommerce and other non-store retailing methods.
In America, during 2017, retail sales at clothing, shoes and accessories stores in the U.S. totaled $226.1 billion (not including jewelry sales of $34.6 billion), according to the Bureau of the Census. In addition, Plunkett Research estimates that 80% ($124.3 billion) of sales at department stores, as well as 60% ($26.0 billion) of sales at sporting goods stores were for apparel and shoes. Assuming that 17% ($77.7 billion) of the goods sold via e-commerce in America consist of apparel, shoes and accessories, this would put the total retail and online clothing, shoes and accessories market in America at $454.2 billion.
While Asia, particularly China, has enjoyed a dominant position in shoes, apparel and household textiles manufacturing for several years, makers of these items located in developed nations such as the U.S. and Canada have suffered a long period of decline. For example, roughly 98% of the shoes sold in America each year are imports, and the majority of these imports come from Asia. To consumers in Europe and North America, this growing reliance on Asia as a low-cost producer has meant very low retail prices for goods of reasonable quality.
However, recent increases in the cost of doing business in China, including rapidly rising labor costs, have put Chinese manufacturers in a much less favorable position. Competition from manufacturing based in very low-cost nations in Africa, as well as Vietnam, Indonesia, Sri Lanka, Mauritius, Malaysia, Cambodia, Bangladesh, Pakistan, the Philippines and elsewhere, is intense, and a large portion of apparel manufacturing formerly done in China is moving to these areas at a rapid pace.
While China continues to have a robust apparel manufacturing industry, it is also moving up the industrial chain by fostering manufacturing that requires greater skills, better technology and more investment in advanced equipment. Industry segments that are rapidly evolving in China include InfoTech, automobiles, trains, aerospace, medical equipment and telecommunications gear.
China’s textile exports soared from $7.2 billion in 1990 to $106 billion in 2016, according to the World Trade Organization’s International Trade Statistics 2017 (the latest data available). India is a distant second in this category, at $16 billion in 2016 (up from only $2.1 billion in 1990). Europe (the EU28) also had strong textile exports at $65 billion.
In terms of apparel, China enjoyed a 36% market share of global exports in 2016 (the latest data available), at $161 billion, up from a mere $8.9 billion in 1990. The EU28 enjoyed a 6.3% market share ($28 billion), when considering only exports made to nations outside the EU and ignoring intra-EU trade.
In many parts of China, apparel and textile manufacturers have had increasing difficulties in attracting and retaining workers in recent years. Wages have risen dramatically as a result. At the same time, as demand for employees has risen, workers have been calling for better working conditions. In fact, apparel and textile workers in many parts of the developing world are beginning to demand shorter hours and safer working environments. The collapse of a multi-story apparel factory in Bangladesh in 2013, killing more than 1,100 workers, immediately resulted in a global focus on workers’ rights and working conditions in the apparel manufacturing sector.
The apparel and textile manufacturing industry has historically been one with few barriers to entry, little capital investment needed and a high level of low-skilled labor involved—a few sewing machines, a bit of training and some dim electric lights were enough to start up a factory. When China’s wages were extremely low, the nation had a clear advantage in this industry, particularly in light of its tendency to cluster factories near shipping ports and logistics centers so that goods could be sent to customers with minimal delay. Today, however, wages are climbing rapidly as China’s urban workers have many options in terms of places and industries in which to work. Demand for workers is high, and they are able to expect much higher pay than those in less-developed nations.
Many Chinese firms are massive in size, with tightly integrated units providing rapid design, manufacturing and logistics. One of the most interesting organizations is the Esquel Group of Companies. Esquel (www.esquel.com ) is one of the world’s largest producers of cotton shirts, with an output of more than 60 million garments each year. The firm’s vertically integrated operation starts in China where it oversees nearly 4,700 acres of cotton farms, which supply Esquel’s spinning, dyeing and knitting facilities, which in turn produce 90 million yards of high-quality cotton fabric annually.
Esquel has manufactured clothing on behalf of brands including Banana Republic, Tommy Hilfiger, Hugo Boss, Brooks Brothers, Abercrombie & Fitch, Nike, Nordstrom and Lands’ End, as well as private-label items for retailers such as Marks & Spencer. The Esquel companies transform their fabric into premium men’s and women’s wear at plants in China, Hong Kong, Malaysia, Mauritius, Sri Lanka and Vietnam. The company also sells its products through its proprietary brand, PYE, which markets high-end cotton apparel in China with a flagship luxury retail store in Beijing. Esquel maintains group sales offices in select locations around the world, including U.S. offices in New York City and regional locations convenient to key accounts. Unlike many textile companies, the firm has an expressed strategy of in-company resource development, seeking to ensure high standards of quality and consistency across all of its product lines.
Meanwhile, manufacturers outside of Asia have become both efficient and quick to react to consumer trends. The most notable company in this category is Spain’s Inditex. The firm is famous for its lean inventory and fast-fashion strategy. It can get a new item of clothing from its 300-person design team, through its manufacturing plants and into its thousands of stores in as little as two weeks. The company operates several manufacturing facilities in Spain. Many of its outside suppliers are located in Spain and elsewhere in Europe. The firm has been opening large numbers of new retail stores under the Zara, Pull & Bear, Massimo Dutti and Oyosho brands.
One of the more interesting recent developments in apparel manufacturing has been a certain amount of reshoring, which is the return of some of the business to plants based in the country where retail sales are made. Some designers and retailers find that their orders are not of sufficient size to interest major offshore plants, or their need for fast delivery makes it impossible to use overseas manufacturers. As U.S. firms are active in this trend, there is promising growth among many American manufacturers. Likewise, the need for extremely high quality is keeping some manufacturing of luxury apparel and accessories at home by Italian designers. As wages continue to rise in emerging nations, and overseas shipping time slows fast fashion, some portion of clothing manufacturing will continue to reshore. Growing productivity from better manufacturing technology will add to this trend, and this reshoring will not lead to high levels of new jobs. Instead, modest numbers of workers will be hired to run advanced factory computers and robots, as well as sewing machines.
During 2017, America exported $22.7 billion in textiles and apparel (up from $22.1 billion the previous year) and imported $106.0 billion (up from $104.7 billion). These numbers are from the U.S. International Trade Administration.
In the European Union (EU), the textile and apparel sector is quite large, particularly in Spain, where global leaders like Inditex have their headquarters, as well as in nations that enjoy lower operating costs, such as the Baltic States and Eastern European States. Nearby, the textile and apparel industry remains a major part of the economy of Turkey. South America, Central America and Africa also play minor roles in world apparel trade. Globally, the World Trade Organization (WTO) reports that apparel and textile exports were $747.6 billion in 2016 (the latest data available), up from $744.4 billion the year before.
Over the past several years, manufacturers of basic synthetic textiles, such as polyester fabrics, have been dealing with a global manufacturing glut. Synthetic textile manufacturing had traditionally been dominated by the largest global chemicals firms, but many of them have exited the business by selling their holdings.
Trade agreements play a vital role in the apparel industry. For example, agreements among the U.S. and its trading partners attempt to foster employment in certain parts of the world (such as low-income areas in the Caribbean) and allow U.S. consumers fair access to reasonably priced goods, while providing some sort of relief to U.S.-based businesses at the same time. Because trade agreements will never satisfy all parties concerned, they tend to lead to controversy and much critical discussion. On the retail end, consumers of apparel in North America, Asia and Europe have long enjoyed wide selections and moderate prices. On the business end, much of the manufacturing once done in Europe and North America has been lost to lower-cost locations.
In late 2015, a new agreement was hammered out that would significantly impact global trade. The Trans-Pacific Partnership (TPP) is a proposed free trade agreement between 11 countries: Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Japan was admitted to the talks in 2013. The pact could greatly reduce tariffs between member countries (or eliminate them altogether in some cases). However, the text of the agreement must be signed and ratified by all nations, which is a complicated undertaking and may never happen. (The U.S. pulled out of the negotiations in 2017.)
Apparel retailing has always been a tough, highly competitive business, and many chains rise dramatically and then fail. Retail fashion merchandising is a vast challenge (witness the recent ups and downs of retail giant The Gap). Just-in-time inventory, driven by highly computerized supply chain management systems, is now an immense asset to major retailers. Nonetheless, price pressure from major discounters like Wal-Mart, Target and Kohl’s can keep profit margins thin at stores that sell moderately priced apparel. Some of the most successful retail chains are those that focus on niche markets with special tastes and needs, such as Chico’s FAS, which caters to 35- to 60-year-old women who want flattering fashions that suit their figures, and Abercrombie & Fitch, which focuses on the 18- to 22-year old market.
So-called “fast fashion” stores that sell the latest designs at very low prices have been enjoying soaring growth in the world’s largest markets. These stores include brands owned by Inditex, along with H&M, headquartered in Europe, and Uniqlo, from Japan.
Speaking of figures, the well-documented expanding girth of consumers in many nations is placing new challenges upon fashion merchandisers as overweight people of all ages, tastes and income brackets require clothes in larger sizes. Designers and merchandisers face the task of developing and presenting larger clothes in a flattering light. “Vanity sizing” is a trend in which manufacturers have restated sizes to make consumers feel smaller. Clothes that were once described as a woman’s size 12 are now an 8 or 10.
While Americans (as well as residents of many other countries from Mexico to China) have been putting on weight, they have also developed a keen interest in sports apparel and workout gear to wear at the gym and in other recreational activities. At the same time, consumers are wearing athletic gear, such as yoga pants, for non-athletic activities in a trend called “athleisure.” This is one of the fastest-growing product categories in the apparel and shoe sector. Over 50 million Americans have some sort of gym membership, and they need appropriate clothing to wear while they work out. Plunkett Research estimates the active sports apparel segment of the U.S. retail clothing market at approximately $40.8 billion for 2016.
Demographic changes will offer immense opportunities to U.S. fashion merchandisers. To begin with, the nation’s millions of Baby Boomers (post World War II babies born from 1946 through 1964) are beginning to enter the 65+ age category. As more and more of these people become seniors, their tastes and needs will bring great revenues to savvy apparel sellers who learn how to cater to this market. Meanwhile, the rapid growth of ethnic consumer groups in America, Hispanics in particular, will offer superb marketing and product development opportunities.
Department stores have changed their business models drastically. While they were historically sellers of virtually every type of product, arranged by category in well-defined spaces within giant buildings (thus the use of the word “department” to describe them), most department stores in America today are primarily apparel and accessories stores. When consumers shop at stores like Nordstrom, Neiman Marcus or Dillard’s, they find floor after floor of shoes, clothing, accessories and cosmetics. This change has created problems within the department store industry, as managers, faced with intense competition, developed the habit of continuously discounting apparel in sale events, consequently putting pressure on profitability. Consumers have been trained to wait for items to go on sale before they make purchases, thus lowering profit margins at stores. Nonetheless, department stores remain major forces in apparel retailing today.
In many Asian nations including China, however, a department store of today typically looks more like one did in America 100 years ago. Department stores in China are known to sell everything from medicinal herbs to clothing to furniture and even automobiles. The world’s largest department stores by far are found in Asia.
Another sweeping change in apparel retailing is the rising success of e-commerce. Retail apparel chains are employing bricks and clicks together successfully. That is, they create synergies between very active web sites and their retail stores. Other firms, such as Bluefly.com, sell apparel through the internet only, often at everyday discount prices. Catalog retailers continue to do reasonably well, particularly if they operate well-designed web sites to supplement their printed catalogs.
The internet has enabled another recent trend: apparel companies that claim to source their clothing at the same manufacturers used by well-known fashion companies, and then sell, via their web sites only, high quality apparel direct to consumers at modest prices. One of the better known companies with this business model is Everlane, www.everlane.com , that states, “We spend months finding the best factories around the world—the very same ones that produce your favorite designer labels.” Meanwhile, a growing number of fashion companies, such as Worth and The Carlisle Collection, are enjoying success selling women’s fashions in the home via independent reps—somewhat like the success of similar companies that sell cosmetics.