The spring/summer season is often touted as the strongest one for fashion retail sales. Cathy Hewish takes a look at how tills fared over this period in 2009 and compares it to previous years.
This year is expected to see mixed retail conditions. While consumers flocked to the 2009 Boxing Day sales, spending was constrained by rising interest rates, falling consumer sentiment and pre-Christmas sales.
Business information firm IBISWorld expects clothing sales to rise over the coming months as the economy strengthens and the high Australian dollar keeps prices lower. This will follow a traditionally quiet January/February sales period.
Nonetheless, retailers should remain on their toes about consumer spending on fashion specifically. A key factor for success for retailers over this period and into the future will be a clear understanding of seasonal changes and rapidly changing fashion cycles.
Seasonality and 2010
Clothing retailers should see clear seasonal trends and ensure they are well prepared. According to the Australian National Retailers Association, the all-important December month sees strong growth in menswear, with men keen to stock up at the Boxing Day sales while prices are lower. Larger stores also see strong demand for women’s footwear and accessories during this peak sales period.
When it comes to consumer buying patterns, spending on clothing peaks in December. Despite the economic downturn, there was strong demand for clothing in December 2008, fuelled by the first Federal Government cash handout.
In 2009 however, many retailers were concerned about a slow Christmas period and brought forward heavy discounting. Australian Bureau of Statistics (ABS) data shows spending on clothing rose by five per cent in November 2009 compared with the same month in 2008.
However, it’s estimated December 2009 then saw lower growth in sales compared to 2008. The effects of the earlier government handouts are wearing off, and three consecutive interest rate rises by the Reserve Bank has lowered consumer sentiment. At the same time, clothing and footwear faced competition from other popular gifts such as electronics and toys.
Despite this, according to an Australian National Retailers Association survey in December 2009, 32 per cent of those surveyed said they had spent more on clothing and footwear for Christmas presents than they’d initially planned.
As we trade into 2010, retailers are naturally cautious about the historically low shopping period of January and February. Sales will remain low and profit margins will tighten as consumers hold off spending on clothing.
Historically, demand grows again during autumn, in line with the changing fashion season, before a lull in winter.
Seasonality and the past five years
On average, ABS data and IBISWorld estimates show that spending on clothing during spring/summer fell by 0.2 per cent per year over the five years to 2008/2009 in real terms, to $9.7 billion. This fall was mostly fuelled by a four per cent decline during the 2008-09 summer/spring season compared to the same period in the previous year.
As concerns about the economy rose, nervous consumers postponed non-essential purchases. The autumn and winter season of 2009, however, saw growth of 2.6 per cent, fuelled by Federal Government cash handouts, falling interest rates and lower petrol prices.
Following on from this, in the 2009 June quarter, clothing and soft goods retailing sector grew at a significantly stronger rate than other retail segments like household goods.
Much of the clothing purchased in Australia is manufactured in China. Based on ABS data and IBISWorld forecasts, imports of women’s and girls clothing will grow by 5.1 per cent on average over the five years to 2009-10 in real terms, to $1.8 billion.
Imports of men’s and boys’ clothing is expected to grow by 2.7 per cent on average annually, to $1.4 billion. A higher proportion of men’s clothing sold in Australia is imported, compared with women’s clothing.
Women spend significantly more on clothing compared to men, which makes women’s clothing sales much more responsive to seasonal changes.
Adding to this, research shows women reduce their spending on apparel less than men during economic downturns. For example, demand for lingerie continues as it can represent a more affordable luxury purchase. This occurred again over the latest downturn with companies in Australia and around the world reporting resilient demand for these goods.
A word of advice
Awareness of rapidly changing fashion trends and seasonality is a key factor for success in clothing retail. Retailers need to keep a close eye on fashion trends in Europe and the US and be able to source new fashions quickly from overseas manufacturers.
Australia’s fashion seasons generally follow those in the Northern Hemisphere. However, trends are now changing at a more rapid pace due to greater speed of communication, made possible through the Internet. New products will continually be introduced. As a result, companies in the clothing sector place a focus on innovation, the introduction of new products, and quick adaptation to fashion in the global the market. This is a trend which will continue to drive the industry as a whole.