Business information analysts at IBISWorld expect that several niche retail industries, from bridal stores to fast fashion and maternity wear, will outperform the wider retail industry over the next five years.
Fast fashion and luxury retailing are expected to lead the charge with annualised revenue growth of 11.0% and 8.5% respectively over the five years through 2019-20.
IBISWorld Australia general manager Daniel Ruthven said the industry is undergoing a massive change.
“Retailers are undergoing one of the biggest transformations in the industry’s history. As our disposable incomes increase, our tastes and buying behaviour change too.
“In many areas of retailing, the industry is fragmenting. Fast fashion business models, which have been harnessed particularly well by overseas retailers, are benefiting from our desire for up-to-the-minute and affordable fashion.
"Luxury retailing has been buoyed by Australia’s relatively stable economy, high disposable incomes and increasingly discerning consumers.
Furthermore, wealthy international visitors are providing additional incentives for luxury stores to increase their floor space,” said Ruthven.
In the lap of luxury
Premium brands have been relatively unaffected by the difficult conditions faced by mass-market retailers. The luxury retailing industry is forecast to grow by 9.8% annualised in the five years through 2014-15, to reach $1.6 billion. IBISWorld anticipates this growth to continue at a searing pace of 8.5% over the next five years, to reach revenue of almost $2.4 billion by the end of the decade. Australians have developed a taste for luxury leather goods and accessories in particular, splurging on items like statement handbags.
“Increasing wealth as a result of the resources boom has allowed many middle-class Australians to invest in a premium product that is long-lasting, high quality and branded. In an attempt to capture the relatively untapped potential of middle-class Australia, high-end retailers have expanded their range to include products such as key rings, belts and costume jewellery for consumers who may not be able to stretch to a $3,000 handbag, but can happily spend $800 on a pair of earrings,” said Ruthven.
A number of international luxury brands, including Chanel and Louis Vuitton, have opened new stores in Australia in the past year. Large multinational luxury brands have adapted their business models to the digital marketplace by offering exceptional customer service in elegant flagship stores selling high-value items, while more accessible categories, like cosmetics and fragrances, are available through a number of retail channels.
While multinational luxury designers have achieved prominence, the failure of some of their domestic counterparts illustrates the challenges of keeping pace with fashion-conscious consumers. Many local brands have lacked exposure to the growing demand for luxury accessories, focusing instead on the comparatively slow growing, but competitive, market for high-end clothing.
A fast fashion fix
Healthy demand for on-trend and affordable clothing has resulted in the fast fashion category burgeoning by a staggering 10.1% annualised in the five years through 2014-15.
“Australia has embraced affordable, fashion-forward apparel, which has driven robust growth over the past five years,” said Ruthven. “This trend is expected to continue over the next five years, with revenue forecast to reach almost $2.2 billion in 2019-20.”
There have been growing competitive pressures from the influx of international retailers into the Australian market over the past five years. Global fashion giants, such as Uniqlo, H&M, Topshop and Zara, have set their sights on the cash-laden wallets of Australian consumers as part of their aggressive global strategies. The Australian market is regarded as ripe for the picking, with a proven domestic spend with online fast fashion retailers like ASOS over the past five years.
“The rise of social media and online shopping, including a number of foreign retailers entering the Australian market, has ignited demand for new fashion designs and styles. Consumers are being constantly exposed to the latest trends, from the catwalk to celebrity dressing, which is driving demand for fast fashion,” said Ruthven.
A nice day for a white wedding
Bridal retailing has experienced a renaissance in recent years, as the number of weddings is growing in absolute terms. IBISWorld expects that this trend will cause bridal stores’ revenue to grow by an annualised 1.5% over the next five years, from $544.1 million in 2014-15 to $584.7 million in 2019-20.
“As the average age of marriage continues to increase, more couples are in a better financial position to splurge on big-ticket items like wedding dresses when they do decide to tie the knot,” said Ruthven.
Plus size fashion taking shape
The plus size clothing industry has recorded healthy revenue growth of 3.7% over the past five years to reach $780.7 million in 2014-15. IBISWorld expects this growth to continue over the next five years, albeit it at a calmer pace of 1.9% annualised.
“The proportion of Australians who are overweight or obese has consistently grown over the past five years to represent approximately 63.5% of the total population. To meet this demand for plus size clothing, a number of companies have branched out by offering consumers greater choice when it comes to fashionable clothing,” said Ruthven.
“Over the past five years growth in plus sized turnover has followed an increase in options for fashion-conscious buyers. However, international competition has also increased, with the launch of dedicated plus-sized ranges by online fast fashion retailers attracting this demographic, which contributes to the slower growth outlook,” added Ruthven.
Flexing its muscles
Fitness and athletic clothing has reported healthy revenue growth over the past five years, at an annualised 5.2% to reach $1.8 billion in 2014-15. IBISWorld expects growth to continue at a similar pace over the next five years, to reach almost $2.2 billion in 2019-20.
“As a nation of sports lovers – whether from the sidelines or on the try line – our expenditure on fashionable and functional sports clothing shows little sign of abating. Demand has increased in line with the continued introduction of new products that promote the benefits of perspiration wicking, breathability, improved recovery and comfort,” said Ruthven.
“Australian companies have latched onto this trend, with labels like 2XU and Lorna Jane expanding aggressively into the category through the launch of fashion- or performance-focused offerings that allow them to compete with global sportswear giants.”
Banking on the bump
Demand for maternity wear is expected to grow by a sizeable 5.4% annualised in the five years from 2009-10 to 2014-15, to total $183.4 million.
“Expectant mothers are increasingly purchasing an entirely new wardrobe of maternity wear to remain fashionable during pregnancy, which is increasing the overall spend in this category despite a stable birth rate,” said Ruthven.
“Many of the industry’s players are either online-only stores or traditional operators with an online presence. Online shopping is particularly popular in this segment, with women taking advantage of the convenience and time savings,” added Ruthven.