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Euromonitor market research associate Minahil Khurshid breaks down the year ahead for etailers.
Internet retailing has become an increasingly important channel for apparel and footwear retailers. The channel accounted for a 16% value share of global apparel and footwear sales in 2017.
The growing number of consumers with access to the internet in addition to heavy investment from both e-tailers and traditional retailers continues to drive growth in online retailing.
Globally, apparel and footwear specialist retailers remain the most important retail channel in the industry, accounting for around 48% value share in 2017.
However, store-based specialists have come under increasing pressure with the rise of internet retailing. Notably, independents have struggled to compete with the vast product offering and competitive prices that online retailers provide.
In terms of absolute value growth, internet retailing outpaced store-based growth of USD122 billion with USD173 billion over 2012-2017.
Apparel and footwear is one of the most important industries in the digital sphere, accounting for a 22% share of global internet retailing sales in 2017.
A number of factors have contributed to the growth of apparel and footwear online, notably, the percentage of households globally with access to the internet has increased sharply, from 41% in 2012 to 56% in 2017.
Globally, apparel in particular has proved extremely successful online, growing by 16% in 2017 to reach value sales of USD222 billion, and accounting for 81% of the industry’s global online sales.
Footwear and sportswear have, however, been outperforming apparel in terms of growth. Online sales of sportswear saw 20% value sales growth in 2017, due mostly to sports-inspired apparel and performance apparel.
In Australia, internet retailing continued to increase its value share in apparel and footwear, driven by Australia’s high penetration (128.9% of the total population in 2017) of mobile phones internet and the growing number of consumers opting to shop and browse for products on their mobile phones.
According to Euromonitor’s statistics, online retailing in Australia accounts for 15% of the apparel and footwear sales in 2017 (Absolute value of AUD 3564 million = USD 2723 million).
More consumers are choosing to shop on mobile applications, due to the convenience and the exclusive offers and promotions available.
Advances in secure payments and anti-fraud protection have also encouraged consumers to trust retailers and make their purchases online.
Most online purchases by Australians are from traditional retailers’ online stores rather than online-only retailers, reflecting the importance of multichannel presence in gaining consumers’ trust. Along with paying increased attention to the online experience, retailers are also focused on improving the instore shopping experiences.
Leading apparel and footwear retailer Cotton On Clothing Pty Ltd, for example, is adopting a mega-store strategy, opening large stores to offer consumers a one-stop destination for its apparel, footwear and lifestyle goods while improving its e-commerce channel which the retailer uses to sell its products to seven other regions including South Africa
As connected consumers disregard the conventions of traditional retail, fashion players are gradually looking to experiential shopping and personalisation to attract consumers’ attention.
For instance, Australian e-commerce player Showpo has incorporated artificial intelligence (AI) to make personalised recommendations to its shoppers online.
The retailing landscape is expected to continue evolving as industry players adopt a customer-centric approach to their retailing strategies. Retailers have started to rethink their online-offline mix and have reacted to this trend by improving their online presence.
For example, Tommy Hilfiger launched a new online store for Australia and New Zealand in September this year followed by Calvin Klein announcing the availability of shipping to Australia from the company’s new localised e-commerce store.
Both Tommy Hilfiger and Calvin Klein are trying to take advantage of digitalization to boost their Australian sales and minimize the risk of fallout from department store sales.
Similarly, besides increasing its physical store footprint, in March 2018 Zara launched its online store and has seen an increase in sales as a result.
Despite the rapid growth of e-commerce over the last decade, it is important to realise that store-based retailing continues to dominate the distribution landscape, accounting for an 83% value share of global sales of apparel and footwear in 2017.
Going forward, store-based retailers will have to continue merging online and offline environments to connect and engage with consumers.
Experience in the store will be key to drive consumer demand.
Apparel and footwear specialist retailers remained the most important retail channel in the industry, accounting for 58% of all store-based retailing sales in 2017.
Department stores ranked second, with a 15% value share. However, the rise of fast fashion and internet retailing have placed pressure on department stores, leading to a fall in share over the past five years.
Although internet retailing is expected to continue to see rapid growth between 2017 and 2022, with a CAGR of 9%, the channel is not expected to overtake specialists in terms of value sales, amounting to USD 370 billion by 2022, in comparison to USD1.1 trillion for apparel and footwear specialists.
With consumers’ adoption of digital platforms and raised expectations of convenience, online retailing is projected to grow rapidly.
Pure e-commerce retailers such as The Iconic have raised the bar for other fashion companies by providing same day deliveries in some parts of Australia. Connected consumers around the world state that they research and compare apparel products online rather than in store.
This shows how online engagement and communication with consumers play an important role in forming companies’ brand strategies. Social media channels present themselves as an opportunity to market brands and easily communicate with consumers.
Mobile user experience and mobile payments are areas where close attention should be paid while integrating the various touch points, since mobile is becoming the first point of search for many consumers. When it comes to apparel and footwear, customers aren’t only buying online or in store, they are using multichannel and therefore having an integrated omnichannel is crucial.
Consumers are demanding a seamless online experience across all channels, which presents opportunities for many companies. Myer, Target, Lorna Jane, David Jones and Country Road are a few examples of retailers reviewing their store network, closing their underperforming stores and increasing their investment in their online presence.
Going forward, Euromonitor International forecasts internet retailing to continue growth, with a CAGR of 9% over 2017-2022 globally. Growth within this channel will be sustained by consumers searching for more convenience and fast fashion retailers responding by evolving to a more integrated omnichannel.
Internet retailing is expected to be a key channel in driving sales of apparel and footwear. In the next five years, consumers will become increasingly accustomed to shopping online through websites and mobile applications.
As a result, a growing number of apparel and footwear retailers are expected to offer products in this channel to remain relevant. A seamless shopping experience between online platforms and physical stores, facilitated by mobile applications and services such as same day delivery and “click and collect” will be new norms rather than differentiators between brands.