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In 2024, global sales of apparel and footwear are set to experience moderate growth of approximately 2% in constant terms, and expected to recover to pre-pandemic levels by late 2025/early 2026. The impact of inflation remains persistent and will translate into cautious discretionary spending levels as the baseline forecast global inflation remains above central banks’ targets, meaning high interest rates are likely to stay and will continue squeezing consumers’ disposable incomes.
After the pandemic revealed the limits and risks of global fashion supply chains with an overreliance on China, the all-time high inflation seen since 2022 has worsened the situation. Not only have brands and retailers felt the pressure of the increasing cost of goods sold (COGS), but they have also refrained from passing all these costs to consumers whose budgets are being squeezed. Even if the COGS somewhat normalised in the last quarter of 2023, the security crisis in the Red Sea is further disrupting supply chains and inflation as the costs of international shipments rise.
In the short term, this poses another pricing conundrum for fashion players, which have already had to contend with costs rising much quicker than the amount they can pass on within consumer pricing. In the longer term, geopolitical tensions will further drive supply chain shifts, which have accelerated since the pandemic.
India, China and the US will be top contributors to global sales, but there is also a growing number of international players seeking to invest in new pockets of growth in Southeast Asia, such as Thailand and Indonesia; Latin America, including Mexico and Brazil; and in the Middle East and African regions, such as the United Arab Emirates and Saudi Arabia, to boost their revenue prospects and diversify their geographic portfolios.
In terms of categories, sportswear and childrenswear are set to outperform the wider industry. The demand for sportswear is expected to benefit from the 2024 Paris Olympics in the short term, but over the forecast period, it will largely be driven by the growing wellness focus and appeal of sports aesthetics in the APAC region. On the other hand, childrenswear is set to grow globally due to favourable sociodemographic factors in the APAC, Middle East and Africa and Latin American regions.
As market conditions are toughening, there is likely to be market polarisation, making it particularly difficult for brands with a mid-price positioning. However, consumers being more careful with their fashion spending in general does not only mean buying cheaper but, rather, buying the best they can afford.
With 32% global sales of apparel and footwear taking place online, the digital transformation continues, albeit at a slower pace than during the pandemic. However, consumers demand the best of both worlds, and delivering a convenient, personalised experience can help win their favour in a saturated digital environment. GenAI and technology can help boost conversion rates and reduce returns by delivering these personal experiences due to offering a more fluid or visual shopping experience, such as the Google Virtual Try-On tool or instant product recommendations, including by Indian ecommerce giant Myntra, which is integrating ChatGPT as part of its platforms.
Another winning strategy is that of hyper localisation. This involves tailoring one’s in-store experience and digital content or developing special collaborations or product mixes to align with key events to help deliver emotional connections. They can achieve this by combining international brand power with the cultural nuances, languages and preferences of regional or domestic consumers.
To conclude, the market environment remains extremely challenging for fashion players in 2024, but there are pockets of growth and companies able to demonstrate and communicate their value to consumers through tailored product offerings and services will fare better than others. In this quest, it will be critical to invest in the right technology that can support more localised and personalised offerings.
Sourced from Euromonitor
