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Clothing Retailers Market Assessment
Key Note Publications Ltd, Jan 2000
Faced by declining real prices and soft demand patterns, UK clothing retailers have been forced to re-examine their consumer positioning very closely. UK clothes shoppers have noted that out-of-town discount stores seem able to supply clothing in styles and at a quality, which, although not the equal of mid-range High Street clothes, is acceptable at the price.
Market sectors
Beyond the split by male and female clothing or the style of retail operation, it is possible to look at the market in terms of consumer perception. Broadly, the market can be split between everyday wear, clothes which have a fashion quotient (High Street fashion) and clothing at the top end of the fashionable ready to wear market.
Looking at the markets for 'standard' clothing, High Street fashion and 'high fashion', Market Assessment estimate that the divisions by value are as follows. 'Standard' clothing accounts for by far the major part of the market for male and female clothing, with fashion wear taking only about 15% of all sales. Standard clothing is the core market for the High Street mixed retailers and department stores, which are the first port of call for many consumers when they are shopping, although for major purchases the fashion chains have an important role.
The standard and discount sectors are dominated by major players with a national profile while fashion wear, although there are many national chains, is much more fragmented and there are also a number of regionally strong chains without national exposure (especially in London and other major cities). High fashion is restricted to fashion-orientated department stores such as Harvey Nichols and Selfridges, independents in affluent parts of the country and to a limited number of specialised chains such as Joseph.
Value and growth
The growth sector of the market in recent years has undoubtedly been the discount clothing market, which still has considerable opportunities to take sales away from the 'standard' clothing market.
Market Assessment estimates the current market for discount clothing at £4.7bn. However, the major operators in this sector such as Matalan are growing fast, and year-on-year growth in excess of 10% across the sector can be anticipated for the near future. Growth in sales in other sectors, however, is difficult to predict especially with continuing price pressures.
Largest sector
Womenswear is the largest sector within the market in general, clothing for women and children is worth double the market for men and boyswear. This reflects the inclusion of babywear and accessories in the 'womenswear' sector, but also the simple fact that women buy clothes more frequently for themselves and often spend more per year than a man.
Within womenswear, day clothing and outer clothing are the primary sectors by value, and this is the sector most sensitive to changes in weather, fashion and disposable income. Unusually, hot or cold conditions can cause havoc in clothing manufacturing order cycles, as can a trend that simply fails to take-off. The industry is moving to just in time (JIT) production systems, but the volumes and range of sizes and colours required across ranges means that this is not necessarily easy to achieve.
Sales of womenswear in 1999 suffered from a combination of these factors and the 'missed target' by major retailers such as Marks and Spencer, had a disproportionate effect across the whole market. Major retailers such as Laura Ashley, Next and Monsoon have all misread the all-important female fashion market in 1998/1999, and had to rapidly restructure their offer. So Marks and Spencer, though it has an exceptionally high profile, was not actually exceptional in other respects.
Significant players
The major groups in UK clothing retailing are the mixed and department stores, led by Marks and Spencer and the men's and womenswear chain Arcadia (which includes both the Burton Group and Selfridges clothing chains).
Marks and Spencer alone accounts for almost 15% of all clothing sales in the UK, a scale of operation only approached by the joint sales of Arcadia. However, all High Street department stores, such as BhS, House of Fraser and Debenhams, rely heavily on their clothing sales, which range from standard everyday products through to premium concessions (such as those operated by Alexon and William Baird).
Fashion chains are highly fragmented and a large proportion appear to be targeting the same consumer the young woman on a limited budget. However, the emergence of discount warehouses over the last five years is challenging this sector as prices offered through Matalan, Bay Trading or TJ Hughes are significantly below most High Street fashion brands.
Regulatory factors
The main regulation that has impacted across the textile and fashion business has been the minimum wage. Textiles and clothing manufacture have historically been poorly paid businesses, which in turn impacted on wholesale prices and margins through the business. Labour costs are a major element of costing and this has been a key reason why manufacture is moving out of the UK.
However, this is becoming a matter of public concern since British jobs are being replaced by potentially exploitative manufacturing elsewhere. Several newspapers reported in late 1999 that 'Conditions in a number of clothing factories in eastern Europe, being used by British High Street retailers such as C&A, Debenhams, Laura Ashley and Marks and Spencer, are shameful with workers being paid starvation wages and having to work in environments which are damaging to their health. In Hirlau, Romania, 900 women are producing clothes for British stores with some only being paid 20 pence an hour' (Sunday Times, September 1999).
The changes to the Multi-Fibre Agreement, which will phase in over the next couple of years, will open the UK market to even more low priced imports, in a market which is already estimated to be almost 70% imported. Eastern Europe has become an important source of tailored articles and the future for UK-sourced goods appears to be shrinking rapidly into sectors such as high specification fabrics, (eg cashmere) or tailoring.
Retail regulation has had less impact in clothing than other sectors such as food. Clothes shops are not as regulated as food stores and their scale of operation means that most do not run into planning problems - the only stores where planning permission is a major concern are department stores.
However, the scale of the retail estate of most significant clothing chains is large, as clothing is often an impulse buy, locations in high traffic areas are a must. Other factors such as business rates place a large part in the costs of clothes retailing, as does rent in general. Fashion stores are the core offer in out-of-town shopping malls such as Bluewater or Trafford Park, and it is fashion stores that normally take the prime A1 sites in city centre developments. Regent Street in London is a case in point. Department stores, with their strong mid- to upper-market fashion position, are still normally the anchor stores for new developments.
Consumer factors
The age distribution of the UK population is going to show some major shifts over the next 10 years, of which the well-documented decline in the teen market is probably the most important for clothing chains. Many specialised fashion chains lead on their young fashion offer, which will be a shrinking proportion of the total market.
Peak spending in some high value sectors such as outer wear is already in the older age groups, with a high level of spend among the over 50s. The good news, however, is that the over 50s are no longer always identifying themselves as a separate fashion group. Fashions, that are not teen-related, are worn by men and women of any age from 30 upwards and this has been noted especially in the trend to less formal wear. Garments such as jeans, chinos, casual shirts and sweaters are effectively ageless, as long as they are not outrageously youthful in design.
The market in the future
The pressure on pricing and the phasing out of the Multi-Fibre Agreement (a result of the latest Gatt talks) means that the UK market will be opened up to even more cheap imported clothing. This will play into the discounters' hands, even if the expected entry of Wal-Mart into the UK Market (after its takeover of Asda, which already has a sizeable clothing business) does not happen as quickly as many anticipate.
The bulk and standard clothing end of the market - the mainstay of High Street stores such as Marks and Spencer - will come under much more pressure, unless stores differentiate their products far more in terms of quality and style. It is notable how youth-orientated the UK clothing retail market is, at a time when the youth market itself is shrinking and when the highest disposable incomes are in older age groups.
By 2004, because of the real decreases in prices which are anticipated to largely cancel out any volume increases in the market, the total market is expected to be worth £29.9bn, or only 7% more than it is in 2000. Sales of men's and boyswear are expected to grow slightly more rapidly than women's and girlswear due to the increasing interest in sports clothing, which is becoming part of the mainstream clothing offer.
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