The new look of fashion: How 2016 made over apparel retail
Amazon disrupted and dominated apparel throughout the year, but it wasn't the only trendsetter: Mobile made waves, omnichannel became omnipresent — and much more.
When it’s all said and done, 2016 will be known in apparel retail sectors as The Year of Amazon. There were other winners, of course (along with a few losers), but even when it wasn’t about Amazon, it still kind of was.
Consider that total U.S. apparel retail sales increased 3% in the 12 months ending November 2016 to $218.4 billion, according to NPD Group Consumer Tracking Service data emailed to Retail Dive, with online apparel sales increasing 12% during the period to $41.4 billion. Amazon is at the forefront of that charge: “Amazon is now the biggest online seller of apparel in the U.S., with apparel sales of $16.3 billion in 2015,” Andy Mantis, EVP of NPD Group Checkout Tracking, told Retail Dive. “Amazon continued to expand its sales as its ‘endless aisle’ found its way to more and more corners of the apparel market.”
According to Bloomberg, Amazon's online sales now outpace its top competitors — Macy’s, Nordstrom, Kohl’s, Gap and Victoria’s Secret parent company L Brands — combined. This year the e-retailer also launched private label fashion ventures as well as range of other retail innovations, and generally upended the apparel market to the point where even Art Peck, CEO of struggling Gap Inc., said it would be “delusional” not to consider selling on the Amazon platform.
Of course, there were other notable trends. Mobile made waves, millennials made their mark (again) and omnichannel became omnipresent. As the year draws to a close, analysts and experts weigh on what impacted 2016 the most — both positively and negatively.
Off-price was on point
One of the few large brick-and-mortar retailing success stories of 2016 was the growth of off-prices stores and dollar stores. Ray Hartjen, director of marketing for business analytics group RetailNext, told Retail Dive that off-price retailers were particularly successful at establishing a strong connection and engagement with the millennial market. Merchandise mix mattered as well. “A big part of the off-price appeal is that more and more often apparel inventory, particularly that at T.J. Maxx, is current and not from previous seasons," Hartgen said. "These timely, contemporary and relevant styles and fashions attract traffic, turn the till and create brand loyalty.”
Off-price shoppers became a sought-after demographic. “Off-price buyers are, first and foremost, loyal to the idea of off-price shopping,” said Mantis. “Both T.J. Maxx and Marshalls saw increases of more than 4% in their share of total off-price buyers who bought at their stores in the most-recent six-month period, and T.J. Maxx saw an increase of 3% specifically among off-price apparel buyers. Ross Dress for Less, a rival off-price retailer, also saw an overall increase, but of less than 3%.”
Lois Sakany, editor at Snobette.com (a women’s street-style fashion blog), calls the success of discounters one of the factors that negatively impacted department stores in 2016. “Part of the issue was loss of sales to online retail,” she told Retail Dive. “But the department stores closures were also forced by increased brick-and-mortar competition from off-price retailers like T.J. Maxx and Ross, and growth among dollar store chains.”
Big brick and mortar lost and lost
As the adage goes, it’s not enough to win: Others must fail. In the case of 2016, one of those failures was the continued erosion of massive brick-and-mortar enterprises. “The biggest trend for 2016 was the retraction of brick and mortar retail, with national chains including Sports Authority shuttering completely, and Macy’s and Ralph Lauren, among others, closing doors,” Sakany said. “Basically, the customer is looking for great stuff at the best price possible, and doesn’t want to spend time looking for it. Giant formats, set up like mazes, reflect a time when there was no Internet. They’ve lost their appeal.”
According to statistics delivered to Retail Dive by NPD Group, total U.S. department store sales of apparel decreased 3% in the 12 months ending November 2016 to $28.3 billion. Although the dip is small, it’s predictive of future decay in the sector, as omnichannel retailing continues its march forward.
Shopping morphed into experiencing
That’s not to say that stores aren’t still destinations. But this is the year that the reason for a trip to the store changed.
“In 2016, apparel stores became a destination for experiences rather than simply for buying clothes,” Emily Bezzant, head analyst at retail technology platform Edited, told Retail Dive. “As store visits shrank, retailers reconsidered floor space in favor of productivity and a more personalized approach.”
Bezzant notes that companies such as Burberry and Apple began equipping their stores with personalized fitting rooms and touchscreen technologies to enhance the personalized shopping experience, while earlier this month, fashion brand Rebecca Minkoff partnered with QueueHop on a new self-checkout technology meant to streamline the holiday shopping experience for millennials.
Online retailers, including Amazon, also decided that 2016 was a good time to connect with customers in as many ways as possible, including physical stores. “Pure e-commerce players are opening stores, understanding the synergy of being on all distribution platforms,” Robin Lewis, CEO of retail strategy publication The Robin Report and co-author of "The New Rules of Retail" told Retail Dive. “In 2016, there was also an increase in retailers and brands putting their brands on other brands’ platforms, like J. Crew placing its brand on Nordstrom’s platform.” Other online stores expanding their physical footprint include eyewear retailer Warby Parker, which plans to open as many as 50 brick-and-mortar locations by the end of 2016.
In order to blur the line between the online world and the physical one, more retailers looked to incorporate technology into every aspect of the retail encounter. “Another trend was the accelerated effort to create frictionless and entertaining shopping experiences through the use of new technology gizmos and gadgets,” said Lewis, noting an uptick in interactive touchscreen kiosks, virtual fashion mirrors, bar-scanned videos and interactive dressing rooms. Retailers became increasingly savvy about using beacon technology to interact with customers both inside and outside stores, Lewis adds.
As online stores were beginning their march into the brick-and-mortar space, established brick-and-mortar stores looked to incorporate the Internet, and other tech solutions, into their experiential shopping. “In-store, the Internet of Things (IoT) began, in 2016, to truly gain traction in creating the smart store of today, and the near-term future,” said RetailNext's Hartjen. “It’s more than just shopper-facing technologies like smart mirrors and the like, although in-store guest Wi-Fi has become the de facto ante into the brick-and-mortar store game.”
Hartjen says that in 2016, shoppers demanded connectivity, and their mobile use dictated an industry response. But he says that the change went far beyond demanding a decent Wi-Fi signal. “Stores are now integrating IoT sensors and systems throughout their entire ecosystem, particularly in the supply chain,” he said. “They’re harvesting data, and developing actionable insights to help eliminate friction and pain points from the shopping journey.”
The changes have affected fitting rooms, order fulfillment, checkout queues, and shopper and sales associate interactions, Hartjen adds. “The recent reception and reaction to the Amazon Go news only reinforces the industry’s need to continuously improve upon the retail shopping experience, from grocery to specialty apparel."
The new face of branding
While stores were busy looking for new ways to connect with customers, a whole new generation of brand influencers decided to forego traditional retail altogether and talk to their customers directly. “In 2016, top tier influencers cut out the middleman of retailers and brands and began selling direct to the consumer through their own online and brick and mortar pop up shops,” said Sakany. “As well, there was an explosion of indie designers who capitalized on their creativity and following to set up Shopify stores with niche followings. Retail in 2016 became a space with fewer stores, yes, but more online sellers, all vying for an extremely distracted consumer who has become very niche in mindset.”
Hartjen says a large part of this trend came from the desire to better control the narrative. “Brands continued to drive increased direct-to-consumer strategies across the entire omnichannel ecosystem, including brick-and-mortar stores,” he said. “In an effort to both break away from the sea of sameness found in so many department stores, and to better control their own brand identity, brands intensified their own direct-to-consumer efforts across all channels.”
In order to create an authentic brand connection between an apparel line and its celebrity representative, it’s become necessary for companies to not only hire a face, but to collaborate with the personality behind the look. “The concept of using influencers as a way to reach customers is no longer up for debate,” said Sakany. “It has become the norm within retail. In fact, the trend has become so elevated that the top-tier influencer is no longer just acting as the face of the brand but also collaborating on designs. Case in point: Selena Gomez, who just signed what is said to be a $10 million dollar deal with Coach, which includes her input on design.”
Personalization is everywhere
It’s not only celebrities who are collaborating with apparel brands, though. In 2016, the customer became a part of the creation process. “The concept of co-created experiences is became a strategic imperative for retailers to compel consumers to their stores or sites,” said Lewis. “Lululemon’s yoga class is an old world example. A customer scanning a barcode of a dress in a Burberry store that triggers a video of the designer narrating the story of what inspired him and how and where the dress was made is a new world example.”
Brands began looking for ways to cash in on this collaboration, and essentially sell customers’ own experiences and idea back to them. “Another trend, very specific to specialty apparel retail, is the growing importance of earned content, meaning consumers’ own user-generated content,” said Hartjen. “It’s driving not only brand awareness but sales too, across a variety of social networking platforms, particularly Instagram, Pinterest and Snapchat.”
The curation that occurred on social media found its way into retail both as a way to shop, but also as a way to form a deeper connection between brand and consumer. “Social played a big role in consumer decision making,” said Edited's Bezzant. “Retailers who have integrated social networks, pictures and videos into their commerce have been successful in getting customer attention. Social influence, including social media, has also pushed brands to foster more sustainable practices and consumer behavior. Brands such as H&M have looked to balance fast fashion with sustainability through its Conscious line, which not only shows their awareness and care for the environment, but also helps in building their brand image.”
Millennials run the world
The impact of millennials on apparel retailing in 2016 was not so much a trend as a sea change. “Millennial consumers are rapidly emerging as the largest consumer segment,” said Lewis. “They’re equipped with technology and they know how to use it, and they’re driving huge strategic and structural changes across all apparel retailing and consumer facing businesses.”
Hartjen agrees. “The influence the millennial segment has on all of retail can’t be overstated,” he says. “Not only is it the largest demographic segment in the United States, but it’s the only one with growing wealth and disposable income. Maybe more importantly, the segment is influential as a role model for other segments, both older and younger, on how to incorporate technology to best fit their lifestyles and shopping missions. As a group, millennials have different expectations as to their control of their shopping experiences and the brands they engage with, and as such, they’re changing."
The store is everywhere
Last but not least, this will go down as the year that brought mobile shopping into the mainstream. “The most important trend impacting apparel retail in 2016 was the continued exponential growth of mobile shopping, perhaps proved most prominently over the Thanksgiving and Black Friday weekend,” said Hartjen. “Shoppers are increasingly more comfortable shopping on mobile devices, and mobile is more than the new front door of the store.”
Hartjen says that for apparel retailers, mobile is a bridge between their physical and digital channels. “It underscores the importance of converging all channels and touchpoints into a single, seamless, branded shopping experience. Mobile is not only the key is reducing friction in the shopping journey, but it’s absolutely critical for personalization and customizable experiences.”
Even when customers decided to shop in-store, they brought their phones with them, and apparel retailers had to find new ways to connect to their connected customers. “New research shows that customers spent over 40% of the time that they shopped in retail stores on their phones,” said Bezzant. “Brick and mortar stores understood the importance of capitalizing on mobile consumerism.” This year’s Black Friday saw an increase in mobile purchases compared to the year before, too, she adds. “As shoppers are more tied to their mobiles whilst in stores, retailers are introducing new ways of engaging customers on their phones, mostly by providing real-time in-store coupons, gifts and personalized recommendations.”
What this all meant for stores is that customers could shop — and would shop — whenever they wanted to, and stores had to be ready. “The most important shift in 2016 was that retailing was flipped on its head,” said Lewis. “Essentially, with consumers having everything in the world sitting comfortably in their pockets on their smartphones, the notion of ‘Build it and they will come,’ when the store was in the center and consumers would go to the store, is dead. The consumer is now in the center and the store must go to them, wherever they are. The consumer is now the point of sale.”