Considering the number of apparel retailers on the ground and online, it would appear to be a winning category. But broad sales trends are not in the sector's favor.
Several apparel retailers are struggling. Ascena is regrouping as sales plummet, unloading its discount banners entirely. L Brands is propped up by its personal care brand Bath & Body Works as Victoria's Secret loses share. J. Crew is in disarray, hobbled by debt and putting its hopes into its much smaller Madewell brand.
Profits in the segment were down 24% in the first quarter, according to a Retail Metrics note cited by CNBC, the worst showing since the first quarter of 2008, when they fell 40%. Department stores aren't faring much better. Their "departments" have been reduced to mostly apparel, plus some beauty and home goods, a stark contrast to their heyday when they sold everything from books to wine.
The troubles go back even further, however. In 1987, the average consumer allocated 5.9% of their spending to apparel and services, but by 2017, that had plummeted to 3.1%, according to a Deloitte spotlight report last year. The challenges faced by consumers outside of top-tier incomes could be a factor: average spending on women and girls' apparel has especially declined for lower-income earners, with the "only bright spot" in footwear, where share in apparel expenditure has risen across income levels, according to that report.
Existing competitive forces — notably the discounts found at off-price retailers and at direct-to-consumer sites, including Amazon — are challenging apparel retail, but fundamental changes in attitudes about what to wear are also at play. That is perhaps best exemplified by Lululemon, an apparel retailer who brought the word "athleisure" to the market and high-priced activewear style to fashion. It is also a rare winner in the category.
Assembling a strategy is complicated by the changing of the guard in fashion: The street has replaced the atelier.
The new boss
Fashion itself flipped the switch, according to Shawn Grain Carter, professor of fashion business management at the Fashion Institute of Technology. "When I saw this trend starting to emerge in the early 90s, really the 80s, I always link it historically to when Marc Jacobs did the grunge collection for Perry Ellis," she said. "Even though the collection was a disaster it was a major inflection point."
Jacobs famously lost his job after the 1993 collection was panned by fashion critics. That wouldn't likely happen today (in fact, Jacobs reprised the collection last year). Instead, brands are increasingly turning to pop culture for designs and trends — and to social media for approval.
"When I worked at Bergdorf's as a buyer, you did not wear jeans past 50 — it was considered inappropriate unless you worked on a farm. "
Shawn Grain Carter
Professor of Fashion Business Management, Fashion Institute of Technology
"The youth are driving this look. Fashion editors have lost the cachet of driving what is in and what is out," Carter said. "We've always had celebrity endorsements — but now we have people involved who know nothing about fashion. I mean Justin Bieber, for god's sake, but this is where we are. And social media is global, driven by peer review and peer approval. You don't have to wait anymore to go to Europe for inspiration. Why would you hire a DJ named Virgil Abloh? He is a creative genius but he's not a couturier."
(Abloh, who was named artistic director of Louis Vuitton's men's in March last year, in 2013 founded his own fashion label, Off-White, part of the Milan-based New Guards Group recently acquired by Farfetch.)
Other strong currents in society are affecting fashion, notably the value placed on sustainability, along with changing norms around gender and age, according to Carter. "When I worked at Bergdorf's as a buyer, you did not wear jeans past 50 — it was considered inappropriate unless you worked on a farm. And the cultural trend of gender fluidity is no longer an experimentation in androgyny. If men are going to wear lipstick, young people think nothing of that — because your gender identity is determined by you and not by society."
Indeed, both Carter and Thomai Serdari, professor of luxury marketing and branding at New York University's Stern School of Business, see fashion trends as driven by consumers, who are willing to wear Balenciaga and Target at once. It's no surprise, then, that haute couture fashion houses are producing sneakers, they both say. But successful fashion brands are doing more than simply adding expensive kicks to their assortments, according to Serdari. They're also relinquishing the power to dictate taste.
"You have this mix of high and low," she said. Even traditional fashion houses like Chanel and Gucci have allowed customers to be individuals and offered them choices by breaking up what were once sets like suits and twinsets.
"We don't see capsule collections any longer, but a focus on products, based on how people live their life. They're thinking about how these products can stand individually, this is what attracts people to Gucci right now. There is still a segment that shops the full outfit from brands. But their number is diminishing," Serdari said.
"With a greater focus on work-life balance, there's an increasing number of people taking an interest in having an active lifestyle so in turn the idea of traditional workwear is evolving."
Edited Market Analyst
Future trends don't look promising either in light of Gen Z's attitude toward paying full price for clothes. Gen Z shoppers who enjoy shopping said they buy clothes at full price 25% to 50% of the time, but those who don't like shopping said they buy clothing at full price less than 25% of the time, according to a recent MakerSights report.
It's not just a penchant for discounts, however. Consumers are not just aiming to pay less for clothing, they're also buying less in the first place. That trend may be further compounded by tariffs slapped on goods made in China that could jeopardize sales, according to several retailers and the American Apparel & Footwear Association.
Cold comfort in hot activewear
Along with a democratization of who determines what is fashionable has come the casualization of apparel. Much of retailers' discomfort can be attributed to consumers' desire for comfort in all phases of their day.
Several analysts have pinpointed athleisure and other casual styles as rare growth areas for apparel retail. In an Aug. 5 note emailed to Retail Dive, Morgan Stanley analysts raised their five-year global activewear growth forecasts, citing "evidence of continued momentum for global brands in the US and accelerating DTC growth, coupled with a stronger 2018" and noting that retailers will be "increasingly challenged."
One reason is that fewer and fewer employees need a separate wardrobe for work. Even Goldman Sachs recently stopped requiring tailored suits for men, notes FIT's Carter. "So now even the bankers don't have to spend $3,000 on a bespoke suit," she told Retail Dive in an interview. "They can wear a sweater like they're going on to the Hamptons. Everybody wants to have this hip look from the entrepreneurs who are revolutionizing society."
Euromonitor pins recent and future U.S. apparel sales growth on "changing consumer lifestyles" centered on health, wellness and activity. The firm measured 10% growth in U.S. apparel and footwear sales over five years (2013-2018) to $284 billion, according to data emailed to Retail Dive. That's spilling into everyday wear, according to fashion analytics firm Edited. New sneaker arrivals for men, for example, have risen 34% year over year and for women 11%, while new arrivals for women's pumps fell 3%, according to Edited data.
"With a greater focus on work-life balance, there's an increasing number of people taking an interest in having an active lifestyle so in turn the idea of traditional workwear is evolving," Edited Market Analyst Kayla Marci told Retail Dive in an email. "Globally, the lines between workwear and everyday apparel are becoming more blurred. A great example is how sneakers are dominating footwear assortments, and worn outside of the gym and into the office."
And it's not just work, Carter notes. "Tea, the Saturday and Sunday Sabbath, a wedding, a funeral," she said. "What are you going to get dressed up for? Whereas baby boomers always had clothes for career, clothes for socializing and clothes for special occasions, I can wear my sneakers to every single event."
"If my life had four activities per day, I needed four outfits, five days a week — that's a lot of outfits and people don't need that any longer."
Professor of Luxury Marketing and Branding, New York University's Stern School of Business
It's not hard to see why, for example, Nordstrom is struggling despite its retail innovations. Shoppers no longer flock there for special occasion and other pricier apparel, which led UBS analysts last month to deem the department store a "no-growth retailer," citing trends for less expensive and more casual attire.
That's unlikely to change, at least not much. Carter says she is seeing some return in the desire to dress up a bit more, with invitations to weddings and fundraisers now often calling for "smart casual," which is often open to a wide interpretation.
"Americans started this trend and it's here to stay. But they still get dressed for dinner in Europe, and you don't go to a meeting in Shanghai or Beijing in khaki pants," she said. "I'm seeing women dress up a little more. Cute ballet flats. And we're dressing up things that we didn't before, like sneakers and tote bags. We have to be careful to ensure that the expression through our fashion doesn't mean that we are sloppy in our lives."
Serdari isn't so sure. "If my life had four activities per day, I needed four outfits, five days a week — that's a lot of outfits and people don't need that any longer," she said. "I don't think our styling is going to change or go back. I think we're going to get even more relaxed."
And therein lies the hope for fashion — that it is a way to express yourself, according to Carter.
"People will always buy fashion because people like to escape, and we sell a fantasy," she said. "Most people wear fashion because they feel good. It has an emotional appeal and it is an expression of their individuality and their identity. I'm noticing more adjectives added to the word 'casual,' like 'casual chic.' These are all buzzwords for dressing with some class and sass, even if it's casual."