Clothing and
footwear in Australia
EXECUTIVE SUMMARY
Slow-down bucks trend of previous
years
Overall growth in the clothing and
footwear market in 2007 was slightly slower than in 2006, and it became
negative in 2008. In the five years prior to 2007, growth in sales of clothing
and footwear had been strong, on account of strong economic growth and high
consumer confidence. Australians were spending as if there was no tomorrow,
often living beyond their means on credit. The demand for high-end goods and
designer brands was growing, as everyone wanted a little (or a lot of) luxury.
This trend has now changed, with slower growth in 2007 and 2008.
Global financial crisis slows sales
growth
The slow-down in 2008 was due to the
global financial crisis, which has already had a significant impact on
Australia. Economies all over the world are being affected, with businesses
closing down, share prices tumbling, and unemployment rates rising in almost
all developed economies. Australia is now in recession, and both consumer and
business confidence are extremely low. Consumers have therefore cut back on all
areas of discretionary spending, including clothing and footwear, and they are
focusing instead on reducing their debts, saving in case they become
unemployed, and attempting to rebuild their investment nest eggs and pensions,
which have lost value on account of the financial crisis.
Baby boom buoys infant clothing
sector
The fastest-growing sector over the
review period was clothing accessories, and infant clothing also performed very
well. This was undoubtedly a reaction to the record number of births registered
in Australia in 2007, since the government’s baby bonus has encouraged people
to have more children since its introduction in 2004. An increase in the number
of births has led naturally to increased demand for infant clothing, which has
been the sector least affected by the financial crisis, since people will
always need to buy clothes for their newborn babies. They cannot simply choose
to save their money instead, as they usually can with adult clothing.
Children’s market immature
Most sectors of the clothing and
footwear market are mature and highly competitive. There are, however, some
sectors – and areas within sectors – that are less competitive and experiencing
faster growth. These include the market for infant clothing, which grew faster
than other sectors during the review period and has less players competing
within it. Another sector with a growing market is children’s clothing. Thanks
to the baby boom, and growing demand for more stylish children’s clothing, this
is an area with less competition and good opportunities for growth.
Hard road ahead
The years 2009 and 2010 will be very
difficult for the clothing and footwear industries. While the recession lasts,
and the economy recovers, demand will remain low and competition fierce.
Negative growth is expected in 2009, and many businesses will struggle to stay
afloat. From 2011 onwards, however, consumer confidence will improve and demand
will pick up again. Demand for infant and children’s clothing and footwear will
remain strong, and other sectors will see renewed growth. High-end fashion and
designer labels will be hardest hit during 2009–2010, and beyond that they will
be the slowest to recover.
KEY TRENDS AND DEVELOPMENTS
Australians eschew conspicuous consumption
The
annual growth rate of retail sales in Australia in 2008 was the weakest it has
been in eight years according to ABS figures, with mining-driven Western
Australia the hardest-hit state. Consumer sentiment has declined by almost 30%
in the last year, as fears of unemployment prompted Australians to save their
money and pay off debts rather than spending on discretionary items such as
clothing and footwear.
The
demand for luxury, designer branded, expensive goods has skyrocketed in
Australia since the late 1990s, following the trend established in other
Western countries such as the United States. The celebrity lifestyle became the
ideal, and everyone was spending more money, often using readily available
credit to live beyond their means, as they sought to emulate the lifestyles of
the rich and famous. Australia therefore currently has one of the highest
levels of household debt in the world.
As
unemployment has risen and Australia has entered the recession, people have
realised this is not a good position to be in if they lose their jobs.
Australians are now looking at the dire economic situation in the US and
realising that they no longer want to emulate its example. Australians now want
to reduce their exposure to credit, pay off their debts in order to achieve
greater financial security, and reduce the risk of losing their homes or going
bankrupt if they lose their jobs.
Current impact
The
impact of the global financial crisis on Australian retail sales emerged in
2008. Sales in all areas of discretionary spending decreased, and clothing and
footwear was no exception. The clearest trend so far is that sales of high-end,
designer and luxury goods have fallen the most. After years of demanding more
luxury, high-end brands, and adopting celebrity-inspired lifestyles, consumers
turned away from this pattern of conspicuous consumption in 2008. The remaining
demand for clothing and footwear is now for less expensive, less ostentatious
and more modest articles, and even consumers who are still buying luxury
products are buying fewer of them, and they are buying good-quality but
understated items that do not scream “I’m expensive”.
So
far, retailers and manufacturers have responded to this trend by reducing their
production costs wherever possible, and cutting their prices. Clothing and
footwear shops everywhere have “sale” signs in their windows.
There
are no real “winners” in this situation, as demand has fallen across all
sectors. Men’s clothing and footwear has been less adversely affected than
women’s, however, on account of the emergence of the “frugalistas”, or women
who are becoming the more frugal members of the household in terms of spending.
Women in Australia have responded more strongly than men to the financial
crisis, embracing frugality as a virtue and cutting their spending.
Fashionistas have become frugalistas – who still want to look good, but also
want to spend less money. It has not yet become fashionable for men to be
frugal in this way, so demand for men’s clothing and footwear has not fallen as
much as for women’s.
The
financial crisis and its effects on consumers have obviously had a major
influence on the clothing and footwear industry in Australia. Manufacturers and
retailers are already feeling its effects, as business confidence is very low,
and some businesses have been forced to close stores or shut down altogether.
Adopting an appropriate response to this trend will be important for businesses
if they are to survive the current recession.
Outlook
During
2009–2010 while the financial crisis continues, this trend towards less
expensive, less flashy clothing and footwear – particularly among women –will
continue, as it has yet to reach its peak. Unemployment looks likely to get
worse, and demand for clothing and footwear, particularly at the high end of
the market, will then decrease further. Because this trend emerged as a
response to the current financial situation, however, demand will increase
again once the economy improves, although the conspicuous consumption of luxury
items is unlikely to rise during the forecast period to the levels seen around
2006.
Thanks
to the baby bonus, Australia has had a relatively high birth rate in recent
years, so demand for infant and children’s clothing and footwear will be
affected less by the financial crisis than that for adult clothing and
footwear. Children outgrow their clothing and shoes, which therefore require
regular replacement, which in turn maintains demand. Consistent with the trend
in other sectors, demand for more expensive products will be lower than demand
at the low end and in the middle market, which is an area of opportunity for
manufacturers and retailers alike.
With
men reacting less dramatically than women to the financial crisis, the men’s
sectors are also areas of opportunity. In Australia, the teen market for
reasonably priced, fashionable clothing and accessories is well catered for,
but the same cannot be said for men over 30. In addition to men’s fast fashion,
there is a lack of specialist stores offering men’s up-scale (non-luxury)
fashion. In the current climate and during 2009–2010 at least, consumers will
not be buying expensive luxury fashion, and these missing men’s markets may be
the key to suppliers’ survival.
Future impact
Many
people have lost, and will lose, a significant part of their wealth during this
financial crisis, because of losses on the stock market, declines in their
pension funds, and reductions in property values. Consumers will therefore have
less disposable income than they did a few years ago, particularly at the high
end of the market, as they will need to save their money to rebuild their
pension funds. Demand for high-end, luxury clothing and footwear will therefore
lag behind the recovery of the lower-to-middle range of the market.
Businesses
should beware of cutting staff to reduce their costs, which should be
absolutely the last resort, since it will increase unemployment, and this can
only serve to worsen and prolong the recession. In order to thrive, or even
just to survive this recession, manufacturers should aim to provide
good-quality offerings at reasonable prices to meet market demand. With
consumers buying less in general, they are demanding better-quality,
longer-lasting clothing and footwear, rather than buying items to follow
changing fashion fads which they can only wear for one season. Once the
recession is over, the lower-to-middle range of the market will recover faster
than the high end, which will obviously be to the benefit of the lower end of
the market.
This
trend is not encouraging new entry into the market, in which the current
players are already battling fiercely to survive. There will probably be some
consolidation in the industry, as some businesses close down, and this will
leave the survivors in a better position towards the end of the forecast
period, when fewer businesses will be competing to satisfy the growth in
consumer demand.
Eco-friendly is the new black
Over
the past few years people have become increasingly concerned about the
environmental impact of every aspect of their lives. There is growing demand
for environmentally sound products in all areas, from transport, food and
garden products to beauty products, packaging and energy. Australians are paying
greater attention to their individual and collective national environmental
“footprints”, and they want to preserve the planet for future generations.
In
the clothing and footwear industries, consumers are demanding items made from
organic, sustainable or recycled materials, and they are paying attention to
the processes used to manufacture the products they buy. Consumers are paying
more attention to where the materials are sourced, what materials are used, and
whether their production has a negative impact on the environment. They are
also concerned about the health implications of wearing clothing made with
harsh dyes or chemicals.
In
addition to genuine concern for the environment, people are also buying
eco-friendly clothing and footwear because it has become fashionable to do so.
Eco-friendly is the new black.
Current impact
There
has been huge media attention on the environment in recent years, as the
majority of Australians now consider issues such as global warming and
sustainability to be extremely important. Many consumers are now considering
more than just a garment’s look and price before buying it, but also its entire
life cycle and its impact on the environment. They will consider the material
from which it was made, where it was made, the manufacturing process, how far
it had to travel to the store, the manufacturer’s environmental policies and
practices, and what they will do with the product when they have finished with
it.
Many
people are now buying or swapping second-hand clothing as a means of reducing
the environmental impact of the production of new clothing, and of the waste
produced when it is thrown away, but it is not just second-hand clothing, but
also “recycled” clothing made from second-hand fabrics, that is gaining
popularity. New businesses such as Kara Smith have entered the market, which
cater specifically to this demand by using only recycled fabrics and materials
to produce their clothing. Other established businesses have responded to this
trend by adding organic or eco-friendly ranges into their existing product
lines, such as Country Road’s organic cotton babywear.
There
are plenty of opportunities for both new and existing businesses to break into
this market, as it is a fast-growing one with few competitors. There are now
quite a few businesses selling organic cotton or hemp babywear, and handbags
and children’s clothing made from recycled fabrics. Regular women’s and men’s
wear retailers do not have many environmentally friendly offerings, however, so
this is definitely an area of opportunity both now and for the forecast period.
Outlook
This
trend has certainly not yet reached its peak. Global warming and sustainability
are not issues that will be resolved during the forecast period, so this trend
still has a long way to go. Environmental awareness is increasingly becoming
mainstream across many different industries in Australia, and also becoming
more popular and more fashionable. The demand is definitely not yet being met
in the Australian market, since there are still relatively few retailers and
manufacturers offering environmentally friendly clothing and footwear.
During
the forecast period this trend will continue to grow, with more department and
specialist stores offering environmentally friendly ranges of clothing and
footwear. Internet sales will continue to grow rapidly, as this is a cheap way
to enter the market, especially for new businesses that do not yet have the
capital or income to be able to pay the rental costs of conventional retail
stores.
Future impact
The
negative impact of this trend will be felt by those businesses that ignore it.
Environmental responsibility is here to stay, and it is critical for small
businesses in particular not to underestimate its importance. By the end of the
forecast period there will be greater competition among environmentally and
socially conscious retailers and manufacturers, so businesses will benefit from
getting in early and establishing themselves and their brands. This trend will
continue to grow until the majority of the products on the market are
eco-friendly, by which time retailers will need to differentiate themselves in
other ways.
This
market is just starting to take off, and no single brand is recognised for its
environmentally aware clothing and/or footwear, so now is the time for a
company to get its brand out there and build a reputation in this market.
This
trend is benefiting manufacturers that already make their clothing and/or
footwear in Australia, since they are immediately at an advantage relative to importers,
whose goods are transported from overseas and thereby create carbon emissions.
Australian retailers should exploit this advantage to create more sustainable
products and market them as such.
Fashionable sportswear
Over
the review period obesity has become a major issue in Australia, which now has
one of the highest rates of obesity in the world. Of particular concern is the
high level of obesity among Australian children, which has also grown
considerably. This “obesity epidemic” has been good news for the diet and
fitness industries, while television programmes are increasingly focusing on
losing weight, getting fit and improving one’s looks and body. Television is
inundated with advertisements for diet companies such as Weight Watchers, Jenny
Craig and Lite n’Easy.
More
new gyms are opening in every state of Australia each year, and personal
trainers and other health and fitness providers, such as yoga and meditation
studios, are also setting up in business. More people are now taking part in
formal exercise programmes such as “boot camps” and joining gyms than ever
before. This has created increased demand for sportswear, and in particular
fashionable sportswear. People want to look good when they are exercising,
particularly women.
Current impact
This
trend has forged a new market in the clothing industry, creating opportunities
for new entrants into the market. Stella McCartney now has a line of
sportswear, as do tennis stars Serena and Venus Williams. Lululemon is another
new manufacturer/retailer of yoga-inspired sportswear that has taken off in
Australia. Established companies such as Nike are also now designing more
fashionable sportswear in response to this trend.
Demand
for high-end sportswear grew less quickly in 2008 than in 2006 or 2007, on
account of the financial crisis, which led to a reduction in demand for all
types of clothing and footwear, but especially for high-end, more expensive
products. There are currently not many companies that produce low-priced,
fashionable sportswear, which is mostly available only at premium prices. This
may represent an opportunity for sportswear manufacturers at the low end to
create a more fashionable offering and gain market share.
Outlook
The
trend towards fashionable and designer sportswear during the review period
reflects a number of factors. Concern about obesity and health has led more
people to exercise more often, which has increased demand for sportswear; the
prolonged economic boom in Australia, in combination with celebrity culture, has
increased the popularity of expensive personal trainers and boot camps; and
increasing urbanisation means that houses are smaller and back yards have no
room for exercise equipment, which is forcing people to exercise in public.
People are exercising more, and particularly in places where they will be seen
by others, and this has led to the desire to look good while exercising and
hence to increased demand for fashionable sportswear.
Of
the factors mentioned above, only one changed in 2008 – Australia’s economic
situation. The recession the country is currently facing is likely to reduce
the demand for expensive, fashionable sportswear, as people cut back on their
discretionary spending. The other two factors, obesity and urbanisation, have
not changed and will not change during 2009–2010. There will still be a demand
for fashionable sportswear during the recession, but the majority of it will be
for reasonably priced products.
Future impact
Once
the recession is over, consumer sentiment will improve, and with it the demand
for higher-end products. Growing obesity, increased concern about health and
urbanisation are all long-term trends, which will continue to fuel demand for
fashionable sportswear over the forecast period. There is still room for more
competition in this market in all price brackets, and it will be much more
competitive by the end of the forecast period, with price, function and design
providing the main areas of product differentiation.
Once
competition has become intense in the adult market, it is likely to carry over
to the children’s market. Obesity among children is a big issue, so the new
practices we are currently seeing among adults, such as boot camps, will
probably be adopted by children. Children’s fashion is a growing area right now,
so this fashion consciousness will probably come to affect children’s
sportswear in future. This is certainly an area of opportunity for
manufacturers of both children’s wear and sportswear.
Yummy Mummy fashion
Over
the past few years the baby bonus has been credited with increasing the birth
rate in Australia, with 285,000 births registered in 2007 – the highest number
in the country’s history. This baby boom has increased the number of babies and
children in Australia, which has led to increased demand for babywear,
maternity wear and children’s wear.
The
level of popular interest in celebrity pregnancies, and in celebrities’ babies
and children, has also increased. Before celebrities such as Demi Moore raised
the profile and glamour of pregnancy and having children by posing naked for a
magazine while pregnant, and revelling in their pregnancy rather than hiding
away until they lost the weight, most women did not expect to feel attractive
while pregnant. This has all changed now, and the demand for fashionable
maternity wear, and babywear and children’s clothing, has also grown.
Current impact
In
the past, women did not expect or endeavour to look fashionable or stylish when
they were pregnant, but celebrity “yummy mummies” have changed all that. Women have
realised they do not have to wear overalls and shapeless dresses when pregnant;
they can celebrate their pregnant bodies, wearing beautiful, stylish clothes
just as they did before becoming pregnant. The market is not very competitive,
however, and most retailers offer either high-end, expensive but beautiful
maternity clothing, or low-end, less stylish clothing. There is not much in the
middle market.
It
is not just maternity wear that is in high demand, but also stylish children’s
wear and babywear. Mothers not only want to look good themselves but also want
their children to do so. Many manufacturers responded to this demand for
stylish children’s clothing and footwear by designing children’s wear that
follows adult fashions, such as skinny jeans, knee-high boots and crop tops.
There has now been a backlash against the premature sexualisation of children
in Australia, prompting demand for more old-fashioned, traditional babies’ and
children’s clothing and footwear, such as pretty dresses with puffed sleeves,
mary janes, overalls and vests. At the moment this demand is mostly being met
at the high end of the market, with very few alternatives in the low-to-middle
range.
Outlook
This
trend has not yet reached its peak, especially for children’s wear, as all the
babies born in and around 2007 will continue to underpin the increase the
demand for children’s clothing over the next 5–10 years. In addition, the baby
bonus is still in operation, so the birth rate should remain high during
2009–2010. If the government cancelled the baby bonus, this would lead to a
decline in the birth rate and thus reduce demand for maternity and children’s
wear.
During
2009–2010, because of the recession, demand for high-end clothing will continue
to decline, which will benefit those retailers offering more reasonably priced,
stylish maternity and children’s wear. The important thing about children’s
wear is that children grow out of their clothes, which must constantly be
replaced, unlike adults, who can wear their existing clothing for longer. This
also applies to a lesser extent to maternity wear. Women who have not been
pregnant before will need new clothes while they are pregnant, since their
existing clothes will not fit. New clothing in this market is therefore not
only a want, but a need, and this will buoy demand during the recession.
Future impact
Once
the recession is over, demand for higher-end maternity and children’s wear will
increase again, while demand at the lower and middle ranges will remain strong.
These are signs that Australia will remain obsessed by celebrity, and that its
people will continue to aspire to celebrity looks and style, and this will
maintain the strong demand for stylish maternity and children’s wear.
The
trend towards more traditional values, particularly concerning children, will
continue to increase over the forecast period. Sales of more traditional
children’s and babies’ clothing and footwear should therefore increase at the
expense of those suitable for “miniature adults”.
These
markets present great opportunities for new and existing businesses to build
their brand recognition and gain market share, as there is currently no
dominant player in any of them. These markets will become more competitive over
the forecast period, so now is the time for businesses to start meeting this
demand.
Online retail boom
Towards
the end of 2007 and throughout 2008, local retailers reported a large downturn
in sales, but the opposite applied to online sales, particularly imports.
Consumers are being lured on line by the lower prices of clothing and footwear,
particularly for big-name brands. It is not only the money-saving aspect of
online shopping that is attracting consumers but also the convenience.
Consumers in rural areas especially are flocking to the Internet, where they
have access to a much wider range of products than are available in their local
areas.
The
Internet is also more convenient for people with limited time or mobility, such
as apartment dwellers in cities who do not have cars, or the elderly. It has
become popular to buy everything from groceries to furniture on line and have
them delivered to your door. This reduces the propensity to make impulse
purchases at the check-out, or indeed in any store, which is also contributing
to the rise in popularity of online shopping during this tough financial
climate.
Current impact
Internet
sales have increased every year for around a decade, but there has been a huge
surge in the growth of Internet sales in 2007–2008. One reason for this has
been the strength of the Australian dollar, so that buying products from the US
and UK is much more affordable for Australian consumers. People also feel more
secure when buying goods over the Internet than previously, because websites
are more secure, consumers’ understanding of them has increased, and Internet
retailing now has a mainstream, everyday image.
Generation
Y has grown up with computers and the Internet, and now uses the Internet for
almost everything. If a company does not have a good website, it might as well
not exist for Generation Y. If Generation Y wants to buy something and doesn’t
know where to get it, it will Google it to find out. Retailers ignore the
importance of the Internet at their peril.
Outlook
During
the recession, it is Generation Y that will have the highest disposable
incomes. This is the generation that has not yet had children, and in most
cases does not have mortgages, nest eggs or pensions that have suddenly halved
in value like those of older generations. It is Generation Y that will be
buying the most clothing and footwear during 2009–2010, and retailers should
therefore increase their Internet presence and operations to take advantage of
this trend. In order to compete with other companies, including those based
overseas, they will need to offer significant discounts on line.
During
2009–2010, the recession will definitely favour online retailing, and not just
for customers from Generation Y. The big advantages of Internet shopping for consumers
who are trying to save money are that they can research where to get the best
price very easily, without walking around lots of different shops, and that
they can go on line to buy one particular item, without having to wander
through stores filled with other tempting products, so they won’t overspend.
These are some of the main reasons customers give for shopping on line.
Future impact
Once
the recession is over, and consumer confidence improves, store-based retail
sales will also increase. Some demand will shift away from Internet retailing
back to conventional stores, but this will not be the end of the trend towards
online shopping. Australia currently has an ageing population. As the baby
boomers grow older, the demand for online shopping will increase, since it
provides is an incredibly convenient way to shop, especially for those with
reduced mobility, such as older people. Ageing baby boomers will shift a large
proportion of their demand away from conventional stores to the Internet. Why
drive to the shops, park the car, and walk around searching for the right item,
when you can just click your mouse and have it delivered to your door?
