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Apparel | Competition, shopping changes hinder growth

Brands revise retail strategies and distribution models


Two category growth drivers, sportswear and fast fashion, struggled last year. The BrandZ™ Apparel Top 10 declined 7 percent in value, following a 14 percent rise a year ago, as shoppers purchased with more discretion, looking for durability and value, and favoring brands that were on trend, such as Adidas, which rose 58 percent in value.


Having filled their closets with performance clothing and seasonal designs over the past few years, consumers slowed their purchasing and looked for items that were not only comfortable, but also appropriate across occasions—for work days that might begin at the gym and end with an evening out with friends.


Millennial shoppers fit their apparel purchases into limited budgets that included other priorities, such as travel and other experiences. They selected items carefully, mixing and matching them into personalized combinations. A retro trend emerged, and vintage high-top sneakers became the fashion counterpoint to technological accessories like smartphones and earbuds.


Two other trends—globalization and urbanization—also influenced the category, as apparel marketers focused on a cross-national audience of young people from Shanghai, New York, London and other world capitals who share similar tastes, values, and brand preferences. And more options enabled women to dress modestly but with style, whether for religious reasons or their own comfort.


Brands adjusted retail strategies because of competitive pressure and to better express the brand experience. Zara closed some small stores and opened larger flagships instead. The athletic performance brands—Nike, Adidas, and Under Armour—expanded fitness studios. Lululemon opened a new concept store called Lululemon Lab, in New York. And Amazon was expected to develop a private label activewear brand.


Performance underperforms

Adidas was especially effective in being on trend, with classic-styled sneakers that met the fashion moment. The brand’s popularity had lagged in the US, in part because the German-based company focused more on soccer than American football. Recently it increased its association with basketball and entered partnerships with American style leaders, like rapper Kanye West.


Adidas celebrated diversity and humanity with its Pharrell Williams sneaker line alternatively called “Hu,” or “Human Race.” It created its “Parley” shoe made from plastics recycled from the ocean. Adidas also planned to open its first US factory, a location in Atlanta that it is calling Speedfactory, as part of its commitment to expand in the US, be close to customers, and respond quickly to fashion trends.


Nike remained the most valuable brand in the BrandZ™ Apparel Top 10. While retaining its authority in performance, Nike faced stronger competition in fashion, particularly from brands targeting women customers. Reflecting a more diverse and global view of apparel, Nike introduced a lightweight hijab designed to be comfortable during sports.


Competition from Nike and others hurt Under Armour sales and its share price. To widen its reach and drives US sales, particularly to women, Under Armour distributed the brand at Kohl’s, a discount department store. Looking for new opportunities, it also took its wearables to a new place—the bedroom. Having developed a technology story about compression wear, Under Armour extended the brand into what it termed “Athlete Recovery Sleepwear.” The brand introduced these pajamas, made with a specially engineered fabric, at the Consumer Electronics Show.


Lululemon sales increased as it attempted to expand its appeal to men, and the brand commanded loyalty despite strong competition. However, the stock price dropped after shoppers reacted negatively to the dark colors of its early spring collection.


Fast fashion slows

The fast-fashion brands experienced a challenging year for several reasons, including heightened competition, slower sales in parts of Europe and the US, and exchange rate pressure. Zara, with strong sales results, continued to expand worldwide, but changed its distribution strategy.


Zara will close smaller stores and open flagship locations, while expanding its e-commerce presence. The arrangement coordinates online and offline, with large stores better able to express the brand and display more merchandise. The brand will facilitate e-commerce with website launches planned throughout Southeast Asia and in India.


Zara represents about two-thirds of the sales of its corporate parent Inditex, the Spanish fashion group. Inditex operates around 7,300 stores globally under eight brands, including Massimo Dutti, which joined the BrandZ™ Apparel Top 10 this year. Massimo Dutti also entered India.


H&M, which ended the year with around 4,000 H&M stores (and 4,350 stores in 64 markets for the H&M Group), experienced slower growth and price markdowns in some of its larger markets, like the US and China. It decided to slow the rate of store growth and shift some attention to e-commerce. The brand felt price pressure from discounters like UK-based Primark.


H&M focused on supply chain improvements and developments of sub-brands, such as & Other Stories, which are more protected from price competition. It planned to open its eighth brand, Arket, in the fall. And H&M developed its Conscious line, which promises production that is ethical and sustainable. Meanwhile, H&M continued to expand globally, opening its first stores in Vietnam.


Wearable technology remained a trend. Uniqlo, with over 3,100 stores worldwide, stressed its Japanese provenance and its brand story as a leader in wearable technology. The brand continued to focus on apparel basics and emphasize color choice. A price promotion to drive sales hurt profits, however. Uniqlo also planned to revise its distribution model and expand the online portion of total sales from 5 percent to 30 percent.


Meanwhile, competition and changing tastes impacted Victoria’s Secret, as foot traffic declined at shopping malls and Amazon challenged the brand online by introducing its own-label bras, branded as Iris & Lilly and priced at $10. Still, Victoria Secret featured Lady Gaga at its Paris catwalk show, which was a major social media event. Declining mall traffic also hurt Ralph Lauren, which planned to close its flagship Fifth Avenue store as part of its effort to revive the brand and increase its online presence.




Brand-Building Action Points


1.          Have a clear purpose

Have a clear purpose. It does not need to be a higher purpose, but the purpose should express the brand’s contribution to the customer’s life, and explain what drives the brand and distinguishes it.


2.          Deliver experience

Do not neglect e-commerce and the convenience and range it offers. But coordinate and balance online and offline, finding innovative ways to present the brand in physical locations where the customer can experience it directly.


3.          See beyond millennials

It is important to reach millennials worldwide—but not only millennials. The aging populations of many countries offer brands a major opportunity to market across age groups.


4.          Respect changing values

One size does not fit all. Increasingly, women dress to please themselves, not men, usually because of self-confidence and independence, and sometimes for religious reasons—or both.


5.          Be versatile

Offer products that can be used for multiple occasions. People have more events packed into the day and less time to change clothes between them. They want items that justify spending money and making room in the closet.