A slowdown in emerging markets, a heavy discounting addiction, and ongoing weak consumer confidence in developed markets: 2013 had the elements of a perfect storm. And yet, amidst these tempestuous circumstances, the global apparel and footwear market grew by 5% in value, according to the latest estimates from Euromonitor International.
The China Preoccupation
With China’s slowing economy sending jitters across the globe, is it time to re-evaluate the obsession with this market? Economic conditions have indeed impacted the country’s apparel and footwear consumption: the market registered 9% value growth in 2013, compared to 11% in 2012.
Nonetheless, it accounted for 27% of the global market’s US$85 billion incremental growth in 2013. Looking ahead, China will account for 50% of absolute growth over 2013-2018. It will overtake the US to become the world’s largest apparel and footwear market in 2017.
As heady as these figures sound, China remains a high-stakes gamble. The market has become an incredibly competitive battleground, with domestic players increasingly losing share to international brands. Success lies in understanding where new opportunities will arise as the market becomes more sophisticated, by either looking to new territories, price tiers or categories.
Time To Get Over The BRICs?
In fact, over-reliance on the BRICs as a whole has become a dicey strategy. India’s currency slide led a number of international players to reassess their entry into the market in 2013. Brazil’s rising debt levels loom large. Nonetheless, as is the case with China, the fixation with these markets is not unfounded. For all their economic vulnerabilities, the BRICs are still set to be the greatest contributors to global apparel and footwear sales over the forecast period.
The Middle East and Africa region has also become a new frontier for growth. The region’s apparel and footwear sales are set to rise by US$17.9 billion over 2013-2018. The importance of the Middle East as a travel destination and shopping paradise will continue to sustain the influx of multinational brands into the market. Sub-Saharan Africa’s demographic dividend presents a sizeable opportunity for international apparel brands, but one which remains latent due to a weak retail infrastructure outside of South Africa.
Developed Markets Show Mixed Results
While set to be dethroned from its number one spot by China, the US has shown a notable comeback from the economic doldrums. It has clocked persistently positive year-on-year growth since 2009, and, more impressively, is forecast to be the second largest contributor to global value growth after China over 2013-2018, ahead of the other BRIC markets.
Western Europe proved to be a mixed bag in 2013. Among the gainers were Turkey, the UK and Norway. At the other end of the spectrum, conditions continued to deteriorate in the region’s largest markets, Germany, France and Italy. The German market is forecast to contract by US$2.2 billion over 2013-2018. A key issue in this region has been breaking the cycle of discounting, which has been placing downward pressure on margins. Consumer perceptions of prices have strongly changed following ongoing bleak economic conditions.
Japan saw a slight glimmer of hope in 2013, following Prime Minister Shinzo Abe’s monetary and fiscal stimulus, which temporarily revived consumer confidence. The market grew by 0.2% in value in 2013, following a prolonged period of declines. However, these quick-fix measures have not set the ball rolling for sustainable growth. Growth will be virtually static over the forecast period, as the country grapples with a fragile economy and a rapidly ageing population.
A US$2.0 Trillion Future Awaits
Global apparel and footwear sales are set to surpass the US$2.0 trillion mark by 2018. It is evident that, while China will remain a powerhouse of growth, reducing reliance on this market (along with the other BRIC economies) will be a key challenge for apparel players. More importantly, the dazzling figures that emerging markets present should not take attention away from mature markets like the US and the UK, which still offer growth opportunities.
Analyst Insight by Ashma Kunde - Apparel and Footwear Analyst, Euromonitor International
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