Fashion giants like Inditex and tech behemoths like Amazon are intensifying competition and shaping apparel and footwear markets globally, as they benefit from economies of scale, lean supply chains and big data analytics. Meanwhile, the digital evolution continues to speed up the pace of change, which permeates throughout the industry.
The frantic pace of the industry is affecting consumer behaviour, with consumers becoming ever more fickle and demanding. In addition, fast fashion has turned the industry into a demand driven one, thanks to its highly responsive supply chains.
Shifting market frontiers and the race to China
While apparel and footwear is fragmented, concentration increased during the review period, with many of the largest companies expanding their geographical reach beyond their home markets. This is not surprising when considering that 65 out of the 75 largest companies globally originated in developed countries, which only accounted for 18% of absolute value growth during the review period. Emerging markets have proved to be a dynamic growth opportunity, and also offer companies the potential to diversify their revenue stream, reducing their reliance on sales in a particular country or region.
No other country has received more attention than China. Its burgeoning consumer economy accounted for no less than 30% of absolute value growth in apparel and footwear globally over the review period. Fast fashion companies, Fast Retailing (Uniqlo), H&M and Inditex (Zara) have been quick to capitalise on the aspirational consumption habits of the Chinese adding 387, 383 and 303 stores respectively during the review period. H&M and Zara have leveraged their strong brand equity and pursued a premium positioning in China targeting the country’s rapidly rising middle class. This contrasts with their typically value-oriented position elsewhere.
Fast Fashion Stores in China
Source: Euromonitor International
Prioritisation of emerging markets differs widely
Many of the most dynamic apparel and footwear companies during the past five years still rely on developed markets for majority of their revenues. There are, however, noticeable differences between them in the importance emerging markets have played in their strategic vision. In fast fashion, H&M, Inditex and Fast Retailing have had much more of an emphasis on expanding into emerging markets than Associated British Foods (Primark) and Forever 21, which have had a greater focus on developed markets.
In sportswear, Nike has focused its expansion on the largest sportswear markets globally, and consequently leads rival adidas in value sales in four out of the five largest sportswear markets worldwide (the US, China, the UK and Japan). In contrast, adidas has had a greater focus on global reach and smaller markets. In 2016, adidas’s sales were ahead of Nike in 27 of the 46 researched markets. During the review period, an impressive 48% of adidas’s revenue originated from emerging markets. That is one of the highest value shares, together with New Balance, which derived 46% of its revenue from emerging markets.
Global Leading Apparel and Footwear Companies
Source: Euromonitor International
Emerging markets will continue to shape the future
A clear strategic vision that includes emerging markets shows foresight, as emerging markets will continue to offer the greatest growth opportunities going forward. Despite developed markets being set to perform better than in the review period, apparel and footwear in emerging markets will be worth only USD133 million less than developed markets in 2021, and emerging markets are set to account for 74% of absolute value growth over 2016-2021. The long-term growth opportunities in emerging markets should not be understated, as some of the world’s most populous countries, including China, India, Indonesia, Vietnam and the Philippines, are all expected to delivery some of the fastest disposable income growth globally in per capita terms.