The United States Fashion Industry Association (USFIA) is pleased to announce that we have partnered with Euromonitor International to bring you exclusive industry analysis. On March 30th, Euromonitor released a new report, New Insights in the Apparel & Footwear Market in 2015--which was available a few days early exclusively for USFIA members!
Looking at the data, Euromonitor has discovered two interesting trends: the growth of menswear, as well as the importance of markets in Latin America.
The Growth of Menswear
According to the report, in 2014, menswear grew by 4.5 percent reaching US$440 billion in sales compared to 3.7 percent in womenswear with US$662 billion.
By 2019, menswear will contribute close to US$40 billion in the global apparel market, offering opportunities for category development. Men’s shirts, jeans and jackets and coats are forecast to be the top performers between 2014-2019.
"Growth in menswear is fuelled by a greater focus on personal appearance combined with large disposable incomes,” said Head of Apparel and Footwear research, Magdalena Kondej. "Globally, men’s annual disposable income is still 50 percent higher than women’s and while Western markets still spend the most on apparel, future growth is expected to be driven by Asia Pacific."
Brands traditionally focused on womenswear have now started opening separate menswear stores, while department stores are starting to revamp menswear areas. This has been particularly true in the luxury market, which remains underexploited for men's fashion. A number of luxury and mass fashion brands like Burberry or Zara have opened standalone menswear stores to take advantage of the growing trend.
"Menswear presents a great opportunity for fashion brands looking to diversify their product portfolios and reach out to new consumers. The more effectively brands are able to harness wealth and unique consumption cultures of male consumers, the more successful they will be," added Kondej. "It is in that perspective that New York will launch its first menswear fashion week in July 2015, following London’s path in 2012."
Can Latin America Fulfil Its Long-Awaited Potential in Designer Fashion?
By Magdalena Kondej, Head of Apparel & Footwear Research for Euromonitor International
It has long been touted that Latin America is a goldmine for international apparel brands, and it is true that the region is packed with potential, but macroeconomic conditions mean brands at the luxury end of the market in particular face complex hurdles to overcome.
Latin America continued to blaze a trail in 2014, with apparel and footwear value sales in the region growing by 10% according to the latest Euromonitor International data, reaching US$152 billion. For the most part it is fast fashion brands that have made headlines in the region of late. Looking to dilute reliance on their sluggish home markets, they have arrived in the region in droves. Forever 21, American Eagle Outfitters, H&M, Topshop and Gap are all recent arrivals.
However, while fast fashion brands are making waves, opportunity at the luxury end of the market, particularly in the more developed economies of Mexico, Brazil and Argentina, should not be overlooked. Many international luxury brands in the region – Ralph Lauren, Calvin Klein and Salvatore Ferragamo, for example – have already established a foothold, and economic conditions suggest there is plenty of growth yet to be achieved.
Rising incomes buoy luxury apparel market
Thanks to rising incomes and a growing middle class, Latin America has the world’s second-fastest consumer spending growth behind Asia Pacific. In Mexico, for example, average per capita disposable income is set to grow by 40% in constant value terms over 2014-2019. Furthermore, middle class consumers are not averse to spending this new-found disposable income on designer apparel and footwear. Latin America registered 14% value growth in the category in 2014, surpassing all other regions.
Latin America’s potential is, however, considerably uneven. For example in 2014 two-thirds of the region’s middle class households came from the top three apparel markets of Brazil, Mexico and Argentina. Meanwhile, just two countries – Mexico and Brazil – dominate designer apparel and footwear, together accounting for almost 58% of regional sales.
Full potential is a long time coming
Despite the encouraging conditions, doubts remain regarding if and when Latin America will fulfil its potential for luxury apparel. To take Brazil as an example, although designer apparel and footwear continues to show healthy growth (9% in 2014), actual expenditure is relatively low on a global scale, less than Canada, for example. Yet Brazil is the 10th-biggest retail market in the world, and ranks well ahead of Canada in almost all fast-moving consumer goods categories. To compare with another BRIC economy, Brazilians spend less than half as much on luxury goods as Russians, even though Brazil’s economy is bigger.
Brazil’s consumer market has not reached the size it is overnight, neither have disposable incomes jumped in a day, and the country is certainly not new to the economies to watch list. So it has to be acknowledged that if the Brazilian market was all plain sailing we would no longer be talking about Brazil as a place with potential for luxury apparel, as the rewards would already have been reaped.
High import taxes send Brazilian shoppers overseas
The crux of the problem lies in high import duty and taxes across the region, meaning that international brands are far more expensive in Latin America than in the US or Europe. The impact of these tariffs has a knock-on effect on right down the fashion chain. Brands that in Europe would be considered high-street staples, such as Topshop, are forced to adopt a higher-end positioning simply because of inescapable price increases. There are of course exceptions – import tariffs in Paraguay are notoriously low.
With premium prices across the board, high-income consumers, Brazilians in particular, are well aware that they will be paying far more for the product on home soil. So when they are planning a luxury spending spree they head overseas, diluting sales in their home countries.
Argentina nuance creates an unexpected opportunity
Meanwhile, currency complexities are having a perhaps surprising effect on the luxury market in Argentina. There are two active exchange rates in the country: the official rate; and the ‘blue dollar’ black market rate; technically illegal but widely available. As the gap between the official and blue rate has grown, luxury brands have benefitted. A luxury item paid for with currency bought on the black market comes in at hundreds of dollars cheaper than its official exchange rate equivalent. For well-off Latin Americans, Buenos Aires is a cheap weekend shopping destination, provided they are happy to exchange US dollars on the black market. Argentina’s economy is mired in problems, yet luxury brands stand to benefit.
Can consumers be convinced to buy locally?
Argentina’s dual exchange rates aside, the greatest challenge in Latin America lies in persuading wealthy consumers to shop at home rather than abroad.As infrastructure develops, shopping mall penetration is steadily increasing, and these new malls will play a vital part in driving regional growth by increasing consumers’ enjoyment of the overall shopping experience. For luxury brands, new state-of-the-art malls are the place to be, extending the footprint of the brand but at the same time retaining that air of exclusivity that is so important.
But with the lure of cheaper products overseas, a presence in malls may well not be enough to convince consumers to spend on home soil. High-end international apparel retailers need to investigate ways to make their shopping offer so attractive it outweighs the price benefits of shopping abroad – not an easy proposition. Building a community through exclusive events, either in-store or at the latest city hotspots, is one avenue to explore – Burberry, for example, hosted the opening event for the Mario Testino ‘In Your Face’ exhibition in São Paulo. Bringing more local flavour to marketing and the implementation of store cards or members’ clubs could also aid in fostering a feel of community, encouraging consumers to buy then and there.
Investment in Internet retailing should also be prioritised, in particular converting the channel from a marketing tool to a transactional platform. Latin American consumers are increasingly digitally connected, yet online luxury sales remain extremely low. 45% of Latin Americans use the Internet, yet only 2% of designer apparel and footwear is sold online, meanwhile in Asia-Pacific just 30% of the population use the Internet, but online sales in the same category stand at 9%.
Challenges ahead are worth facing
Moving forward, Euromonitor International predicts that the Latin American apparel market will expand by a further US$14 billion to 2019, while designer apparel will see US$1.4 billion value growth over the same period. Despite the difficulties, Brazil will overtake Hong Kong and Canada in terms of designer apparel value sales, and a strong performance is also expected from Mexico, which is forecast to be the eighth-largest contributor to absolute growth in designer apparel over the period to 2019.
Complex macroeconomic conditions will continue to pose a challenge, but the region’s booming middle-class, a sophisticated and brand-savvy generation, make this challenge one worth confronting.
Additional Materials
Click here to view Euromonitor International's video about the report's menswear findings
About Euromonitor International
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