Chilly Prospects for Fashion and Apparel Retailers This Holiday Season
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- Published: Tuesday, 07 November 2023 23:40
As the holiday season approaches, fashion retailers may not be decking the halls with joy. Experts are projecting a 2.3 percent decline in direct-to-consumer fashion and apparel sales for 2023 compared to the previous year, painting a potentially gloomy picture for the industry.
These forecasts come from Commerce Signals, an organization that analyzes consumer spending patterns using credit and debit purchase data from across the United States. Nick Mangiapane, the Chief Marketing Officer and Head of Partnerships at Commerce Signals, points out that the 2.3 percent drop might not capture the full extent of the issue, stating, "In our overall forecast, we’re only seeing total retail up 2 percent. With fashion down 2.3 percent in our projections, that’s not hugely different from the overall forecast being up 2 percent. But obviously, it’s still down, and that doesn’t even account for the fact that inflation is up 3 percent, so… you’re closer to minus 6 percent, in real economic terms."
However, when viewed in the context of recent trends in fashion and apparel sales, this decrease could be seen as an improvement for retailers. Mangiapane explains, "Over the past three months, we’ve seen consumer card spending decline at fashion retailers by 7.7 percent across all channels. While a -2.3 percent holiday forecast certainly isn’t good for the category, it is an improvement versus recent trends."
To navigate these challenges, direct-to-consumer (DTC) fashion retailers may need to target consumers with a household income of over $100,000. Mangiapane notes that higher earners have increased their spending slightly over the past three months, whereas spending among those with less than $75,000 in household income has dropped.
The trend of increasing consumer spending, as indicated by industry-agnostic data, is expected to rise by 6.4 percent this holiday season. However, much of this spending will be directed towards experiences rather than material goods, which could be contributing to the decline in DTC sales in the fashion sector.
Mangiapane points out that declining in-store purchases is a significant factor in the projected 2.3 percent decrease in fashion sales. Commerce Signals predicts that online fashion retail sales will be "essentially flat" with a decline of 0.1 percent, while in-store sales will see a more significant decline of 4.6 percent.
Curiously, this dip in in-store fashion and apparel purchases stands in contrast to other projected trends for brick-and-mortar options like department stores and mass merchants. Commerce Signals' data forecasts a 4.4 percent increase in department store sales and a 7.1 percent increase in mass merchant sales during the holiday season.
While sales in physical stores have positive projections, the number of stores the average consumer will visit during the holiday season is expected to decrease. Shoppers are anticipated to visit approximately four stores, down from six in 2022.
The last two weeks of November are set to be pivotal for retailers, as nearly one-third of shoppers' budgets will be spent during this period. Sixty-six percent of consumers plan to participate in Black Friday and Cyber Monday deals, with higher-income shoppers showing a greater interest.
In the quest for a piece of the holiday shopping pie, retailers will need to provide superior customer experiences, a task made challenging by a tight labor market. Verint's data shows that 53 percent of retailers expect difficulties in effectively staffing their stores with seasonal workers, despite 41 percent prioritizing improvements in in-store customer service and engagement.
As the holiday season unfolds, fashion and apparel retailers will need to adapt to these shifting dynamics to ensure their festive cheer isn't left out in the cold.