If there is one subject close to our hearts at Fung Global Retail & Technology, it is fashion retailing. Over the last few years, we have established ourselves as a leading global think tank on apparel. Our coverage continues with our On Trend series of thematic fashion reports, which are published on FungGlobalRetailTech.com. In this week’s note, we distill some thoughts on the underlying trends driving changes in fashion retail.
Consumers Demand Newness and Value
The shifts in the US apparel market are about more than just a battle between e-commerce and department stores—even though they often seem to be characterized that way by the media and commentators. Faced with a profusion of choice and information, consumers are more demanding than in the past, and we perceive them wanting more newness but not wanting to compromise on genuine value for money. These two elements are driving various innovations, some of which are at the heart of the mass market and some of which are—for now, at least—more peripheral.
Apparel rental is resonating with millennials who want new looks and premium brands, but who do not want to pay a fortune for them or even necessarily hold on to a particular look for any period of time. This model is a near perfect answer to the demand for short-term fashions at affordable prices, as it does not require that renters compromise on style or brand. Rental company Rent the Runway has attracted 6 million customers in the US, and the rental format is growing in other markets, too, such as the UK and Australia. We discuss the apparel rental trend in our recent report Deep Dive: Millennial Lifestyles Drive Growth in Apparel Rental, which can be found here: bit.ly/ApparelRent
Fashion resale marketplaces have attracted millions of members looking to buy and sell clothing, footwear and accessories, often high-end items. Like rental services, resale marketplaces combine demand for new products and brands with affordability. Major firms in the space include The RealReal and Tradesy, which each say they have 5 million members, and Vestiare Collective, which claims 6 million customers. Our forthcoming report Fashion Re-Commerce Evolution covers this segment in detail.
The option to buy straight from the runway is making up-to-the-minute trends available to shoppers (although it does not meet their demand for value). This model’s immediacy is a big break from the traditional industry model in which designer brands and luxury houses present two seasonal collections per year and the showcased items appear in stores some six months later. The see-now, buy-now trend is being adopted by more and more designer names, from Alexander Wang to Burberry to Tom Ford to Tommy Hilfiger, as we discuss in our recent report From Runway to Checkout: The See-Now, Buy-Now Trend in Fashion, which can be found here: bit.ly/InstantFashion
Meanwhile, in the store-based mass-market segment, the demand for newness and value is driving the growth of fast-fashion retailers and off-price stores. Midmarket rivals are being compelled to adopt fast-fashion techniques in order to bring more newness into their ranges, and major names such as Macy’s are rolling out off-price formats. We cover the American mass-market apparel segment in detail in our forthcoming report Retail Revolution—US Apparel Shifts in 20 Charts.
Several of the segments noted above—such as apparel rental—remain niche oriented and pose little threat to mass-market giants in the near term. Yet they reflect consumers’ demand for getting genuine value without having to trade down to the lowest tier. In fashion, shopper frugality is about more than just getting ultralow prices from discount retailers, and demand for newness is about more than the growth of big fast-fashion names.
Other pieces you may find interesting include; From Runway to Checkout, The See-Now-Buy-Now Trend in Fashion, Is Experience Enough? Three Core Functions Will Drive The Future of Retail,
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