Plunkett Research Divulges 10 Prominent Trends in the Apparel and Textiles Industry

Houston, TX. June 10, 2009

Plunkett Research uncovers 10 major trends occurring in the apparel and textiles industry. These trends will not only affect apparel and textile producers, but also, workers, importers/exporters, retailers, as well as the global economy. This and more is reported in Plunkett’s Apparel & Textiles Industry Almanac, 2009 edition.

Plunkett’s 10 trends influencing the apparel and textiles industry:

1)   Globalization: Growth in Offshore Apparel Manufacturing Slows/China Remains Major Factor - The apparel and textiles industry has long been ruled by complex import and export agreements that limit the amounts of particular garments (such as t-shirts, pants and sweaters) and textiles (such as yarns and fabrics) that may be exported to specific markets around the world. In an effort to safeguard domestic production, the United States, Canada and several additional countries, established the Multifiber Agreement (MFA) in 1973, which put a quota system in place and established a maximum number for products produced in developing countries that could be legally exported to MFA member countries. For many years, there was remarkable growth in Chinese exports. In 2008, the U.S. imported $22.9 billion in the apparel category alone from China, up from $22.7 billion in 2007. As of January 1, 2009, all quotas capping Chinese textile exports to the U.S. and Europe lifted, opening the world market to free trade. In a healthier economic climate, this would likely have had boosted Chinese exports tremendously. However, global demand for textiles is falling as the economic crisis continues. The impact of globalization on the apparel and textiles industry in the U.S. has been devastating. According to the Department of Labor, the total number of workers in U.S. textile mills fell from 332,900 in 2001 to 151,000 in 2008.

2)   High-Tech, Nanotech and Smart Fabrics Proliferate - The abilities of high-tech materials to keep athletes dry and comfortable sparked a $9-billion market for high-performance outdoor apparel. The limitless possibilities are fascinating. The future for high-tech fabrics and smart fabrics in the near future sounds like something out of science fiction. Nonetheless, specialized fabrics will be sensitive to a wide variety of external substances, including harmful toxins or chemical agents. The U.S. military has already incorporated patches worn on uniform cuffs that change color when harmful agents are detected in the surrounding air. Scientists at MIT have created smart fabrics that filter or shield wearers from radiation by combining synthetic fibers with an optical device called a dielectric mirror.

3)  The Vast Majority of Shoes Sold in the U.S. Are Now Made in China - U.S. retail stores specializing in shoes sold $23.2 billion in goods during 2008, which is down from $27.1 billion during 2007. Americans purchase more than 2.2 billion pairs of shoes yearly. More than 98% of those shoes are imported, and China is the largest supplier by far. Major Chinese shoe manufacturers include Yue Yuen Industrial Holdings Ltd. (which had about $4.9 billion in 2008 sales), Li Ning Co. Ltd. ($977 million in 2008 sales) and Belle International Holdings Ltd. ($1.6 billion in 2007 sales). While a handful of manufacturers, such as Allen-Edmonds (a high-end maker of men’s shoes with about $100 million in annual sales), are able to maintain factories in the U.S., domestic manufacturing is all but dead. Another exception is New Balance, a manufacturer of high-end running and athletic shoes operating six factories in the U.S. The only large American maker of athletic shoes, New Balance still has plants in the U.S., while its major competitors, such as Nike and Reebok, get most or all of their shoes from Asia.

4)  Bricks, Clicks and Catalogs Create Synergies While Online Sales Growth Slows - The 2008 slowdown in consumer spending has put the brakes on online retail sales. Reports show that 2008 online sales to be up only 7.2% over the previous year (not including travel sales), which is a letdown from the 19.8% growth rate they found in 2007. Analysts further predict a very low 4.1% growth rate in 2009. Plunkett Research estimates U.S. e-commerce sales at $145.6 billion for 2008, boosted by very strong results at Amazon.com (Amazon is one of the few retailers that posted growth in 2008, largely due to its competitive pricing and convenience of use). Several factors will encourage consumers to do more of their shopping online, including today’s wildly fluctuating gasoline costs, the fact that consumers feel pressed for time, the widespread adoption of high speed Internet access and growing ease-of-use of online shopping carts. Online shopping often goes hand-in-hand with in-store shopping. Numerous surveys consistently show that most shoppers prefer to make their purchases in physical stores but that these shoppers, who browse a traditional retail firm’s web site, do so to gain information, later visiting a physical store to make a purchase. The reverse is also true.

5)   Alternative Sizing Is Big - A recent study, which was sponsored by the U.S. military as well as clothing companies such as Lands’ End, J.C. Penney, Target and Dillard’s, shows how factors such as age, income and occupation affect the size and shape of the human body. For example, those who earn up to $25,000 per year weigh 152 pounds on average; those in the $50,000-to-$75,000 category average 160 pounds: and those earning above $75,000 weighed nearly the same as those in the lowest income category. Regardless of income, the average adult American woman is 5’4” tall, weighs 155 pounds and wears a size 14. Retail sales of plus-size clothing for women and girls and big and tall clothing for men and boys reached $76 billion in 2006, and could exceed $100 billion by 2012. Over the years, as more and more Americans have approached the “overweight” category (women are generally moving from size 12 to 16, and men from size 40 to 46), manufacturers have adjusted their sizes to stroke consumer egos and generate more sales, a trend called “vanity sizing.” What used to be labeled a women’s size 10 is now a size six. Some manufacturers are even making their sizes slightly looser.

6)   Discount Clothing Retailers See Promise in Designer Lines - The most successful discount retailers offer apparel focused on fashion as well as low prices. Among the key players in this business are Wal-Mart, followed by T.J. Maxx/Marshall’s, Target, Old Navy, Kmart and Kohl’s. In terms of apparel, discount stores such as Target, Wal-Mart and Kmart have typically been the places where consumers shop for inexpensive clothing basics such as socks, hosiery, underwear and sweatpants. But all of these retailers are now trying to gain a firmer hold on casual and career wear as well, by offering trendier, more upscale lines of clothing. Both Wal-Mart and Target spent millions to advertise their fashion-forward apparel in upscale media including Vogue. Wal-Mart bought an eight-page advertising spread in 2005, which culminated in 2007 with a total of 116 full pages of ads for the discount giant. This was a major investment; Vogue’s average advertising rate for a full page is $104,000. While these developments point to the increasing competition among discount retailers, they also reflect the general public’s greater ease in shopping for discount apparel.

7)   Luxury Goes Online - Haute couture companies such as Dior, Louis Vuitton and Bottega Veneta are also operating their own web sites. Although once seen as unnecessary competition to luxury boutiques in glamorous world capitals, company web sites are proving to be an absolute necessity. At Dior, www.dior.com is becoming one of the firm’s fastest-growing points of sale. Unlike the company’s brick and mortar stores, the web site does not require exorbitant rent payments, world-class architecture and staggering overhead in the form of staff and customer perks. Another trend in the world of online luxury shopping is broadcasting designer trunk shows. Once held only in stores and open to favored customers only, online trunk shows are open to the public and can be accessed for up to two weeks instead of limited to a single day in stores. Online shows can also be augmented by footage from runway shows and interviews with designers.

8)   Self Service Retail and Travel Technologies Take Off - Another innovation that has been growing rapidly in store use is the automated self-checkout kiosk. Thousands of these machines are being used in traditional retail stores such as Kroger, Albertson’s, Wal-Mart and Home Depot. Most major airlines have now installed similar automated kiosks for checking in passengers, saving significant overhead necessary to support ticket agents. Though initially avoided by many shoppers because of worries about mistakes and complications, these clerk-less checkout lanes have been gaining popularity and have become the preferred method of checkout for many customers, especially after they have used them many times. From the consumer perspective, older shoppers dislike the increasing lack of human interaction that began with the automated use of such systems as voice mail and has culminated in this new technology, which completely replaces customer relations with clerks. Of course, for retailers, installing these devices is simply good business. The machines pay for themselves in nine to 12 months, as the cost saved in labor alone is enormous.

9)   Mass Designers and Retailers Speed Up for Fast Fashion - Several European mass retailers are experimenting with a new business model known as “fast fashion.” For these retailers, success comes from designing trendy, inexpensive clothes that mimic high-end fashion and that are delivered to consumers at lightning speed—two to four weeks after conception. This turnaround time is a far cry from the four to nine months that U.S. mass retailers typically require. The key players in this business are Sweden’s Hennes & Mauritz, also known as H&M, as well as Zara and Mango, two Spanish retailers, and the U.K. chain New Look. H&M is, by far, the largest retailer in the fast fashion market, both in terms of sales and stores. From design table to store rack, its lead time is three weeks. In keeping with the fast fashion model, H&M typically does not restock items—once they’re gone, customers won’t see them again. This “now or never” policy helps to promote H&M’s image as a purveyor of up-to-the-second style.

10)  Apparel Goes Green - As industries from agriculture to automobiles focus on eco-friendly products and processes, apparel and textiles are going green as well. Organic cotton is a major trend in apparel retailing with firms such as Nike, Timberland, Patagonia, Eileen Fisher and Levi Strauss. Organic Exchange, a nonprofit organization that provides information and advises farmers and retailers, reports that the organic cotton market reached $3.2 billion in 2008, a 63% increase over 2007. Retailers committed to the trend are promoting clothing made from cotton grown without chemicals or genetically modified seeds and are charging premium prices for it. Take Levi’s Eco jeans, for example. Made of organic cotton, the company’s signature leather patch on the waistband has been replaced with an organic fabric patch, and prices run from $58 on the low end to $198 on the high end.

Additional information is available in “Plunkett’s Apparel & Textiles Industry Almanac 2009”, as well as on our web site, www.PlunkettResearch.com.

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