The famous American dream has taken the world in its grip.
Billions, on the lookout for good opportunities, are working hard towards settling down in the country. The prosperity of the United States of America can be measured by its Gross Domestic Product calculated to be US$ 17.710 trillion in the first quarter of 2015. One of the most promising sectors in the country's textile industry. Apart from giving various countries tough competition in terms of quality, it has grabbed fourth spot in global export value behind China, India, and Germany.
Exports of textiles also increased by 45 per cent between 2009 and 2014 to US$ 18.3 billion. Contrary to these figures are reports that decreasing demand in domestic market is having an adverse effect on apparel retail business. From changing customer preferences to hunger for innovation, there are several factors ruining the smooth journey of apparel retail in the United States of America. Even lower gas prices, which result in more money savings for consumers, have failed to ignite higher spending, probably because consumers believe the price drop is not permanent.
Vulnerable apparel retail market
The apparel sector is highly vulnerable to economic shocks as purchase of clothing items is largely optional in comparison to other consumer goods. The brittle and slow recovery of the country's economy has brought a sharp decline in retail apparel sector sales there. Clothing and clothing accessories store sales declined in April 2015 from March 2015 levels, reaching US$ 20.4 million, according to latest data from the United States Department of Commerce. According to a separate report by the United States Labor Department, receipts at clothing stores fell 0.8 per cent in early 2015.
Local clothing brands were hopeful about sales in March and April, as the drop in February was largely attributed to winter storms and it being a relatively small month with fewer days for sales. Apparel retail store Cato Corp registered a decline of 10 per cent in February, which was shocking as the retail store was basking in its new-found glory of 14 per cent rise in sales in January. Another retail giant, Gap, reported a decline of seven per cent in Gap label and five per cent drop at Banana Republic. Old Navy, another successful apparel brand, experienced flat store sales. Sale at The Buckle which has 460 stores in the country, declined from US$ 89.5 million in January 2015 to US$ 88.6 million in February 2015.
"With the continued increase of online sales threatening the traditional brick-and-mortar retail model, retailers and brands must be quick to adapt to the changing needs of the online shopper," said the NPD Group's chief industry analyst, Marshal Cohen.
For some other brands like L Brands, which owns Victoria's Secret, La Senza and Pink, the sailing was smooth as store sales grew by six per cent. The net sales of the stores were also up by seven per cent and stood at US$ 806.1 million in comparison to US$ 750 million in 2014.
Made in USA
The overall picture in the country's apparel manufacturing sector is not rosy. According to the statistics from the Bureau of Labor Statistics, between April 2014 and April 2015, nearly 4.2 per cent employees lost their jobs in the apparel manufacturing sector. Approximately 39 per cent or 86,800 jobs were lost in the apparel manufacturing sector from January 2008 to April 2015.
Trade experts believe that a sizable chunk of apparel manufacturing can return to the country if apparel manufacturing becomes highly automated like the textile industry or if foreign workers are given permission to work. The possibility of industry and government acting on these two factors is extremely slim, so manufacturing of apparel from the United States of America seems like a remote possibility.
Another important factor that has led to the steep decline in domestic manufacturing of apparel is that the country's apparel market has registered highest growth in the branded and luxury apparel sector. The manufacturers of luxury brands prefer to outsource manufacturing to developing nations because of low labour cost and lower cost of overheads like electricity. The companies looking forward to bring production to the United States of America struggle to find labourers who can pass simple drug tests or come to the job regularly. Manufacturing challenges in the developing countries are still controllable, which makes it rare to find 'Made in US' labels on apparel.
Why did sales drop?
Retailers like Macy's, J.C. Penney, and Kohl's have reported little or no rise in sales. The retailers point fingers at several temporary factors for the slowdown. This includes delay in inventory shipment, erratic weather and a steep decline in tourists.
There has also been a shift in consumption pattern. America's baby boomers, or those born between 1946 and 1964, were the main drivers of apparel sales. Now, as most of these people prepare to retire, demand has slowed down. Most of the disposable income of the adult population goes to healthcare and retirement expenses.
Recently, Macy's CFO Karen Hoguet blamed weak growth of the luxury retail market on Netflix Inc, Millennials and women averse to the idea of looking decked up while shopping. "We did some consumer research, and the customers said, they like going to the off-price retailers because she doesn't have to put lipstick on," Hoguet said at an industry conference.
Millennials prefer to buy gadgets like smartphones and tablets rather than clothes. A recent Morgan Stanley report revealed that most of the expenditure of Millennials includes rent, cell phone bills and personal services. This leaves less money for buying clothes or home furnishing.
According to retail expert and author Robin Lewis, today's consumers are not willing to pay the full price because promotions are fairly common. "With coupons, discounts, loyalty points and gifts-with-purchase more the rule than the exception today, consumers are spending less because they can," he wrote on his website.
Understanding consumer sentiments
Demographic transformation has changed the opinion of customers on fashion. Retailers are now under constant pressure to produce endless quantity of garments at lowest possible price. Competition has increased, forcing many retail houses to lower their price range.
The apparel industry is also focusing on innovation and technology to offer something new and fresh to consumers. NPD Group's chief industry analyst Marshal Cohen said, "Apparel manufacturers should take a cue from the tech industry - take the lead in investing in the apparel innovation consumers are hungry for, tell them why they need it, and they will buy it. Fashion must get the passion back into the equation in order to truly compete for today's consumer dollars."
Shorter lifespan of apparel products, demand for product range extensions, changes in shopping habits and the growth in discounts and freebies are just some of the challenges for retail apparel.
While it is still too early to predict how apparel retail sector will fare in future, the brands have to ensure that they are ready to serve the innovation-driven Millennials. Effective adjustments to cope with customers' demands will help apparel retailers determine their future course of action, sell more, earn customer loyalty and increase profitability.