China, UAE and Chile top A.T. Kearney Retail Apparel Index
July 19, 2013 - United States Of America
China’s continues to remain the top apparel market for global retailers due to its market size and strong growth in clothing sales, followed by the United Arab Emirates (UAE) and Chile, according to the Retail Apparel Index 2013 released by A.T. Kearney.
Kuwait, Brazil, Saudi Arabia, Russia, Malaysia, Mexico and Turkey are the other developing countries identified by the Index, which shows that countries continue to offer compelling opportunities to apparel retailers.
The Retail Apparel Index identifies the top 10 developing countries ranked in the A.T. Kearney Global Retail Development Index in terms of market attractiveness, retail development, and country risk for their clothing retail industries
"Since the last Retail Apparel Index in 2011, Western apparel retailers have increasingly looked for growth from developing markets, where apparel spending remains strong as disposable incomes rise. E-commerce has also developed significantly for both local and international players,” said Michael Moriarty, A.T. Kearney partner and co-author of the study, in a press release.
The report says three trends have shaped China's apparel market: the rise of e-commerce, a boom in fast fashion, and the evolution of the luxury market.
According to Althea Peng, A.T. Kearney partner and co-author of the study, “In most emerging markets, e-commerce is less than 1 percent of total sales. In China, it is 6 percent which is higher than in the United States. More than three-quarters of online sales in China are in apparel.”
Several fast fashion retailers have aggressively expanded in China over the last year. For example, Uniqlo opened 65 stores in China in fiscal year 2012, bringing its total count to 145, and it plans to add 100 stores a year to reach 1,000 stores. Similarly, H&M opened 52 stores in 2012 and Zara opened 37 stores. Gap has plans to open 35 stores in 2013.
The report notes that China’s luxury market remains strong, and it surpassed Japan to become the second largest luxury market in the world in 2012. However, it is not growing as fast as in the past. A key reason is that a large portion of luxury purchases are made abroad, due to lower prices and a strong renminbi.
Three Latin American countries—Chile, Brazil and Mexico—take a strong position in the Apparel Index. Brazil is South America's largest apparel market, with $42 billion in sales, compared to $14 billion for Mexico. The Brazil luxury market is forecast to grow to more than $48 billion by 2025.
However, an issue for Brazil is that 80 percent of luxury purchases are made outside of Brazil due to import challenges, including high tariffs that increase the cost of imported products by almost triple relative to the United States and France, according to the study.
Making a mention of aggressive expansion plans of apparel retailers in the Latin American region, the study says Gap, which currently has 36 Latin American stores (including 28 in Mexico and four in Chile), plans to open 30 more by 2014, including its first Brazilian store in 2013. Similarly, Zara built 12 new stores in 2012 taking its tally to 150 stores in Latin America (including 56 in Mexico and 39 in Brazil).
The Middle East region also remains an attractive retail apparel market with the UAE, Kuwait, and Saudi Arabia ranking in the Index.
Many retailers are testing their operations in the UAE before expanding to other Middle East countries due to its ease of doing business, sizeable retail segment, large expat community, and tourism. Several notable apparel openings occurred in the UAE in 2012, including Level Shore District, Prada, Muji, COS, Gap, Pomellato, Calvin Klein, Juicy Couture, and Destination Maternity. Bvlgari and Bloomingdale’s plan new stores in 2013 in Abu Dhabi.