Tomorrows apparel industry:

products, markets, sourcing

and influences - forecasts to
2019
2013 edition

Tomorrows apparel industry: products,

markets, sourcing and influences forecasts to 2019
2013 edition
By: Malcom Newbury

June 2013

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iii

Table of contents
Tomorrows apparel industry: products, markets, sourcing and influences - forecasts to 2019 ................................ i
Table of contents ............................................................................................................................................................. iv
List of tables ................................................................................................................................................................... vii
List of figures ................................................................................................................................................................. viii
Introduction, apparel industry explanation, and report methodology ........................................................................ 1
Explanation of the apparel industry within the apparel supply chain ................................................................................. 1
Consumers .....................................................................................................................................................................................3
Retailers..........................................................................................................................................................................................3
Brands and wholesalers ...............................................................................................................................................................3
Branded and external manufacturers .......................................................................................................................................4
Fabric and other material suppliers ...........................................................................................................................................4
Simple and complex supply chains............................................................................................................................................4
Value added in the supply chain ................................................................................................................................................ 5
Report methodology and apparel definition ...........................................................................................................................6
Methodology for market forecasts ...........................................................................................................................................6
Methodology for the other forecasts........................................................................................................................................ 7
Chapter 1 The retail market, in and after 2013, with likely future scenarios .............................................................. 9
The recent past, from 2007 to 2013 .........................................................................................................................................9
The market in 2007, before the financial crisis ..................................................................................................................... 10
The market in 2009, after the financial crisis ........................................................................................................................ 11
The market, an estimate for 2013, after four years of recession ....................................................................................... 12
The market, likely future scenarios to 2019 .......................................................................................................................... 12
Chapter 2 Recent merchandise trends and product changes, with likely future scenarios ...................................... 16
Apparel merchandise, the big picture ..................................................................................................................................... 16
The product market in 2007, before the financial crisis ...................................................................................................... 17
The product market in 2009, after the financial crisis ......................................................................................................... 17
The product market, an estimate for 2013, after four years of recession ........................................................................ 18
The market, likely future scenarios to 2019 .......................................................................................................................... 18
Chapter 3 Market and distribution evolution, in and after 2013, with likely future scenarios ................................ 21
The definition of distribution not lorries but routes to market....................................................................................... 21
Distribution in 2007, before the financial crisis ....................................................................................................................22
Distribution in 2009, after the financial crisis .......................................................................................................................22
Distribution channels, an estimate for 2013, after four years of recession .................................................................... 23
Distribution channels, likely future scenarios to 2019 ....................................................................................................... 24
Chapter 4 The industry, in and after 2013, with likely future scenarios .................................................................... 26
Methodology of industry wholesale value calculation ....................................................................................................... 26
The industry in 2007, before the financial crisis ................................................................................................................... 27
The industry in 2009, after the financial crisis ..................................................................................................................... 28
The industry, an estimate for 2013, after four years of recession .................................................................................... 28
The industry, likely future scenarios to 2019 ....................................................................................................................... 29

iv

Chapter 5 Sourcing and production, in and after 2013, with likely future scenarios................................................ 31
Methodology of production value calculation ...................................................................................................................... 31
Production values in 2007 ....................................................................................................................................................... 32
Sourcing and production in 2007, before the financial crisis............................................................................................. 33
Sourcing and production in 2009, after the financial crisis ............................................................................................... 34
Sourcing and production, an estimate for 2013, after four years of recession .............................................................. 34
Sourcing and production, likely future scenarios to 2019.................................................................................................. 35
Production in the worlds regions analysed by garment destination region .................................................................. 35
Production growth by producing region.................................................................................................................................37
Where in the world are the industrys garments made, and to whom are they sold?....................................... 38
Annual apparel industry figures, including a sub-split of the rest of the world .................................................. 40
Chapter 6 Definition of external influences in the supply chain ................................................................................ 41
The supply chain reconsidered for PESTEL analysis............................................................................................................. 42
Chapter 7 Political external influences impacting the apparel industry ....................................................................44
World politics ............................................................................................................................................................................. 44
Pakistan and Bangladesh ............................................................................................................................................... 44
Eurozone financial crisis ................................................................................................................................................ 45
The Arab Spring uprisings.............................................................................................................................................. 45
Chinese cost increases ................................................................................................................................................... 45
The dangerous political landscape .............................................................................................................................. 46
Chapter 8 Economic external influences impacting the apparel industry ................................................................. 47
World economics ........................................................................................................................................................................47
Cotton ..........................................................................................................................................................................................47
Retail demand ............................................................................................................................................................................ 48
Increasing wage costs in China benefit Bangladesh ............................................................................................................ 48
China still the world export leader ......................................................................................................................................... 48
US import figures for apparel .................................................................................................................................................. 49
European apparel manufacturing ........................................................................................................................................... 49
Chapter 9 Socio-cultural external influence impacting the apparel industry ........................................................... 51
World socio-cultural trends...................................................................................................................................................... 51
West meets East, Furla and Fung............................................................................................................................................. 51
Tazreen and Wal-Mart ...............................................................................................................................................................52
Chapter 10 Technological external influences impacting the apparel industry ........................................................ 54
Previous expectations ............................................................................................................................................................... 54
New technology in the apparel supply chain ........................................................................................................................55
Technology fairs......................................................................................................................................................................... 56
Chapter 11 Environmental external influences impacting the apparel industry ....................................................... 57
Socio-cultural and environmental combined ........................................................................................................................ 57
Main environmental influences on the apparel supply chain ............................................................................................. 57
OrthoLite..................................................................................................................................................................................... 58
Chapter 12 Legal external influences impacting the apparel industry ....................................................................... 59
Apology and explanation ......................................................................................................................................................... 59
Chapter 13 Summary of PESTEL influences impacting the apparel industry ............................................................. 61
The summary as a figure ........................................................................................................................................................... 61
The major influences today ..................................................................................................................................................... 62

Consumers (21/30) .......................................................................................................................................... 62

Governments (12/30) ...................................................................................................................................... 62

Fashion retailers (25/30) ................................................................................................................................ 63

Brands (19/30) .................................................................................................................................................. 63

Wholesalers (16/30) ........................................................................................................................................ 63

Manufacturers (17/30) ..................................................................................................................................... 64

Fabric weavers (19/30) .................................................................................................................................... 64

Chapter 14 External influences that will impact on the apparel industry ................................................................. 65
The overall future summary as a figure ................................................................................................................................. 65
The major influences on tomorrows apparel industry ....................................................................................................... 66
A

Consumers......................................................................................................................................................... 66

Governments .....................................................................................................................................................67

Fashion retailers ................................................................................................................................................67

Brands..................................................................................................................................................................67

Manufacturers................................................................................................................................................... 68

Fabric weavers ................................................................................................................................................... 68

Chapter 15 External influences that will not impact on the apparel industry ........................................................... 69
Political ........................................................................................................................................................................................ 69
Economic ..................................................................................................................................................................................... 69
Socio-cultural ..............................................................................................................................................................................70
Technological ..............................................................................................................................................................................70
Environmental ............................................................................................................................................................................. 71
Conclusion ................................................................................................................................................................................... 71

vi

List of tables
Table 1: Market trends by region at retail prices .................................................................................................................................................................14
Table 2: Markets % share at retail prices..............................................................................................................................................................................14
Table 3: Markets US$ bn values at retail prices Annual figures 2007-2019................................................................................................................... 15
Table 4: Product trends at retail prices .................................................................................................................................................................................19
Table 5: Products % share at retail prices ............................................................................................................................................................................19
Table 6: Products US$ bn values at retail prices Annual figures 2007-2019 ................................................................................................................ 20
Table 7: Distribution trends at retail prices ......................................................................................................................................................................... 25
Table 8: Distribution % share at retail prices ..................................................................................................................................................................... 25
Table 9: Distribution US$ bn values at retail prices Annual figures 2007-2019........................................................................................................... 25
Table 10: Industry trends by region at wholesale prices ................................................................................................................................................... 30
Table 11: Industry % share at wholesale prices .................................................................................................................................................................. 30
Table 12: Industry US$ bn values at wholesale prices Annual figures 2007-2019 ....................................................................................................... 30
Table 13: Production trends by region at producer prices ................................................................................................................................................ 32
Table 14: Production % share at producer prices............................................................................................................................................................... 33
Table 15: Production US$ bn values at producer prices Annual figures 2007-2019 .................................................................................................... 33
Table 16: Industry Production Calculation by Region ....................................................................................................................................................... 36
Table 17: Main rest of the world apparel manufacturing 2013 ........................................................................................................................................ 40
Table 18: Top ten apparel importers to USA 2012 in US$ square metre equivalents (bn) ......................................................................................... 49

vii

List of figures
Figure 1 The Supply Chain in the Apparel Industry ...............................................................................................................................................................2
Figure 2 The Supply Chain in the Apparel Industry, with an Added Value Chain............................................................................................................ 5
Figure 3 Fashion Industry Supply Chain............................................................................................................................................................................... 42
Figure 4 PESTEL Model for Tomorrows Apparel Industry, Recent Past and Current ................................................................................................... 61
Figure 5 PESTEL Model for Tomorrows Apparel Industry, future ................................................................................................................................... 66

viii

Introduction, apparel industry

explanation, and report methodology
This report is the third edition of just-styles Tomorrows apparel industry. It is intended to contribute in-depth
and thoughtful insights into:

How and why the apparel industry has changed in the recent past

The manner in which it is changing now

How it will change in the foreseeable future

For just-style, the future of the apparel industry, viewed within regions across the world, can be forecast ahead
for about six years.

Explanation of the apparel industry within the apparel

supply chain
The purpose of this explanation is to make it clear to the reader of what the apparel industry is composed.
The apparel supply chain can occasionally be simple. It can also be very complex, and frequently is. There are
five layers in the supply chain, which work backwards from the final consumer of the garment. They are:
1.

Consumers (the retailers customers)

2.

Retailers (the market that the industry sells to)

3.

Brands and wholesalers (the industry)

4.

Manufacturers (the factories that produce the garments for the industry)

5.

Materials suppliers (who produce the fabric required as the raw material for the garments)

The connections between the five layers are shown schematically in Figure 1. There are many potential
permutations, within that chain.

Chapter 1 The retail market, in and after

2013, with likely future scenarios
The recent past, from 2007 to 2013
The economic crash began in 2007 has been well documented, and extensively analysed. At just-style, we have
looked in depth at how the financial meltdown has affected the apparel industry. The first and most obvious
casualty was the fashion retail market in the developed world.
To begin with, it was by no means clear that the unravelling of the American sub-prime house borrowing
market was going to affect day to day spending on staples such as clothing. The effect was not really seen nor
understood until the Autumn/Winter 2008 season. But by that point the effects of the collapse of Lehman
Brothers, following the demise in the US of Fanny Mae and Freddie Mac, and the collapse in the UK of first
Northern Rock and then RBS totally dried up the supply of credit to the apparel industry, as well as choking off
consumer demand.
Retailers and brands reacted by playing safe for 2009. They reviewed the composition of ranges, the styling,
fabrics and colours, the result in Autumn/Winter 2009 was the most monochrome colouration and boring
styling seen on the High Street for years. But AW 2010, 2011 and 2012 were not much different.
This fuelled the behaviour of already street wise and picky consumers to do more waiting for markdowns.
The downturn fed on itself. In Spring/Summer 2009, there was unprecedented marking down of prices through
in-season promotions. High Streets were effectively on sale virtually continuously. Retailers achieved
margins, the difference between what they had already bought for, and what they were able to sell for, were
cut by up to five percentage points. This effect has continued. Retailers such as Arcadia have blamed xx%
reductions in profit before tax on xxx%-x% reductions in intake margins caused by the triple whammy effect
of increased cotton prices, increased labour costs and increased shipping charges on merchandise that will not
bear retail price increases to the consumer.
By 2011, the quantitative balance was restored. Retailers were buying what they believed they could sell. But
the apparel fashion buyers were now trying to rebuild their margins. They mostly felt they could not do this
through higher prices, because the consumer was either still frightened to spend, or was waiting for a bargain.
So, the pressure came to be felt by the suppliers. They were either forced to sell for lower prices, or more
frequently, found the business going to even lower cost countries. Bangladesh, Sri Lanka, Vietnam and

Chapter 2 Recent merchandise trends

and product changes, with likely future
scenarios
Apparel merchandise, the big picture
This report has deliberately excluded shoes, hats, bags and belts, as well as other accessories. This means that
just-style cannot comment on the long term demise of hats. Sixty years ago, no one went out without wearing
one. Today, they are only worn for special occasions.
Womens trousers have happened. Once a daring idea, they are now normal. Jeans are de rigeur. Even womens
underwear as outerwear is no longer shocking.
But whereas style changes all the time, the evolution of the major apparel product categories is just that; a
slow evolution. Consequently, there are few surprises in the trend predictions for:

Womens outerwear

Womens underwear

Menswear

Childrenswear

Sportswear

For many decades in the developed world, the proportions of womenswear, menswear and childrenswear have
been of the order of:

Womenswear

xx%

Menswear

xx%

Childrenswear

xx%

Sportswear

xx%

The figures in Table 4 support the historical evidence, and are hardly affected by the addition of the
developing regions.

16

Chapter 3 Market and distribution

evolution, in and after 2013, with likely
future scenarios
The definition of distribution not lorries but routes to
market
In this report on tomorrows apparel industry, distribution does not mean the physical movement of apparel
around the world. Rather, it means the channel through which the apparel reaches the final consumer, the
method used through which to sell the apparel. The channels of distribution are:

Traditional retail shops. These can be on the High Street, or in shopping malls, or in discount outlet
parks. They can be anything from individual boutiques, through multiple chains, to department stores.
There are obviously many shop formats, but the basic similarity they share is the bricks and mortar
they are made of.

Market stalls. These are transient shops, often set up and dismantled at the start and end of the same
day.

Catalogues. These can be either traditional large book format, or set up electronically on the internet.
Either way the consumer accesses them from home without visiting a bricks and mortar physical
shop.

Social networking and other channels. Other includes, for example, TV shopping or shopping via parties
at friends homes.

21

Chapter 4 The industry, in and after

2013, with likely future scenarios
Methodology of industry wholesale value calculation
Tables 1 to 9 were calculations of the market at retail values, by market region, by product category, and by
channels of distribution. That is to say, they represent what the consumers pay for their apparel, and are equal
to each other. But this report is primarily about the apparel industry. Therefore the retail values have to be
converted into the value of what the industry sells to its customers, the retailers. The sales value of the apparel
industry is what it sells at wholesale value.
Wholesale values have been derived by dividing retail values by weighted average mark-ups. These are the
added value calculations applied by the retail industry to obtain the difference between what they buy
merchandise for, and what they sell it at to the final consumer, as explained in Figure 2. The mark-ups used are
sales tax inclusive, because that is the price that the consumer pays, the price on the ticket. They vary
significantly from region to region. As illustrations of the variability of different mark-ups, it is the case that:

Mark-ups in Japan are very high. This is because of the complex nature of the supply chain, which has
many intermediaries in it. Each one takes a profit cut which pushes the price higher as the merchandise
moves down the supply chain.

Mark-ups in USA are quite low, because the retail market is homogeneous, and because there is fierce
price competition.

Mark-ups in Western Europe lie in between those of North America and Japan. However, they vary
significantly from top end designer clothing (Prada has a very high mark up) to budget value retailers
(Primarks is very low). Multiple chains like H&M and Zara lie between these extremes.

Mark-ups in countries like China and India are very low, but are creeping up as organized retail
develops.

It is anticipated that:

26

Mark ups in Japan will remain high. There are entrenched institutional defences against lower prices

Mark ups in USA will remain low

Chapter 5 Sourcing and production, in

and after 2013, with likely future
scenarios
Methodology of production value calculation
Tables 1 to 9 were calculations of the market at retail values, by region, by product category, and by channels
of distribution. Wholesale values have been derived by dividing retail values by weighted average mark-ups.
These are shown in Tables 10-12 in Chapter 4. They represent the added value calculations (mark ups) applied
by the retail industry to obtain the difference between what they buy merchandise for, and what they sell it at
to the final consumer.
In this Chapter, we consider production values, what brands, wholesalers and own label retailers pay
manufacturers for producing their branded, anonymous and own label merchandise. This was explained in
Figure 2, in which the major elements of added value in the supply chain were:

The consumer pays for the garment

Of which the government gets in sales tax
So the retailers income is

31

US$xxx
US$xx
US$xx

The retailer buys a branded garment for

US$xx

Or an wholesale anonymous garment for

US$xxx

The brand pays the manufacturer

US$xx

The wholesaler pays the manufacturer

US$xx