April 13, 2017
The BHS closure has boosted supermarket brands such as Asda’s George
Primark and Asda’s George lead the £10 billion sector; Internet pure plays are growing very rapidly
Ultra-fast-fashion offerings from e-commerce players have injected new vigor into the value market
London (April, 2017)—A resurgence in apparel sales at grocery stores and a boom in revenues at online-only retailers are driving growth in the value clothing sector, according to a new report from retail think tank, Fung Global Retail & Technology. The value clothing market was worth nearly £10 billion by the end of 2016, equivalent to around one-quarter of the total UK apparel market, and it continues to grow in 2017.
John Mercer, lead UK analyst at Fung Global Retail & Technology commented: “Our research has pinpointed two major growth segments. First, grocery retailers are growing apace, apparently helped by the closure of the BHS chain in August 2016. Second, Internet pure-play retailers are drawing in shoppers with ultralow prices and fashionable ranges. Meanwhile, undistinguished, middle-ground retailers targeting shoppers in the family life stage or older shoppers have struggled to gain traction, just as their midmarket retail peers have.”
BHS Closure Has Provided Opportunities for Grocery Retailers’ Private Labels
Grocery retailers have become even more prominent in the value apparel market in the last 12 months. Private-label ranges at Tesco, Sainsbury’s and Morrisons appear to have been boosted by the closure of the BHS chain. Each of these retailers remarked that they had seen strong apparel growth, particularly over the Christmas 2016 period. However, this benefit to year-over-year growth will fall away after the anniversary of BHS’s final closure, which was in August 2016.
Pure Plays Look To Be Structural Winners
Online retailers such as Boohoo.com, PrettyLittleThing and Missguided are bringing fast-fashion to the value market, and can take ranges from concept to sale in as little as two weeks. They are being rewarded with rapid sales growth. Boohoo.com recently said that sales for fiscal year 2017 (ended February 28) were up about 50%, ahead of previous guidance of 46%–48% growth. The company recently acquired PrettyLittleThing, which will further boost its UK revenues. Privately owned Missguided recently reported that sales were up 34% in the year ended March 2016, and that sales rose 60% in the subsequent six-month period.
Mercer added, “The structural winners, such as Boohoo.com, are those that offer a fast-fashion product to a young target customer. Unlike more middle-ground value retailers, these young-fashion players are not dependent on mopping up share from the BHS closure.”
New Entrants Are Heightening Competition in the Market
New entrants are heaping further pressure on longstanding incumbents. These include Pep&Co, which is now rolling out clothing to stores in its sister chain, Poundland. Reserved, a Polish retail brand, is also set to open its first UK store shortly, on London’s Oxford Street. And Amazon, which already offers low prices on branded fashion, is set to launch private-label products designed specifically for the UK market.
Higher standards and an explosion in choice are heaping competitive pressures on a number of long-standing value players such as Matalan, New Look and Blue Inc. Mercer concluded, “Growth in the overall value clothing market is not a rising tide that is lifting all boats.”
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The full report is available to download here. Previous reports issued by Fung Global Retail & Technology include: “Online Grocery Series: France-Where Click-and-Drive is King,” “The UK Apparel Handbook-2017 Outlook,” and “Deep Dive: International Retailer’s Guide to Cross-Border E-Commerce in China.” Fung Global Retail & Technology’s reports and analyses can be found at www.coresight.com and www.deborahweinswig.com. Subscribe here to Deborah Weinswig’s daily news and analysis on retail, fashion and technology.
About Fung Global Retail & Technology
Fung Global Retail & Technology is a think tank whose research team, based in New York, London and Hong Kong, follows emerging retail and tech trends, specializing in the ways retail and technology intersect, and in building collaborative communities.
The team, led by Deborah Weinswig, former top Wall Street and retail tech analyst and startup advisor, publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omni-channel retail, luxury and fashion trends and disruptive technologies. More information can be found at www.coresight.com.