Executive Summary

We discuss three growth segments in European apparel, which look set to keep the pressure on legacy midmarket apparel retailers:

• High-Quality Value Retailers: Primark has raised standards in discount apparel. It appears to have drawn shoppers from midmarket rivals while consolidating the value segment. T.K. Maxx likely had a similar impact. Consolidation means the apparent strength of the discount segment is not a rising tide that lifts all boats.
• Internet Retailers: Zalando aims to grow gross merchandise volume (GMV) from €6.6 billion in 2018 to €20 billion by 2023/24. But Zalando, like ASOS and Boohoo Group, is facing a challenge as fulfillment cost ratios rise in line with consumer expectations. More positively, marketing costs as a share of revenue are tending to decline across the pure-play space.
• Major Sportswear Brands: In the UK, Germany and France, sales of sports apparel have grown considerably faster than sales of all apparel. Even as brands focus on direct-to-consumer channels, we see demand for premium-branded sportswear supporting multibrand platforms such as ASOS, Zalando and Amazon. We see a degree of symbiosis in increased demand for major sportswear brands and the growth of online fashion platforms.