Green shoots for European retail sales in H2 2013

Wednesday, 12 March 2014
compiled by FashionUnited Business Intelligence reveals.

Data pulled together by FashionUnited shows that European retail sales (EU-28) in fashion stores grew 0.9 percent in the second half of 2013, despite a slight decline year-on-year due to inflation and an adjusted retail calendar. On a yearly basis, deflated turnover for fashion stores stocking textile, clothing and footwear was offset in the second half of the year, with a 1.6 percent increase over the last three months of the year.

A strong increase was reported in online retail, with the likes of Burberry, Primark and Zara cutting their teeth at e-commerce with dedicated websites all over Europe, Russia, and the Middle East were the main highlight of the period.

Mail orders were also an important ally for the likes of LaRedoute or Next, just to mention but a few top players in this segment. Aggregated total retail sales for mail order and catalogue business and online channels improved by 8.9 percent in 2013.

Likewise, the overly predicated shift from brick and mortar to online has left its mark across Europe, it was especially remarkable in countries such as the Netherlands, where sales in specialised stores dropped 3.6 percent in the last half of 2013 while sales via mail order houses and Internet grew approximately 9.3 percent.

Fashion giant Inditex alone reinforced its bid for all things digital by rolling out online sales for Zara, Bershka, Massimo Dutti, Stradivarius and Oysho in Russia. The group continued to expand its online platform in the third quarter of 2013, deploying online stores for five of the Inditex sales formats in Russia and planning to launch e-commerce operations in South Korea and Mexico for Zara in 2014. Commenting on these developments, analysts at Citigroup recently highlighted that Inditex is one of the few beneficiaries of the shift to online sales, but that the Spanish firm will be impacted by emerging-market currency translations.

Trends: savvier and younger consumers, affordable luxury

Data collated by Verdict researchers in the UK identify three key factors that have shaped up the performance of main players within the apparel retail market and are widely affecting the broader European market. Those key factors are: an extended heat wave; young and unemployed consumers that get ever savvier and a steady rise of affordable luxury. The longest heat wave seen in seven years left "department stores struggling to appeal to consumers, though clothing specialists will have had a good chance to clear terminal high summer stock.”

“A sustained period of high unemployment over the next five years coupled with low wage growth will contribute to weak volume growth across retail sectors. High unemployment among younger consumers and the rising cost of tuition and living expenses will hit discretionary clothing purchases." On the upside, Spain seems to start seeing the light at the end of the tunnel, with fast declining turnover rates slowing down (-6.5 percent in 2013 compared to -1.9 percent in H2). Spanish retailers saw stronger sales during November, and are upbeat about December, as shown by data released by Eurostat late in 2013.

Although the general tone is still downbeat, with Italy and the Netherlands closing the second half of 2013 in the red, other countries like Belgium, Germany, France and the United Kingdom are showing signs of growth.

Last but not least, savings were pivotal to humbly boost spend in retail over the second half of the year- mainly clothing, small appliances and accessories: "with savings ratio down and personal allowances up, we do expect consumers to spend a little bit more on retail," revealed research by Verdict.

'Accessible luxury' to capitalise on battered European consumers

Due to the dramatic slowdown in consumer´s spend in China and other Asian markets, luxury goods retailers had to turn back to Europe, hoping to lure consumers with their affordable luxury proposition. As pointed out by the 'Financial Times', "throughout 2013, the "hi-lo" divide between the industry's key groups became more pronounced."

Brands from the US such as Michael Kors - which reported that European sales doubled in the last quarter, with comparable growth expected in 2014 - or Coach have led this move, with the former putting a golden brooch to its year with its entrance into the S&P 500. Other American high-end fashion peers including Ralph Lauren, Tory Burch and J Crew have also recorded steady growth, particularly in newer markets. Another case in point is that of British high street retailer Karen Millen, which announced it was moving into accessible luxury territory soon.

* The data used in this publication is collected from renowned local Statistical institutes. Although selection has been done with the greatest care, readers are reminded that the figures contained within this release are estimates. And methods of calculation may differ from one country to another.
Sources: Inretail, GFK, CBS, IFM, DESTATIS, ONS, INE, Eurostat.

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