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Coresight Calls Out 3 ‘Major Destinations’ for Apparel Shopping

While supply chain issues have begun to fade and inflation remains a question mark, experts predict that 2023 will be a lackluster year for apparel and footwear sales.

The lingering effects of the pandemic continue to weigh on retail’s prospects, according to Coresight Research’s new Market Navigator report. Material prices and production costs remain elevated across categories, and the resulting inflated prices and higher interest rates are putting the squeeze on shoppers’ discretionary spending power. “Consumers will be more cautious about spending as they are focused on their finances, so they will look for cheaper options,” analyst Sunny Zheng wrote.

Coresight projects that apparel and footwear spending will take a low-single-digit hit compared with the 6.6-percent growth seen in 2022. The sector is expected to generate about $476 billion in sales, with the decline mirroring lower spending across categories. Digital sales will also follow market trends, with demand easing throughout 2023 compared to the previous three years.

“Although e-commerce growth is set to soften, we anticipate that many consumers will retain online shopping habits in 2023 and beyond,” Zheng said, with mid- to high-single-digit growth expected in 2024.

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The sector may not see sales growth, but this year represents an optimal moment for evolution, according to Zheng. Brands and retailers must meet consumer trends, both in terms of fashion and shopping behaviors, and deliver the newness and experiences customers demand. “The dominant aesthetics of apparel and footwear speak to economic conditions under which they were created—and as consumers are more digitally connected and have more options for shopping, the variety of trends has also increased,” she wrote.

Consumers embraced comfort and sustainability during the pandemic, but a return to professional and social responsibilities is shifting their preferences. Now they want a variety of styles from occasionwear to casual clothes like baggy jeans. Shoppers are gravitating to color, prints and novelty elements more so than in recent seasons.

“Brands and retailers should respond to their needs by offering not only great products but also more choices and services,” Zheng said. Private labels and resale are two areas that have shown momentum, suggesting they could offer more resilience than other areas. “The U.S. fashion resale market evolved from a single-billion-dollar market in 2008 to a $28.1 billion market in 2022, we estimate,” she added. Coresight expects to see the market grow by more than 14 percent this year, pointing to the increase in brand partnerships with third-party marketplaces like ThredUp, as well as brand-owned resale platforms.

Shoppers are looking for value to offset inflation, which is good news for the private-label products they know and trust. Amazon, Target, Walmart, Dick’s Sporting Goods, Costco, Kohl’s, Macy’s, Nordstrom and JCPenney have used this to their advantage.

By contrast, Coresight sees specialty retail sales declining after growth in 2022. Specialty store sales increased 6.2 percent year over year to about $312 billion, according to the U.S. Census Bureau. “We identify that growth was driven by ongoing demand recovery and consumers’ return to more normal ways of living and spending,” Zheng said. “Consumer willingness and ability to purchase from apparel retailers appeared stable despite persistent inflation, geopolitical uncertainty and supply chain constraints.” Against those strong comparatives, Coresight expects specialty retail sales to drop 1.7 percent to about $307 billion—and inflation could mean bigger drops this year.

Multi-category big box stores and retailers should continue to dominate. During the fourth quarter of 2022, Amazon, Target and Walmart were the top three destinations for U.S. apparel shoppers. “Our findings indicate that compared to specialty retailers, e-commerce platforms, mass merchandisers and department stores are major destinations for apparel shopping,” Zheng said, noting their larger product assortments, services like BOPIS and fast delivery. Nike, Under Armour and Adidas were ranked highest in clothing and accessories sales, followed by Levi’s, Puma and Vans. During the same period, Amazon and subsidiary Zappos, Walmart and Foot Locker were the top three retailers from which consumers purchased footwear, with Nike, Adidas and Skechers seeing the greatest sales.

While both brick-and-mortar and online retailers still have too much inventory, many are discounting product to fix the situation. Brands and retailers should improve overall inventory management, and work with suppliers to realign their seasons and build more demand-responsive supply chains, Zheng said. They can do this by investing in visibility software and tools to monitor performance metrics, like sell-through and inventory turnover rates, that will help them identify the right products to stock and reorder. “We expect inventory levels to further normalize in 2023,” she said.