Digital innovation, globalization, and changes in consumer spending habits have catapulted the fashion industry into the midst of seismic shifts.
To explore where we are and where we’re heading, this article takes a detailed look at …
The statistics, trends, and strategies shaping the ecommerce fashion industry in 2018 and beyond:
- Industry-Wide Data
- Clothing and Apparel
- Shoes Segment
- Accessories and Bags
- Jewelry and Luxury
- Anywhere Ecommerce
- Flashes and Drops
- Going Global
- Technological Innovations
Ecommerce Fashion Industry: Statistics
1. Industry-Wide Data
Cumulative data compiled within The Fashion and Apparel Industry Report paints a bright portrait with worldwide revenue expected to rise from $481.2 billion in 2018 to $712.9 billion by 2022:
Driving this growth are four notable opportunities:
- Expanding global markets outside the West
- Increasing online access and smartphone penetration
- Emerging worldwide middle-classes with disposable income
- Innovating technologies to create experiential ecommerce
Fashion consumers will also have more buying power, as the number of potential customers is projected to grow to more than 1.2 billion by 2020. The good news for fashion is that the majority of these new consumers are within the 16 to 24 and 25 to 34 age groups.
The biggest threats to established brands include the:
- Death of brand loyalty due to market fragmentation
- Cost of combating return rates as high as 50%
- Fast fashion’s ability to manufacture styles on-demand
- Pressure from consumers to use ethically sourced and green manufacturing materials
Particularly exciting for ecommerce is the rise of direct-to-consumer in fashion.
Comparing decade over decade, D2C will eclipse department stores and “other” retailers by 2027 as the top fashion channel consumers purchase through:
- Department stores: 23%
- Other retailers: 17%
- Direct to consumer: 3%
- Department stores: 14%
- Other retailers: 15%
- Direct to consumer: 10%
- Department stores: 10%
- Other retailers: 10%
- Direct to consumer: 11%
Of course, D2C is both a blessing and a curse. Legacy manufacturers and physical stores are already feeling the pressure. Last year, more than 1,875 fashion retailers shut down.
This year, projections reported by WWD place the number at just under 10,000, “up 53 percent from the number of doors that went dark amidst the Great Recession in 2008.”
We’ll get into strategies later. For now, let’s examine how these big numbers play out in industry sub-verticals.
Insights for today and tomorrow
Keep reading to explore the data, but if you’d like an executive summary, download The Fashion and Apparel Industry Report.
Inside, you’ll get one-pagers detailing …
- Comprehensive data on the opportunities and threats
- Business spotlights for insights on growth
- A checklist for selecting the right fashion platform
2. Clothing and Apparel
Lower digital barriers to entry for all clothing merchants offer the opportunity to market, sell, and fulfill orders globally and automatically.
As a result, worldwide revenue and revenue per user (ARPU) are both projected to grow:
However, while clothing’s absolute numbers are steadily climbing, worldwide revenue growth — as represented by compound annual growth rate (CAGR) — is slowing:
Western-market saturation is the most likely source of this trend. When growth rates are compared between the US, Europe, and China, that reality becomes even starker.
Between 2017 and 2022, CAGR is expected to settle in at …
- 8.8% in the US
- 8.7% in Europe
- 14.1% in China
3. Shoes Segment
As a segment of ecommerce fashion, shoes display a similar pattern of shrinking revenue expansion year-over-year. From double digits in 2017-2019 — 13.6% and 10.8% respectively — footwear is expected to grow a mere 6.6% in 2022.
In absolute market size, the shoes segment will increase from $96 billion in 2018 to $135 billion in 2022.
4. Accessories and Bags
Not surprising, the bags and accessories segment — although still growing at a stronger rate — will likewise see its double-digit growth dip into the single digits by 2022:
- 2017: 16.4%
- 2018: 15.6%
- 2019: 14.2%
- 2020: 12.4%
- 2021: 10.5%
- 2022: 8.7%
Those projections actually make bags and accessories the healthiest segment of ecommerce fashion, despite its absolute numbers being the smallest.
5. Jewelry and Luxury
The global jewelry market is growing at 5-6% annually. China is the top spender on hobby (think Etsy) and luxury style items, followed by the U.S. at $2.7 billion.
Jewelry industry threats stem mainly from wholesalers selling direct-to-consumers, plus consumer pressure on jewelry manufacturers to be more transparent about pricing. Also, it is expected that by 2020, the jewelry market will be dominated by major global brands, stealing market share from local artisan shops.
While ecommerce currently comprises approximately 4-5% of total jewelry sales, that number will trend towards 10-15% by 2020.
Multi-brand boutiques can win market share by curating collections for specific segments – a strategy that works well for apparel retailers as well.
Increasing affluence in Asia-Pacific and in the Middle East are driving up the average revenue per luxury good consumer to $313 USD by 2020.
Despite luxury goods sales seeing sluggish growth at 3.4% annually, McKinsey forecasts indicate that ecommerce could triple in sales over the next decade:
The biggest threat is the affordable luxury market: Should the industry offer luxury goods at multiple price points to grow the market overall? Or, will affordable luxury dilute or erode the high-end luxury market – dampening consumer confidence that what they are buying is “true luxury?”
Ecommerce Fashion Industry: Trends and Strategies
The above data points offer a wealth of growth opportunities for fashion and apparel retailers. Below are some of the latest trends that you can work into your long-term ecommerce strategy. For more, take a look at The Best Fashion Ecommerce Sites and What to Learn From Them.
According to data presented by Nosto at a recent Growing Your Online Funnel Webinar, personalization is a leading factor in ecommerce at large:
- 43% of purchases are influenced by personalized recommendations or promotions
- 75% of consumers prefer brands to personalize messaging, offers, and experiences
- 94% of companies see personalization as critical to current and future success
By tracking user behavior, either session-by-session or by account, fashion sellers can build Netflix-like personalization into the onsite experience.
Although this may start with recommended products — if you watched or bought this, you might like to watch or buy that — true personalization extends to the very visuals that are used to present products themselves:
Moving into the future, shoppers will begin to expect the same kind of personalization in the ecommerce fashion industry. For instance, visitors who have either browsed or bought women’s clothing should experience a homepage experience catered to that history:
While those who have browsed or bought men’s clothing should be given an onsite experience that correlates:
Situational targeting, based on user data points like location and weather, is being promoted by ecommerce experts as a solution to the erosion of cookie tracking.
Still, nothing has yet to replace the identification and tracking power — not to mention the revenue possibilities — of an email address.
In regards to the leading threat to online fashion, learning more about your customers can help you identify people who are more or less likely to return an item.
First, ensuring your return policy and process are positive experiences can actually increase customer lifetime value.
Second, personalization can be used to segment serial returners and thereby avoid offering discounts and promotions like free shipping to those that take advantage of such options.
Third, offering virtual styling assistants to loyal customers as a value-add service (e.g. hiring real people to customize shoppers’ wardrobes online) has been proven to increase retention and margins.
7. Anywhere Ecommerce
It goes without saying that social media has been a driving force in the fashion market. Unfortunately, most brands are plagued by a single sin. Andy Crestodina describes the situation perfectly:
“Most branded content is advertising under a thin layer of information or entertainment. Scratch the paint, find an ad. It’s the brand putting itself first.”
Thankfully, fashion and social media are a match made in ecommerce heaven. Even when it comes to explicitly “branded” content … and especially on Instagram:
Particularly powerful on this front is mixing product-centric content, mainstream influencer marketing, and micro-influencers. As a model (pun intended), Fashion Nova excels on all three fronts.
With 10 million followers on Instagram, partnerships with celebrity accounts like Sarcasm Only, Cardi B, and Kylie Jenner, plus an army of over 3,000 micro-influencers, Fashion Nova pairs social-media dominance with a unique approach to fast fashion. CEO Richard Saghian’s claim that Fashion Nova is “the fastest-growing women’s apparel company” is no exaggeration.
And yet …
The real power for social comes from integrating multi-channel ecommerce to create anywhere commerce.
Beyond simply sharing or advertising on social, multi-channel ecommerce integrates native selling off-site to build direct buying paths in the places your audience spends their time:
Shopping on Instagram, Facebook Shops, Buyable Pins, and more all take advantage of this strategy.
Just remember the words of Kevin Dao, co-founder and CEO/CCO at ORO LA:
“In everything we do, we’re helping the customer imagine. We want them to imagine being the man in every picture. To imagine us being their stylist. To imagine, ‘That could be me wearing those clothes.’”
We’re not so much curating content as curating imagination.
8. Flashes and Drops
Flash sales are no longer a lowbrow method of unloading out-of-season or “leftover” inventory. Instead, they’re the stuff of ecommerce fashion royalty. As long as they’re combined with exclusivity and anticipation.
Naturally, apparel, accessories, and shoes lead the way in the flashiest and most profitable shopping days of the year: Black Friday and Cyber Monday.
So, how do you maintain brand integrity and still leverage big sales?
One of the ways to do this is by making flash sales members-only, “velvet rope” experiences. Talbots, Sephora, Evy’s Tree, and Kylie Cosmetics do this regularly through exclusive collections and early access to social media fans and loyalty program members.
Another way is to merge flash sales with product drops.
Frankies Bikinis, for instance, regularly sells out new products in a matter of minutes. Even better, their product drops generate over six figures in sales within the first hour of launch. The downside is that monthly launches and regular flash sales are labor intensive.
Director of Marketing and Ecommerce Brittney Bowles and a co-worker used to be responsible for manually executing tasks like:
- Unhiding products
- Navigation changes
- Landing page updates
- Collection page alterations
- Uploading hero images
- Publishing new homepage layouts
Today, Frankies Bikinis uses Shopify’s ecommerce automation tool, Launchpad:
“We schedule everything during normal business hours,” says Bowles, “and Launchpad does all of the work for us automatically. This is why Launchpad is our savior.”
Perhaps the most stunning example — combining social media, flash selling, and a product release — is Jordan Brand, Snapchat, and Shopify’s collaboration to drop the limited-edition Air Jordan III ‘Tinker.’
Snapcodes were displayed to fans during NBA All-Star 2018 weekend. The codes unlocked a live, in-app experience and most purchases were delivered the same day via fulfillment centers run by Darkstore.
9. Going Global
Much has been made of fashion’s new global landscape. Ecommerce, in general, has already moved beyond the West.
According to Business(dot)com, the 10 largest ecommerce markets in the world are …
- China: $672 billion
- United States: $340 billion
- United Kingdom: $99 billion
- Japan: $79 billion
- Germany: $73 billion
- France: $43 billion
- South Korea: $37 billion
- Canada: $30 billion
- Russia: $20 billion
- Brazil: $19 billion
Fashion-related products (as reflected in rising purchase rates) are among the most in demand:
The irony is that going global actually means getting local. Australian watchmakers, The 5TH, have established themselves as a truly borderless brand.
“We ship around the world from Melbourne, but we had to connect better with our international audiences,” says The 5TH co-founder Alex McBride. “Working with Shopify allowed us to do that so seamlessly and so easily. Everything was managed so effectively on the backend that now we have four Shopify stores for each of the regions in which we do the most business.”
10. Technological Innovation
Augmented reality, virtual reality, wearable tech, and connected fitting rooms are all making big waves in online fashion. Still, in the war on returns, two innovations stand out …
- Online sizing
- Onsite search
Smart fitting technologies like Virtusize enable online shoppers to buy the right size by either measuring the clothes in their closet or by comparing specific brands and styles to your own.
Rhone Apparel implemented Fits Me’ Fit Origin and, within the first month, raise their conversion rates among users from 3.7% to 9.8%. Those number held even after the solution had been in place for over a year and “analytics show that Fit Origin has delivered an impressive +20.4% in incremental revenue to Rhone’s website.”
Virtual fitting room apps go beyond smart fitting and let customers use their smartphones or virtual reality glasses to conduct 3D body or face scan — ensuring accuracy when customers try on cosmetics, jewelry or fashions online before making a purchase.
Perhaps the simplest — though most-useful — form of artificial intelligence and machine learning revolves around onsite search. Fashion Nova’s predictive autocomplete, for instance, not only saves shoppers time, it also front loads popular products:
As Paul Rogers points out in Ecommerce Site Search Best Practices:
“If I’ve been interacting with men’s Nike products, the associated products would then be boosted for other queries."
“The use of machine learning adds a second layer of accuracy, prioritizing products based on their performance and also ensuring that results are improved over time, based on the ‘learning’ from user behavior (e.g., the products that are being clicked or purchased most frequently)."
Voice-powered AI search (think Alexa for fashion) can help make recommendations based on a user’s past purchase history and online behavior as well as enable voice-activated purchases within an app or augmented reality.
Beyond that, wearable fashions and accessories that are equipped with special sensors provide an opportunity to use situational targeting to influence purchase behavior. For example, a shoe manufacturer could identify whether a runner has an issue with their gate. The manufacturer could then use that data to recommend a better shoe for that individual.
Want More About the State of Ecommerce Fashion?
For an executive summary, download The Fashion and Apparel Industry Report.
Inside, you’ll get one-pagers detailing …
- Data on the opportunities and threats
- Business spotlights for growth
- Tools for selecting the right fashion platform