- For recessionistas, online is on-trend this season

Even before the financial crisis, Australia’s fashion industry was under pressure on the back of reduced barrier protection, rising levels of outsourcing and a lack of skilled labour. Obviously, the subsequent downturn created an even tougher environment for local clothing and apparel manufacturers, with revenue in the women’s and girls’ apparel sector falling by 3.4% this financial year to $747.2 million, and a drop of 5.9% in the men’s and boyswear segment to $312.0 million.

However, IBISWorld General Manager (Australia), Mr Robert Bryant, said online retailing would buck this trend, posting average yearly sales growth of 4.3% per annum over the next five years to 2014, and total $15.8 billion in 2008-2009.

“In the short term, we believe online shopping will display resilience, as more Australians turn to the internet to source bargains, and consumers opt to engage in more research and price comparison rather than impulse buying,” said Mr Bryant.

“The speed and around-the-clock convenience of the internet for browsing and comparing prices is helping attract more time-poor Australians, with the first week of March alone seeing 4.5 million apparel and accessory queries on search engine Google.”

Of course, the major challenge for the fashion industry in promoting online retailing is customers’ inability to touch or try on the product – a vital aspect of the shopping experience for many a consumer.

“Despite the many, and growing, advantages of the e-commerce sphere, this is where shopfront retailers have a distinct advantage over their purely online competitors. As a result, we’re seeing stronger performance from retailers combining an online offering – incorporating features such as the opportunity to return goods ordered online or to order additional stock – with a physical retail presence so that customers can browse online, but buy in-store.”

IBISWorld predicts smaller players without a strong niche following will face difficulties setting up wholesale distribution and delivery points, with larger retailers boasting both storefront and online options more likely to harness supplier support.

According to IBISWorld, other key trends in the Australian fashion industry this year include:

Growth in mid-market sales

Over the past decade, a significant proportion of Australian retailers and brands have positioned themselves either at the luxury, high-value end or the high-volume, low-cost end of the market. This year, IBISWorld predicts neither will perform well, with the mid-market segment forecast to post growth of 9% - outshining the estimated 6.7% growth at the lower-end of the market.

“We are currently seeing both high-end and discount shoppers favouring mid-market brands, as those accustomed to buying at the higher end trade down to more affordable, quality items; and discount apparel shoppers trade up in search of better quality as they cut back on overall volume purchasing,” Mr Bryant explained. He said this trend would greatly benefit chains such as K-Mart, Big W and Target, particularly as Target continues to focus on developing designer inspired merchandise lines at affordable prices.

High-end hardship

As consumers continue to knuckle down on discretionary spending and so-called recessionistas turn to mid-market brands for more affordable options, revenue within the top end of Australia’s fashion field is likely to fall by 19% this year.

“While relative prosperity over the past five years led to an increase in the number of designer boutiques and luxury clothing stores, this sector will fall the hardest during the current crisis, with brands such as Morrissey and Herringbone already closing their doors, and more likely to follow,” Mr Bryant said.

The high-end mens’ market would feel the tightest pinch, with men more willing to wear last year’s gear than women; however, Mr Bryant predicted all areas would experience closures, mergers and acquisitions as this financial year draws to a close.

Department store discounting

With discretionary spending on a tight leash, IBISWorld believes clothing prices will continue to fall as designer labels and larger brands battle to compete with mid-market and high-volume low-cost retailers.

“A prime example is the current cost cutting at department stores Myer and David Jones, where we’re seeing targeted discounts, as well as the introduction of a wider range of middle market fashion items to retain customers and maintain turnover – as shoppers seek to spend less but buy better quality,” said Mr Bryant.

Manufacturers moving offshore

Following a tough 10 years of declining revenue, employment and establishments, many Australian clothing manufacturers have found themselves unable to compete with cheaper imported items, subsequently moving activities offshore.

“The most recent – and most public example - is Pacific Brands’ announcement to cut about 1,850 jobs in its Australian manufacturing operations and move production to China, a major blow to the local industry. We’ve also seen many operators within manufacturing transform their businesses from strict manufacturing to wholesaling and importing overseas manufactured accessories,” said Mr Bryant.

Less international trade

Despite the low Australian dollar, IBISWorld expects Australian clothing exports to fall by 2.4% to $322.5 million this financial year as credit market instability in the US, Europe and Asia sees consumers buying less high-value Australian fashion exports.

The silver lining may be that this trend will be a short-term one, with IBISWorld predicting that from 2010 global spending power will increase as economies recover and enthusiasm for unique, well-designed Australian fashion returns.

“Typically during difficult economic times, luxury purchases – such as high-priced fashion – hold up relatively well as the wealthiest customers can still afford them. However this time this is not the case for most of Australia’s major fashion export destinations as global property prices have fallen, coupled with plummeting sharemarkets and business closures – all of which have hit the three main asset classes of the higher income international consumers of Australian fashion exports,” explained Mr Bryant.

For more information on these, or any of Australia’s 500 industries, log onto www.ibisworld.com.au