Online retail sales growth slowed to 0.6% in the 12 weeks to June 2, versus 8% in 2018. While we can point to the weather as being partly to blame, I think there are a few larger trends at play here.
Fast fashion has been a mega-trend in retail, with an estimated 90% of women’s clothing bought as a result of desire, not need. The growth of the market has been driven by offering something new to the consumer.
Over the past five to 10 years it has become far easier to produce and disseminate cheap clothing: the cost of marketing and advertising has been driven down by social media, the cost of transportation has fallen as volumes have risen and technology has improved, garment production cost has dropped as automation has taken a more pertinent role and clothes can be produced wherever labour is cheap.
“Offering something that people need or creating desire for a new product are crucial to grow sales. Offering something cheap just isn’t enough any more”
However, now that we can buy a dress for £5 and have been able to for a number of years, the appeal of constantly buying cheap clothes is dwindling.
The excitement of being released from having to save for purchases and consider the longevity of every item of clothing has grown old, and there’s only so much newness that retailers can offer in a saturated market.
As a result, retailers have panicked and still are panicking. Volumes have fallen and there’s a whole lot of leftover stock that they can’t shift. So the discounting begins. It started with discounting the stock they couldn’t shift but now it’s used across the market as a tactic to try and drive higher sales volumes.
The trouble with constant discounting is that it damages consumer perception. If a brand has products that are constantly on Sale, then the consumer will feel that there’s no reason to pay full price for their products. When a large amount of stock is on Sale all the time, it’s pretty obvious to the consumer that it’s because no one wants it.
Sales should be for end-of-line products and out-of-season stock, they shouldn’t be the norm.
In addition to all of this, people are thinking about the impact of constantly buying more stuff. We have seen environmental consciousness affect other retail industries, and it’s starting to gain traction within clothing, particularly as the younger generation, who are more environmentally conscious, move to having a disposable income.
Now there’s nothing new or exciting about buying your twentieth crop top of the summer, purchases are becoming more considered and environmental impact will be high up in those lists of considerations for those who can afford it.
So what can be done?
Of course, fast fashion isn’t dead. We just saw Boohooo.com overtake Asos in terms of market cap, so we know the demand still exists for the online players. However, as we have seen in almost every other consumer-facing industry, the exponential growth that came with offering something new to the consumer has disappeared.
Retailers need to differentiate and offer something different to the consumer. Online has been a consistent disruptor to the bricks-and-mortar retailer, but now online is becoming susceptible to the same challenges that bricks and mortar faced before, as next-day delivery and an increased range are no longer new and exciting.
People are buying less stuff, so instead of online retailers having the luxury of competing for a slice of a rapidly growing pie, they’ve now got to fight it out among themselves for a slice of a relatively stagnant pie.
Offering something that people need or creating desire for a new product are crucial to grow sales. Offering something cheap just isn’t enough any more.