Apparel has been one of the major retail casualties of the Covid-19 crisis. In the US, deep declines in clothing sales have been followed by sluggish recovery and sustained consumer behaviors of buying more online and less through traditional in-store channels. This week, we look at recent demand data points and consider the prospects for the holiday season and into 2021.
Our weekly surveys confirm that US shoppers are returning to stores for apparel purchases—albeit only gradually. In the two months to October 6, we recorded a 3.7-percentage-point increase in the proportion of respondents saying that they had recently bought clothing or footwear in a store. This was only partially offset by a 1.7-percentage-point decline in the proportion buying clothing or footwear online over the same period.
Coresight Research estimates that consumer spending on clothing (through all channels) will fall by 13.2% in 2020 overall. Recent consumer spending and retail sales data suggest that underlying demand for clothing remains stubbornly negative—rather than following a smooth upward trend path, negative growth in spending has remained at circa (10)% in recent months. Depressed underlying demand reflects the context of fewer visits to workplaces and fewer social events.
In October, we expect an early start to holiday shopping, with a number of shopping festivals and events providing a boost to performance. Many consumers plan to start their holiday shopping earlier this year, according to Coresight Research surveys, and we expect the pull-forward of holiday demand to ease the declines in October but at the expense of November and December.
Benefitting performance in the final quarter, we anticipate holiday gifting demand to be stronger than underlying demand for clothing. Practical, immediate clothing needs, such as those tied to visiting workplaces or attending social events, are less important for those buying apparel as gifts for the festive season. As a result, we expect year-over-year declines in clothing spend to ease to the mid-single digits in the holiday quarter. See our new Apparel Retail: Post-Crisis Outlook—Fall 2020 Update for further details on our forward estimates.
However, store-focused clothing specialty retailers will continue to underperform total category spending, not only due to the retained habit of buying more online but also the impact of physical constraints on store capacity (number of shoppers in stores) in the holiday peak. During the busiest time of the year, managing fixed store capacity to maintain social distancing implies a more substantial year-over-year decline in in-store shopper numbers than at less busy times during the year.
Looking to 2021
Against very undemanding comparatives, and assuming a return to more normal ways of living and working, we estimate a solid bounce in total US clothing spending in 2021. However, even with this jump, total clothing spending would still be below the pre-crisis level in 2019. Drivers of demand in 2021 will include:
• An expected incremental return to more normal ways of living—spurring demand for apparel for workplaces and social events.
• Renewal, as consumers this year deferred renewal in some clothing categories.
• Clothing for children, which is driven much more by renewal, given that they outgrow clothing.