Apparel sales slump in China-do consumers really not like purchasing clothes? –
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Apparel sales slump in China-do consumers really not like purchasing clothes?

2019-09-16 08:41:57 CCFGroup

According to statistics, sales of China apparel and fabric have declined evidently, and retail sales of apparel in key large-scaled retail enterprises have also experienced a downward trend in recent years.

1. Sales of apparel and fabric continue to decline, and proportion of apparel consumption in overall consumption expenditure drops.
Statistics from the National Bureau of Statistics showed that from the fourth quarter of 2017, sales of apparel and fabric moved down in various degree. Sales of apparel reached 54.06 billion pieces in 2018, 24.8% lower than 71.91 billion pieces in 2017.

People did buy fewer apparel. According to the statistics of China market commodity sales released by China General Chamber of Commerce and China National Business Information Center, retail sales of key national large-scaled retail enterprises decreased by 4.2% in 2018, and growth rate slowed down by 8.4% compared with that in 2017. In major apparel category, except for positive yearly growth of retail sales of sportswear, retail sales of other apparel categories were lower than that in same period of last year.

In overall consumption expenditure, proportion of people spending on apparel also went lower. NBS data also showed that China's per capita consumption expenditure increased by 8.4% year-on-year to 19,853yuan in 2018, of which per capita apparel consumption expenditure reached 1,289yuan, up by 4.1% year-on-year, and the growth rate was 1.2% higher than that in same period of 2017. In the same period, per capita consumption expenditure of residents increased by 6.2%, and growth rate of daily necessities and services, transportation and communication, education, culture and entertainment, and medical care was significantly higher than that of apparel consumption. Proportion of per capita clothing expenditure in consumption expenditure was at 6.5% in 2018, down by 0.3%. According to statistics from Tencent Data Lab, growth rate of China apparel retail sales slowed down to single figures since 2016. In 2018, retail sales of apparel increased by 7% to 1.5 trillion yuan, while the growth rate in 2017 was 8%. Average annual cost of apparel per capita ranged within 1,000-3,000yuan. Only 13% of people spend more than 8,000yuan per year on apparel, and consumers from first-tier cities still spend the most on apparel. According to DTT's report last year, ordinary consumers spent 5.9% of their spending on apparel in 1987, but by 2017, the proportion plummeted to 3.1%. As for low-income earners, average expenditure on women's apparel dropped more obviously, and the rise in footwear expenditure was the only bright spot.

2. Unit price of apparel increases sharply, and overall expenditure on apparel consumption is still increasing.
The data showed that in 2018, retail sales of apparel of enterprises above designated size reached 987.04 billion yuan, up 8.5%, and growth rate was 0.5% higher than that in 2017. Retail of apparel of enterprises above designated size continued the acceleration trend since 2017. China retail sales of apparel of China key large-scaled retail enterprises increased by 0.99% year-on-year in 2018. Apparel retail sales and clothing consumption expenditures increased, but apparel sales decreased, which meant that apparel prices changed.

Statistics from China National Business Information Center showed that apparel consumption prices rose by 1.4% in 2018. For China key large-scaled retail enterprises, the price increase was a main reason for a fall in apparel sales. In 2018, unit price of China key large-scaled retail enterprises increased by 5.3%, up by 4.1% than that in 2017, with that of men's clothing, women's clothing and children’s clothing rose by 4.6%, 7.1% and 10.5% respectively, and growth rate of men's clothing and women's clothing unit price was 2.4% and 7.1% higher than that in 2017 respectively, but that of children's clothing slowed down by 2.1%.

Why did price increase so evidently?
On the one hand, comprehensive cost of enterprises remained high. China Garment Association pointed out that due to continuous increase in cost of labor, financing, taxation, raw materials, energy, etc., comprehensive operating costs of enterprises continued to increase. From proportional changes cost in main business revenue, the average level of industrial enterprises above designated size has been declining year-on-year, while proportion of apparel industry has shown upward. The rapid increase in cost and expenses has further squeezed profits of apparel enterprises. On the other hand, industry insiders pointed out that popularity of fashion, fast-selling, personality and other clothing consumption concepts changed whole clothing consumption market. Apparel enterprises invested a lot of human and financial resources in clothing design, styles, fabrics, etc. It was difficult to put into production as much as before to reduce innovation costs and expand profits, and unit apparel also increased.

3. “Small and beautiful” brand is more attractive, and market potential for children's clothing and sportswear is large.
Viewed as a whole, fashion changes accelerated industry segmentation, and more small and beautiful niche brands are favored. Younger and more upmarket products gradually become the mainstream trend of apparel industry transformation and upgrading.

From crowd, men's clothing, women's clothing, and children's clothing are showing different competitive landscapes. Men's clothing is customized. Women's clothing has own branding. Children's clothing market is expanding rapidly.

From categories, sportswear has great potential. The data showed that in recent years, compound annual growth rate of domestic sportswear market has remained at 30%. With rise of the third-and fourth-lined market and shrinkage of brand channels, casual clothing brands will face more challenges of international fast fashion brands, and product fashion and cost-effective demand will continue to increase.