Apparel Industry Trends Are Creating A Perfect Storm

• Recent retail consolidation (such as Federated’s acquisition of the May Company) has compelled apparel wholesalers to accelerate development of direct to consumer strategies in order to gain greater control of their distribution channel.
• Wholesalers are on the lookout to acquire companies with the potential to develop into global retail “lifestyle” brands.
• Properly executed retail concepts have the effect of strengthening the brands wholesale business.
• As wholesalers direct to consumer business grows (Liz Claiborne is projecting to 40%) it will create a fundamental change in financial planning.

I am often asked “what trends are currently having the greatest effect on the apparel industry” and my answer is usually a long one. A good place to start is at retail consolidation and the resurgence of department stores with consumers. This is attributable to more sophisticated merchandising strategies and accelerated pace of private and exclusive label brands.

The advent of lifestyle niche specialty retail players such as Abercrombie & Fitch, Chico’s and American Eagle (fueled by integrated multichannel distribution) has changed the landscape at malls and lifestyle centers around the country. At the same time, European fast-fashion chains such as Zara, H&M and Topshop have drastically cut the product development lifecycle; bringing current fashion to their stores in weeks rather than months. Global retail expansion is growing quickly, especially in Europe and Asia and direct global sourcing of products by retailers from China, Mexico, Eastern Europe and Central America is operating more efficiently thanks to advanced Product Lifestyle Systems.

With all of these changes seemingly happening at the same time, the largest apparel wholesalers such as Liz Claiborne, V.F. Corp and the Jones Apparel Group are reacting by taking their best brands directly to consumers through their own retail stores and the Internet. Pioneered by brands like Ralph Lauren, Juicy Couture and Guess, the impact of “direct to consumer” on a wholesale brands business is generally positive.

Of course, the phenomenon of wholesalers becoming retailers will not come without some pain. The financial planning of these new hybrids will continue to be vexing to investors as these hybrids adjust to a shift in the timing of revenue. As the culture of these wholesaler/retailer companies change, division presidents will become nimble brand managers with the ability traverse the choppy waters of multiple distribution channels. Merchants and executives with strong retail merchandising and operational skills will be recruited and integrated into a new corporate culture to insure that the store’s and website’s of a wholesale brand deliver an extraordinary shopping experience that can compete on a level playing field with established niche specialty retailers.