Fashion market in developed countries saturated?
Outside the fashion market, Consumers have purchased clothing in unprecedented quantities in the past 20 years when fashion brands such as H&M, Zara and cheap fashion retailers including Primark and Walmart reduced their prices amid production. Apparel shifted to Asia, where the workforce is hefty cheap.
Consumers have reached the peak of happiness with fashion market
According to data from the market research and consulting firm Kantar, the average American consumer currently buys 65 pieces of clothing a year, up from 40 or 50 in the 1990s but lower than their 70 pieces in 2005. Similarly, the United Kingdom consumers are buying 50 costumes per year, lower than the figure 52 pieces years ago.
Clothing prices in the US have decreased by 0.8% per year since 2001, while clothing prices in the United Kingdom have declined for 13 consecutive years through 2010. Sales of clothing in the United Kingdom have more than doubled since 1998 and clothing sales in the United States have increased nearly 50% since 2001. But now, sales in developed countries are stagnant or declining.
Morgan Stanley bank report released on October 11 states that when clothing sales begin to saturate or start to decline and the average selling price continues to decline, the value of clothing sales will decline too.
“So, according to our argument, fashion markets in many developed countries are probably starting to enter a long-term structural decline,” Morgan Stanley analysts wrote.
Increasing consumer awareness about the negative impact of the textile industry on the environment is just one of the reasons for the decline in apparel sales.
Geoff Ruddell, Kimberly Greenberger and Maki Shinozaki of Morgan Stanley bank said that another big reason is that consumers in developed countries have “reached the peak of happiness” when shopping for clothes because the clothes are currently so cheap, allowing consumers to buy in a large amount.
This judgment is based on the Law of Diminishing Marginal Utility of Austrian economist Carl Menger. This law says that the greater the amount of goods or services consumed by consumers, the less the benefit or the satisfaction gained from each additional unit.
“Simply put, consumers prefer spending more money on other things such as going to the restaurant, rather than buying the 60th outfit in each year,” Morgan Stanley’s report said.
As consumers consume larger quantities of goods or services, the gains or satisfaction gains from each additional unit will decrease.
The downtrend will last for a long time
According to the report, the only way for the fashion market in developed countries to grow is that clothing must be more expensive, but this scenario is unlikely.
The report stated that the trend of discounted clothing will continue as apparel manufacturing activities continue to shift from China to countries with cheap labor in the region, such as Vietnam and Bangladesh.
The report suggests that the rise of automation in fashion market, especially the apparel industry, i.e. robots capable of performing T-shirt manufacturing tasks including cutting, sewing and product quality control, may also be possible dragging down garment prices.
In the past 3-4 years, fashion retailers have just begun to realize that the business conditions are becoming too difficult. The report said stocks of leading fashion retailers such as H&M, Inditex, Gap, Macy’s, Kohl’s, American Eagle and Abercombie & Fitch are being overvalued.
“For years, consumers have taken advantage of the low prices to buy fashion in large quantities. But the expectation that consumers will buy clothing in larger quantities thanks to unprecedented low prices is something that can never be sustained in the long term,” the report concludes.
Khanh Lan (According to CNBC, Financial Review)
* Source: Saigon Times
