Home >

Global Economy Continues To Be Uncertain, Fashion Retailers Hit Year-End Sales Into Final Sprint

2022/10/14 22:05:00 0

Entering October means that fashion retailers will usher in the last holiday sales season of each year, which is the last opportunity to impact the annual performance. However, in the face of unprecedented high inflation rate in the European and American markets and the continuous instability of the supply chain and many other adverse factors, fashion retailers are not optimistic at all, because any black swan incident may extinguish the momentum of the recovery of growth. To this end, retailers are trying every possible way to boost the last quarter's performance, including early discounts to stimulate consumer confidence.

The soaring inflation rate in the European and American markets due to energy shortage and the war between Russia and Ukraine has greatly damaged consumer confidence at the end of the year, which will undoubtedly affect the performance of fashion retail industry in the traditional sales peak season at the end of the year.

In its latest report "consumer spending: the international impact of inflation", first insight, a market analysis firm, pointed out that the current high inflation rate in the European and American markets is now the key factor leading to the decline of consumer confidence. The report points out that the vast majority of consumer reports in Europe and the United States show that consumer confidence in these markets has declined significantly due to the rising prices of necessities. Among them, German consumers are the most worried about inflation, with about 86% of German consumers saying they have no confidence in consumption. French consumers are the least worried about rising prices, but three-quarters of them say they are not confident enough.

At present, the high inflation rate in European and American markets is now the key factor leading to the decline of consumer confidence

According to the data of adobe, online retail sales in the United States will reach $209.7 billion during the holiday season, a year-on-year increase of only 2.5%. This weak increase was mainly affected by the deterioration of the economic environment, stock market volatility and rising borrowing costs.

The unprecedented level of inflation will encourage consumers to reduce their spending on non necessities fashion products, which is exactly the true portrayal of the current European and American fashion retail market. Therefore, in the face of the last quarter and the last sales season of the year, fashion retailers must try their best to retain consumers and boost performance. In addition to preparing inventory in advance to cope with the possible sales peak, retailers are also actively considering entering the discount promotion stage in advance, so as to boost consumer confidence and stimulate demand.

Retailers are actively considering entering the discount promotion stage ahead of time

Although it is less than two months away from the "double 11" - black five promotion season in Europe and the United States, for many fashion retailers, entering the promotion phase ahead of time seems to be the only way to cope with inventory growth and boost consumer confidence.

According to the results of a market survey conducted by commercenext and the commerce experience collective (Commx), fashion retailers plan to speed up sales this year and enter the stage of promotion and discount ahead of time due to the inflation of inventory and the lack of consumer confidence caused by inflation.

Kohl's, for example, attracts consumers by offering a 20% discount on time limit across categories; Macy's also offers a 25% to 60% discount on clothing products, but only as of October 10; Wal Mart, another retail giant, has also entered the promotion phase.

Macy's department store

"After a year of supply chain repair and warehouse staff redeployment, fashion retailers are generally optimistic about the end of the year holiday season, but it must be acknowledged that they are also facing new challenges, including consumer confidence hit by high inflation and difficulties in return on marketing investment," said commercenext and Commx.

At the same time, the joint report also points out that retailers are actively preparing to attract consumers to increase their consumption in the coming holiday season through promotion, sending preferential information, paid search, affiliated online marketing and various incentive measures, so as to face the fierce market competition. According to the report, 32 retail executives surveyed said they would increase the number of promotions, up from 13% last year.

Increasing the pace of promotion also requires retailers and brands to adjust their retention marketing strategies. Brian walker, Chief Strategic Officer of bloomreach, a member of Commx, said that while e-mail marketing remains the most important and reliable retention strategy, SMS continues to be popular with nearly two-thirds of businesses who rely on their SMS programs to enhance their holiday sales.

"Often by viewing text messages on the same device as e-mail, marketers can adopt an omni channel strategy that seamlessly connects the purchase journey, ensuring that shoppers can have a unique brand experience even when shopping across multiple channels," says Brian walker, The wide adoption of Omni channel strategy is essential for building sustained customer loyalty, especially in the coming competitive holiday season.

However, under the multiple influences of high inflation pressure, consumer budget reduction and economic recession, the situation of holiday sales season in Europe and the United States is still not optimistic. Some market participants pointed out that this is due to the rise of global purchasing price and overall cost. After the cost of many products increases, consumers can only pay for it, which also greatly reduces consumers' shopping desire.

Consumer confidence in Europe and the United States has begun to decline

For the "people-oriented" fashion industry, consumer confidence is one of the most important factors related to their future development. For consumers who have suffered more or less, light or heavy losses in this round of epidemic, a more conservative and cautious attitude towards consumption behavior may become the mainstream. In the current high inflation rate of the U.S. market, this trend has shown. Some industry insiders pointed out that the surge in luxury consumption by American consumers may be just a flash in the pan. Because the current Russian Ukrainian crisis has led to soaring oil prices and food, many ordinary American consumers have reduced their spending on fashion and luxury goods, such as non necessities.

However, judging from the recovery characteristics of luxury consumption market after the epidemic, the middle class and the rich class have not been greatly affected by the epidemic, on the contrary, they have realized more wealth accumulation under the collective crisis. They have more discretionary money than ordinary consumers, so even in the post epidemic era, they still have the ability to buy luxury goods, and even prefer to buy hard luxury products with higher prices and better value preservation.

Taking American consumers as an example, even though the United States is facing unprecedented inflationary pressure, a large number of new affluent American tourists have begun to return to Europe and "wantonly" buy luxury goods in Paris, Milan and other important European fashion capitals. And the recent sharp depreciation of the euro has allowed American tourists to buy luxury goods at lower prices in Europe.

The rich are not affected by the economic environment

Analysts at Barclays said that the weak euro has a strong attraction for international tourists, especially American tourists, so American tourists have been regarded as the main force driving the growth of European luxury goods market in the second quarter. American tourists took advantage of the weak euro to buy luxury goods, which in fact made up for the loss of European luxury business due to the absence of Chinese tourists. This is an opportunity for European luxury brands, even if it may come at the expense of the euro zone recession.

Compared with the performance of affordable fashion categories and the general "shrinkage" of public consumption spending capacity behind it, although high-end luxury brands have adopted larger and faster price increases to maintain their own cost performance and luxury attributes, the consumption stability and consumption enthusiasm of high-end consumers seem not to be disturbed much, They still use it as an "emotional investment" or a hedge collection, bringing significant recovery growth to the luxury sector. Therefore, what the global fashion consumer market is showing is a complex differentiation situation of two hot and cold days.

Although luxury brands that focus on high-quality goods and high-end service experience have performed well so far, they are still vigilant and make adjustments in a timely manner. For example, John idol, chairman and CEO of Capri holdings, parent company of Versace, Michael kors and Jimmy Choo, has pointed out that despite full confidence, the company is also acting cautiously and that it is ready to make adjustments as autumn, winter and holidays approach.

"We still don't know what will happen to the consumer side in the second half of this year, but the luxury industry still seems to be quite strong and healthy. We think that consumers may make some adjustments, but they will continue to maintain strong growth in the foreseeable second half of the year," he added.

Jean Jacques guiony, LVMH's chief financial officer, stressed: "if the recession really comes, we will adjust in time, and even if the revenue is hit, we will be able to adjust our spending as a luxury group." in addition, he believes that what he has seen from his previous experience is that the current situation will not continue, And we have a very strong resilience.

For those fast fashion brands, middle end and light luxury brands, relying on a large number of marketing activities to boost holiday consumption seems to be the only way to boost year-end performance.

These irresistible "black swan" events, which can not be solved in a short time, not only increase the uncertainty of the development of global fashion consumer market every year and next year, but also make fashion enterprises face greater pressure of cost rise. As predicted by the International Monetary Fund, the global supply chain chaos and rising inflation caused by the epidemic and geopolitics will make the global economic growth rate forecast to be only 2.9% next year. In this period, the global economy will also face structural downward risks. Although these challenges are unavoidable and uncontrollable, enterprises still need to adjust their strategies more flexibly and improve their ability to resist pressure according to market changes.