he famous American dream has captured the aspirations of billions worldwide, as they seek opportunities to settle in the land of prosperity. The United States of America's economic might is evident in its Gross Domestic Product (GDP), which was calculated at a staggering US$ 17.710 trillion in the first quarter of 2015. Among the most promising sectors in the country is the textile industry. Apart from posing stiff competition to various countries in terms of quality, it has secured the fourth spot in global export value, trailing behind only China, India, and Germany.

Textile exports have also witnessed significant growth, surging by 45 percent between 2009 and 2014 to reach US$ 18.3 billion. However, despite these impressive figures, reports indicate that a declining demand in the domestic market is having an adverse effect on the apparel retail business in the United States of America. Several factors, from shifting customer preferences to a hunger for innovation, are disrupting the smooth journey of apparel retail in the country. Even lower gas prices, which typically lead to increased consumer spending due to cost savings, have failed to ignite higher expenditure, possibly because consumers view the price drop as temporary.

Vulnerable Apparel Retail Market
The apparel sector is particularly susceptible to economic fluctuations since the purchase of clothing items is largely discretionary compared to other consumer goods. The fragile and sluggish recovery of the country's economy has resulted in a sharp decline in retail apparel sector sales. According to the latest data from the United States Department of Commerce, sales at clothing and clothing accessories stores decreased in April 2015 compared to March 2015, amounting to US$ 20.4 million. Additionally, a separate report by the United States Labor Department revealed an 0.8 percent decline in receipts at clothing stores in early 2015.

Local clothing brands had hoped for improved sales in March and April, as the drop in February was largely attributed to winter storms and the shorter month with fewer sales days. However, several retail giants faced challenges. For example, apparel retail store Cato Corp experienced a 10 percent decline in February, following a 14 percent rise in sales in January. Gap reported a seven percent decline in Gap label sales and a five percent drop at Banana Republic. Old Navy, another successful apparel brand, saw flat store sales. The Buckle, with 460 stores in the country, reported a decline from US$ 89.5 million in January 2015 to US$ 88.6 million in February 2015.

Marshal Cohen, the NPD Group's chief industry analyst, highlighted the increasing threat of online sales to traditional brick-and-mortar retail models, emphasizing the need for retailers and brands to adapt quickly to the changing preferences of online shoppers.

However, some brands, like L Brands, which owns Victoria's Secret, La Senza, and Pink, managed to navigate these challenges successfully. Their store sales grew by six percent, and net sales increased by seven percent, reaching US$ 806.1 million compared to US$ 750 million in 2014.


Made in USA

The overall picture in the country's apparel manufacturing sector is not rosy. According to the statistics from the Bureau of Labor Statistics, between April 2014 and April 2015, nearly 4.2 per cent employees lost their jobs in the apparel manufacturing sector. Approximately 39 per cent or 86,800 jobs were lost in the apparel manufacturing sector from January 2008 to April 2015.


Trade experts believe that a sizable chunk of apparel manufacturing can return to the country if apparel manufacturing becomes highly automated like the textile industry or if foreign workers are given permission to work. The possibility of industry and government acting on these two factors is extremely slim, so manufacturing of apparel from the United States of America seems like a remote possibility.


Another important factor that has led to the steep decline in domestic manufacturing of apparel is that the country's apparel market has registered highest growth in the branded and luxury apparel sector. The manufacturers of luxury brands prefer to outsource manufacturing to developing nations because of low labour cost and lower cost of overheads like electricity. The companies looking forward to bring production to the United States of America struggle to find labourers who can pass simple drug tests or come to the job regularly. Manufacturing challenges in the developing countries are still controllable, which makes it rare to find 'Made in US' labels on apparel.


Why did sales drop?

Retailers like Macy's, J.C. Penney, and Kohl's have reported little or no rise in sales. The retailers point fingers at several temporary factors for the slowdown. This includes delay in inventory shipment, erratic weather and a steep decline in tourists.


There has also been a shift in consumption pattern. America's baby boomers, or those born between 1946 and 1964, were the main drivers of apparel sales. Now, as most of these people prepare to retire, demand has slowed down. Most of the disposable income of the adult population goes to healthcare and retirement expenses.


Recently, Macy's CFO Karen Hoguet blamed weak growth of the luxury retail market on Netflix Inc, Millennials and women averse to the idea of looking decked up while shopping. "We did some consumer research, and the customers said, they like going to the off-price retailers because she doesn't have to put lipstick on," Hoguet said at an industry conference.


Millennials prefer to buy gadgets like smartphones and tablets rather than clothes. A recent Morgan Stanley report revealed that most of the expenditure of Millennials includes rent, cell phone bills and personal services. This leaves less money for buying clothes or home furnishing.


According to retail expert and author Robin Lewis, today's consumers are not willing to pay the full price because promotions are fairly common. "With coupons, discounts, loyalty points and gifts-with-purchase more the rule than the exception today, consumers are spending less because they can," he wrote on his website.

 

Understanding consumer sentiments

Demographic transformation has changed the opinion of customers on fashion. Retailers are now under constant pressure to produce endless quantity of garments at lowest possible price. Competition has increased, forcing many retail houses to lower their price range.


The apparel industry is also focusing on innovation and technology to offer something new and fresh to consumers. NPD Group's chief industry analyst Marshal Cohen said, "Apparel manufacturers should take a cue from the tech industry - take the lead in investing in the apparel innovation consumers are hungry for, tell them why they need it, and they will buy it. Fashion must get the passion back into the equation in order to truly compete for today's consumer dollars."


Shorter lifespan of apparel products, demand for product range extensions, changes in shopping habits and the growth in discounts and freebies are just some of the challenges for retail apparel.


While it is still too early to predict how apparel retail sector will fare in future, the brands have to ensure that they are ready to serve the innovation-driven Millennials. Effective adjustments to cope with customers' demands will help apparel retailers determine their future course of action, sell more, earn customer loyalty and increase profitability.


References:


1. Tmd433.wordpress.com

2. Marketwatch.com

3. Forbes.com

4. Businessinsider.in

5. Rantoshak.blogspot.de

6. Npd.com