The recent Canadian Apparel Insights report, by Trendex North America, forecasts that apparel sales in Canada will decrease by 1.5% in 2024 but increase by 1.0% in 2025.
Trendex said a number of inputs and assumptions went into its forecast:
Historic Data
- Total sales decreased 1.7% through August 2024;
- Total apparel specialty store sales decreased 0.3% through August 2024;
- Apparel average prices fell 6.0% through September 2024; and
- Non-US foreign tourism increased 4.5% through July 2024.
Subjective Inputs
- Canada’s GDP will increase by 1.1% in 2024 and 1.7% in 2025;
- Canada’s consumers will continue to be adversely affected by inflationary pressures. In response consumers will continue to focus on value;
- Retailers in response will increase their promotional activity to record levels;
- Retailers in the upper-middle price segment will lose share as consumers trade down;
- Both Shein and Temu will continue to gain apparel market share;
- Apparel resellers will see their sales grow four to five times faster than that for the total market;
- Foreign tourism levels in 2025 will return to pre-COVID levels;
- Sales Force is forecasting a 2% growth in retail sales during November/December 2024.
“After increasing by 36.4% in August, Canadian apparel exports declined by 5.4% during September 2024. Through the first three quarters apparel exports were up only 0.9%. While exports to China increased 45.9% YTD, exports to the U.S. decreased 2.1%. Exports also fell to the Netherlands (-19.8%), the UK (-37.0%), and Italy (-25.0%), while exports increased to South Korea (+22.3%), Australia (+21.4%) and Germany (+37.4%),” said the report.
“Apparel imports registered their strongest growth this year in September 2024, as they were up 14.0%. However YTD apparel imports decreased 1.7%. While imports from China (-1.6%) and Bangladesh (-3.1%) fell apparel imports YDT increased from Cambodia (+6.0%) and Vietnam (+5.2%). Vietnam continued to widen its lead over Bangladesh as the second largest source of apparel imports.”
The report highlighted a recent article in Retail Insider, which detailed a number of developments that should, going forward, positively affect Canadian retailing including:
- Augmented Reality—Allows a customer to see how they would look in a garment without actually trying it on. This virtual visualization should in theory, lead to fewer returns;
- Artificial Intelligence—Provides personalized e-commerce shopping experience/assistance. Allows retailers to make product suggestions, while also being able to utilize dynamic pricing;
- Sustainability—A concept of importance to an ever expanding segment of the market;
- Flexible Payment Options—Also know as BNPL, allows customers to purchase more expensive items and more frequently.
“While these trends will affect almost all of Canada’s major retailers, they will have different implications for Canadian apparel retailers and in some cases these new developments could adversely affect Canadian headquartered apparel retailers,” said the Trendex report.
“While the future benefits of augmented reality and artificial intelligence are obvious, incorporating them into a retailers interface with consumers requires both a substantial upfront investment in terms of both capital and employee time. (Although there are services which can be leveraged, they offer a cookie-cutter, one size fits all approach vs. a true customized approach).
“Additionally, the updating/maintenance costs associated with both efforts could be substantial. While international apparel retailers (e.g. H&M, Uniqlo, Gap, etc.) can amortize these costs over a large number of doors, Canadian apparel chains, with an average of 39 stores will, in the majority of cases, be unable to take advantage of these two new technology developments to their fullest. The downside of these developments is that Canadian headquartered apparel retailers and even more so independent apparel retailers will continue to lose share to their international competitors with their deep pockets.
“Although the awareness of sustainability among Canadian consumers continues to increase, there are less than two dozen Canadian headquartered apparel specialty chains who “call out” their sustainability efforts. The primary reason for not doing so again revolves around the cost to both implement and market sustainable products. So, once again Canadian apparel retailers could be put at a competitive disadvantage vs. their much larger international competitors.
“Lastly, offering consumers a BNPL option, for apparel retailers should be a “no brainer”. However a survey conducted this year by Trendex found that less than 40% of apparel chains offer their customers a BNPL option. Of interest is that the percentage of Canadian headquartered apparel chains offering BNPL increased from 37% in 2022 to 39% in 2023. (Hardly a ground swell of retailer acceptance!)”
Related Retail Insider articles:
Canadian resale apparel market sees strong growth: Trendex Report
Canadian luxury apparel sales set to increase: Trendex
