The reemergence of COVID will continue to put a strain on the Canadian apparel industry with uncertainty over shopping restrictions in 2022.
But a new report by Trendex North America, a marketing research and consulting firm, says apparel specialty chains will lose share in the market for the sixth year in a row.
The Canadian Apparel Insights report, released in December, also said the growth rate for apparel e-commerce will slow assuming consumers are able to shop in brick and mortar stores and luxury apparel sales, after a disappointing 2020 and 2021, will increase in proportion to the growth of foreign tourism.
“I think the expectations from a value metric standpoint, meaning sales, you can’t really speculate because you don’t know how long the newest phase of COVID is going to affect shopping restrictions,” said Randy Harris, president and owner of Trendex North America. “I was very optimistic last July when it looked like we were beginning to come back to pre-COVID sales levels on a monthly basis. Certainly, beginning June and July the industry was selling more apparel than it was, not just the previous year but than in 2019. So it made me very optimistic from a sales standpoint.
“Right now, I have no idea what to expect in terms of sales for this year and anybody that says they do is crazy.”
In November, a report by Trendex said Canadian retail apparel sales fell by 23.6 per cent year-over-year in 2020 and the forecast growth was 13.9 per cent in 2021. At that time, Trendex was forecasting 8.2 per cent year-over-year growth in 2022.
“I expect that we’ll continue to see evolutionary changes in apparel retailing as opposed to revolutionary changes in apparel retailing. In a sense, the Canadian apparel industry when it comes to change it moves at kind of glacial speed,” said Harris. “When you look back at last year, you see very few changes were made in the industry. If the changes were made, they were often made in the back rooms if you will, but not in the stores themselves.
“I think one of the things people miss right now is how little apparel retailing has really changed compared to some other industries. Yes, e-commerce has become bigger, buy online and pickup in store has become bigger. But so many other things have not changed that much.”
The latest Trendex report predicted for 2022:
- Resale apparel sales will increase thanks to luxury resale e-commerce;
- SSENSE and Indochino will take advantage of a buoyant IPO market by going public;
- Athleisure sales growth will slow while dress apparel sales will increase from their record low sales levels during 2020/2021;
- Almost 40 per cent of Canadian headquartered apparel retailers will offer a buy now/pay later option by year’s end;
- Personalized digital marketing will increase at the expense of print advertising;
- Turkey will disproportionately increase its apparel exports to Canada as a result of the recent major devaluation of the country’s currency;
- Apparel supply chain problems will sort themselves out by mid-summer; and
- Retail apparel prices will, starting in April, climb steadily during the year.
“If there was one big surprise that I had last year, I expected a flood of bankruptcies in January and February of last year. That did not happen. The lack of bankruptcies for the most part during the entire year last year surprised me,” said Harris.
“From the apparel industry standpoint, e-commerce’s growth really saved the industry for the last two years although the rate of growth last year was far less than the previous year. I think a lot of retailers have batten down the hatches in the last year and a half or so and were able to make it through the year. What surprised me though is yes there were fewer bankruptcies but I also thought companies blew an opportunity to close unprofitable stores. But so many companies kept limping along and I thought this would have been a good time for them closing some stores.”
Harris said some Canadian retailers are opening more stores around the world which is an optimistic sign but it’s in very narrow industries such as outerwear. He expects that trend will continue.
“There’s no doubt that in the coming year the one thing we will notice is that mall traffic will continue to fall. That will have an effect not on the major retailers in the major malls but certainly have a greater effect on the retailers who are basically based in second and third tier malls,” said Harris.
“E-commerce has got an inertia right now and it’s going to continue to grow but we won’t see a triple digit rate in growth. The one that I’m worried about right now is luxury retailing which again last year I believe apparel retailing had a very poor year and I attribute that to the lack of tourists coming in, especially from the Orient. Tourism basically in 2021 shut down for a good part of the year, especially the beginning of the year and that had an adverse effect on the luxury retailers. Tourism numbers started to crank back up at the end of last year but with what’s going on in Canada it might lag it down again. That’s another segment that everything is up in the air right at the moment about.”
Trendex said the sales pattern for footwear over the past three years is unexpectedly similar to that for apparel. Footwear sales decreased 21.3 per cent in 2020 and are forecasted by Trendex to increase 17.3 per cent in 2021. Athletic footwear in 2021 should account for 34.1 per cent of all footwear – an increase from 29.3 per cent in 2019.
“As a result, footwear specialty stores during that period lost share to sporting goods stores and e-commerce retailers. The net result of these two changes is that malls continue to decrease in importance for footwear sales. Although little information is available on the footwear sales of individual footwear retailers, consensus is that the largest retailers are Aldo Inc, CTC (Marks and Sport Chek) and DSW Canada. The latter, a public held company, according to Trendex will have sales of US$236 million in 2021,” said the report.