Sales in that retail category plunged by 23.6 per cent in 2020 as a result of the pandemic but came back with a year-over-year gain of 16.2 per cent last year.
Trendex is forecasting annual gains of 14.8 per cent this year, 5.0 per cent in 2023, 2.9 per cent in 2024, 1.5 per cent in 2025 and 1.8 per cent in 2026.
Randy Harris, president and owner of Trendex North America, said that beginning in March 2021 the Canadian market returned to “normalcy as consumer demand began to increase and stores were opened.”
“Two channels of distribution in 2021 went in different directions. In 2021, the off-price retailers such as Winners, OFF Fifth and the Rack, gained market share but the previous year in 2020 they lost market share,” said Harris. “And the very simple reason for that is that off-price retailers had no e-commerce offering. As a result with e-commerce booming, the off-price retailers lost market share.”
He said e-commerce sales decreased in 2021 and off-price retailers rose. The net effect is a return almost to normalcy pre-COVID when it came to the channels of distribution.
“Luxury apparel sales rebounded slightly last year but they weren’t as much up as the total market. And the reason we have relatively low growth in 2021 for luxury apparel is that foreign tourism almost completely was at a standstill,” explained Harris. “With no Chinese, with nobody coming in, that hurt the luxury apparel business.
“The other thing that hurt the luxury apparel business is the growth of luxury apparel resale. So all of these platforms where you can buy a used GUCCI dress or a Prada bag, are eating into the regular retail sales of luxury apparel retailers. This is a change that nobody is reporting but I think it makes sense to everybody who thinks it through.”
Harris said there is no inflation with apparel prices. As general inflation heats up, it’s not affecting apparel directly but it is in the sense that the consumer has less discretionary money and that means less spending on apparel.
“Inflation overall will affect the demand for apparel in the long term,” he said.
Last year, there were three major market share winners in the Canadian apparel sector – Winners, lululemon Canada and Aritzia Canada, explained Harris, adding that Reitmans’ (Canada) strategic initiatives over the past two years began to pay off in the second half of 2021.
The Trendex report said Old Navy’s failure to increase its share last year was directly related to its year-long logistic problems that limited the retailer’s inventory. Walmart’s failure to gain share was due to Giant Tiger’s apparel related initiatives and Walmart’s less than compelling apparel e-commerce offering. Roots could have lost share last year but given its performance at the end of 2021 it is well positioned to gain share in 2022.
“Roots’ fourth quarter report reflected a lot of the changes that they made last year and I’m confident that this will be a good year for Roots coming up,” said Harris.
He said three things could affect the Trendex forecast for this year – the growth of resale apparel, an extremely high rate of inflation overall, and the possibility of collateral damage as a result of the war in the Ukraine.
“They’re three issues that are there but you don’t know how to quantify them and put them into some type of statistical model if you will,” added Harris.
“There will be continued growth in the buy now, pay later option that up to 50 per cent of Canadian retailers are now offering their customers. This is an interesting change with buy now, pay later because all research has shown that the consumer spends more money than they normally would if they avail themselves of the buy now, pay later option. It’s a new phenomena that’s no more than two years old in Canada but growing very fast.
“We’re also seeing foreign retailers once again coming back into Canada but it’s got to be noted that the invasion of foreign retailers will have minimal effect because most of these retailers that are coming in from Europe or Asia are opening one or two stores only. And none have the potential if you will of an H&M, or a Uniqlo or a Zara in terms of number of stores. But the number is up and will continue to grow this year but it will have minimal effect on the market.”
He said that in the future some brands will increasingly open their own stores in Canada.
“We’ve had this with people like Nike and Adidas and we’ve had it with some women’s apparel brands, the good ones. I think you’re going to continue to see them follow the Canada Goose model and have more control over their own destiny by having their own stores,” said Harris.
“That’s a longer term trend but you’re beginning to see it happen.”