The pandemic during 2020/early 2021 resulted in a revolutionary adjustment to the way consumers worldwide purchased apparel as store/mall closures and shopping restrictions forced apparel consumers to embrace e-commerce to a level never seen before, says a new report by Trendex North America, a marketing research and consulting firm.
The 2022 E-Commerce Canadian Apparel Report said worldwide apparel e-commerce increased during 2021 by 15 per cent to US$759.5 billion, while in the U.S. apparel e-commerce increased by 21.8 per cent to US$181 billion.
“Apparel e-commerce growth in Canada during 2021 slowed as mall/stores began to reopen during the later part of Q2 2021. After increasing by 108 per cent in 2020 in spite of total apparel sales decreasing by 26.4 per cent, it came as no surprise that apparel e-commerce sales declined by 10.7 per cent in 2021. Last year Canadian apparel e-commerce sales totalled C$7.3 billion and accounted for 26.3 per cent of all apparel sales. All early signs indicate that Canada’s apparel e-commerce growth will further slow in 2022 but subsequently apparel e-commerce sales will return to positive growth.”
But the report warns that the benefits of growth will not be shared equally but will benefit a small group of retailers that have “gone all in” when it comes to investing in their e-commerce capabilities.
Randy Harris, President and Owner of Trendex North America, said there’s been a four stage process that apparel e-commerce has been going through. The first stage, pre-COVID from 2015 to 2019, saw industry growth of about 10 to 13 per cent each year. The Quebec market was underdeveloped and towards the end of the period Shopify partnered with the Canadian government to help small retailers get into the e-commerce market which helped the Quebec retailers.
Then we moved into the second stage, COVID, 2020-2021 with astronomical growth in the first year. It grew 108 per cent.
“The reason for the growth was obvious. Stores were closed and the consumer had no choice and if they wanted to acquire something they had to do e-commerce. But the interesting thing was that after growing by 108 per cent in 2020 the following year, especially as things began to open up in the second half the growth rate for apparel e-commerce slowed dramatically and in fact for all of 2021 the apparel e-commerce fell 10.7 per cent and that was after the growth of 108 per cent.”
Now we’re into phase three, which Harris calls return to normalcy, which will go from this year to 2025 with an expected six to eight per cent growth during that period each and every year. Digital marketing will become increasingly more important and there will be an emerging focus on profitability and not sales.
“The most interesting part of our forecast is phase four which I refer to as maturation/consolidation and that will begin in 2026 and what we’re going to see is the consumer by that time will be so overwhelmed with choices that they’re going to either turn to marketplaces to simplify their buying or buy direct from a supplier like Nike as opposed to going to The Bay and hit the Nike product on their site or we’re going to see a growth for really niche product, niche retailers like Knix, the lingerie retailer,” said Harris.
“At that point what we’re going to see is a real shakeout in the apparel e-commerce market and there will be consolidation, bankruptcies. There will be all kinds of things happening. The bottom line is a rising tide, meaning growth of e-commerce, will not lift all boats by 2026 or 2027. There will be consolidation. There will be bankruptcies. There will be people who will step back from it. I think this is a non-Pollyanna attitude towards apparel e-commerce. The consumer likes it but they still like going to the stores.”
Harris said that his long-term worry is that a number of Canadian retailers are just not going to be able to keep up and play in this market. They don’t have the investment capital to upgrade their sites. Unless you have deep pockets, you’re not going to be able to keep up in this market.
He said the overall e-commerce numbers are skewed by the big players like Amazon and Walmart who dominate the market.
“They’ve got awareness. So people think of them first. In the long-term the smaller players are just not going to be able to keep up and the amount of money that people like Canadian Tire and Walmart, and even retailers like Aritzia, are investing in e-commerce, they’re driving the market,” he said. “In the report I mention that 15 retailers in Canada will drive the apparel e-commerce market and everybody else will be fighting over the crumbs basically.”
