A new report says 2022 was the year that Canadian apparel retailing shook off the effects of the pandemic and by the second half of the year returned to normal.
“Not unsurprisingly, retail apparel sales increased 43.4 per cent in the first half of 2022, followed by a 9.9 per cent increase in the second half. During all of 2022, total Canadian retail sales increased 8.2 per cent, while just retail apparel sales increased 21.2 per cent after increasing by 16.3 per cent, during 2021. Last year retail apparel sales totalled C$33.6 billion, which was 7.7 per cent greater than sales in 2019, the year just prior to the outbreak of the pandemic,” said the report by Trendex North America, a marketing research and consulting firm.
“Driving the growth of apparel sales in 2022 was first and foremost the fact that apparel retailing was totally open in the first half of the year compared to a year earlier during which apparel retailing was in a lockdown mode. An estimated increase of 3.5 per cent in Canada’s GDP and a slowdown in housing sales resulted in Canadians having more discretionary income. One factor that can only partially be discounted was inflation. When it came to apparel inflation itself, was not an issue as apparel prices increased a miniscule 0.2 per cent. However. inflation’s overall rate of 6.8 per cent could have had a negative on discretionary apparel purchasing.”
Randy Harris, president and owner of Trendex North America, said the industry has returned to normal.
“All of the negative effects of COVID on the market have now passed. They’re in the rear-view mirror if you will and now we’re returning to the degree of normalcy in the apparel market with very few threats that I can see to apparel sales for the coming year,” he said.
“There is no indication that inflation is having an effect on apparel prices at retail and inflation hasn’t gotten so bad yet that consumers are cutting back on their discretionary purchases of apparel.
“So for the first time in three or four years, it’s full speed ahead for the industry.”
The report found that men’s apparel sales (+27.8 per cent) increased at a faster rate than women’s apparel sales (+20.7 per cent) during 2022. The 8.1 per cent growth rate for children’s apparel was held down by heavy discounting in the segment.
“Not surprisingly as men transitioned back to an office environment, men’s suits/sport coats (+83.0 per cent) recorded the largest merchandise category sales increase. Tops/ bottoms, the largest mens merchandise category registered a 24.4 per cent sales increase, while both outerwear (+34.2 per cent) and accessories (+31.5 per cent) posted significant sales increases,” said the report.
“In the women’s market dresses/suites (+37.9 per cent), not surprisingly, in- creased as women returned to the office. Other women’s categories reporting strong increases included pants/tops (+24.2 per cent) the largest women’s category, followed by accessories (+19.5 per cent) and lingerie (+11.8 per cent). Of note, was that no adult merchandise category registered a decline in sales last year.
“Sales in apparel specialty stores, the largest channel of distribution for apparel, in- creased 23.4 per cent in 2022 and was up 6.9 per cent over 2019 sales. The largest provincial increases during 2022 in specialty store sales occurred in Ontario (+37.8 per cent) and Quebec (+18.9 per cent), while the smallest sales increase occurred in Saskatchewan (+6.6 per cent).”
Trendex’s forecasting model indicates that apparel sales will increase by 4.5 per cent this year.
Harris said men stopped buying dress apparel two years ago. They weren’t buying suits and sportcoats. They had no reason to go out and purchase apparel.
“I think what you’re seeing is that for men you’re seeing delayed purchasing, meaning they postponed purchasing during COVID and now they’ve come back into the market,” said Harris.
“The bottom line. It’s back to normal. Everything’s good for the industry. No threats at all. I have not been this optimistic about the industry for at least the past three years.”
The report said Nordstrom made a number of mistakes in the Canadian market:
- Overestimating the potential of the Toronto metro market. Nowhere in the U.S. are these three full line Nordstrom’s stores physically so near to each other. As Nordstrom is in most cases a destination retailer putting three stores so close to each other did not add to sales. Rather it made it quicker/easier for the Nordstrom customer to shop, as evidenced by Nordstrom’s Vancouver store, which was its most successful. If Nordstrom had opened only two stores or even one in the GTA, it would have resulted in slightly less sales but far less costs;
- Underestimating the competitive framework for the niche it would compete, this failure had three components: Loyalty – Canada’s two largest luxury apparel retailers, Harry Rosen and Holt Renfrew, both have passionate customer loyalty. Nordstrom underestimated the challenge it would have in developing a relationship with potential new customers; Store upgrades – After announcing its entry into Canada, both Harry Rosen and Holt Renfrew announced multi-million dollar store upgrade programs. As part of its upgrade program, Holt Renfrew rolled out its “World Of” concession program, while Harry Rosen expanded its luxury casualwear selection, and began to provide a first-class omni-channel experience; New competition – Again post Nordstrom’s Canadian entry Saks Fifth Avenue entered the market along with its Off 5th stores. Additionally, new foreign apparel retailers have continued to enter Canada;
- Other factors – “While it is debatable whether Nordstrom could have foreseen the previously described events, it is this publication’s contention that the retailer could not have foreseen: COVID related shopping restrictions, which resulted in a 23.6 per cent decrease in total apparel sales during 2020 and according to Trendex, a 14 per cent decline in luxury apparel/accessories sales during the same year. The 47 per cent decline in annual foreign tourism during the period 2020-2022.
Harris said the demise of Nordstrom will benefit its competitors. Holt Renfrew, Harry Rosen, Saks Fifth Avenue and to a lesser degree Simons, The Bay, Marshalls, Aritzia and Canada’s better women’s apparel specialty stores will benefit from Nordstrom’s closure.
“Bottom line Nordstrom’s demise will mean that there will be a jump ball for its C$310 million apparel sales during 2022. However it should be noted that this amount, for comparison purposes, is only 40 per cent of Reitmans (Canada) C$777 million sales in the 12 month period ending October 2022. Additionally for Canadian apparel suppliers Nordstrom’s demise will have a minimal impact on their sales,” said the report.