Chinese Apparel Market To See $60Bil Contraction
15% of the market wiped off due to COVID-19 with little "revenge-spending", according to Oliver Wyman survey.
by Tiffany ApSHANGHAI–More than 75 percent of Chinese consumers reduced or postponed purchases on apparel and footwear with their total spending decreasing by 45 percent in the first quarter, according to Oliver Wyman’s latest survey, with little retaliatory spending seen in April and May.
The world’s largest apparel market is expected to see a 15 percent contraction in 2020, a survey conducted in April by the firm found, equivalent to $60 billion in market value. However, it predicts consumer spending to return its 2019 level in the second half of the year.
“It is going to be a turbulent year, with structural and longer-term shifts in the apparel and footwear market in China,” said Imke Wouters, the Oliver Wyman partner who led the survey. “Despite the industry downturn, we are seeing the further growth of e-commerce, with an accelerated penetration into sub-segments, such as high-income customer groups. The post-COVID market is expected to be more polarized across income levels and city tiers.”
The survey found a divergence between higher and lower income groups, with the latter buying less and trading down for essentials. More than 60 percent said they would purchase essentials only. On the other hand, the respondents from the high-income group said they would trade up and go for both value and quality, with 54 percent of them saying they would still look to buy products offering higher quality and functionality.
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However, the importance of goods that offered value for money was common to both groups. More than 70 percent of lower-income respondents and 56 percent of high-income respondents said they preferred items offering value for money.
The firm also predicts that online channels could take up to half of the entire market in 2020, surging from 34 percent in 2019. Although traditionally shoppers with high-incomes have preferred to shop for apparel and footwear in stores, the group now carries out 64 percent of their spending online.
Some offline apparel sectors fared better than others. Sportswear showed stronger resilience in its offline presence than the general apparel market, the survey said. Compared to the average consumer, sportswear fans said that they intend to shop more at various sportswear brands’ own stores in the next one to two years.
But sales in department stores are not expected to come back robustly and the impact on COVID-19 on China’s high street fashion market has been material, the report said.
“For the remainder of the year, we believe the market’s overall growth will still be lower than the historical level,” added Wouters. “Fashion retailers need to adjust their proposition to address consumers’ changing behaviors, rationalize their store networks, and take cost-control initiatives to minimize their losses while also prepare for the future.”
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