Business is booming for online apparel retailers, particularly in the United States. Between 2011 and 2016, online apparel sales rose from 11% of total US apparel sales to 19%. The market will continue to flourish, with an expected growth rate of over 17% through 2017. But the US is not the only country in which online business is booming. Improvements to infrastructure and internet penetration in Asia-Pacific countries such as India and China will drive online apparel sales in the region. Asia-Pacific is currently the fastest-growing market and is expected to have the highest CAGR through to 2025.
This rapid growth in the market is largely coming at the expense of brick-and-mortal sales, which are growing at a considerably slower rate. E-retailers are often able to offer more competitive prices, as they do not have to bear the cost of physical store locations. Online shopping also offers consumers greater convenience, both in terms of finding the type of garment they are looking for, and in the ease of comparing prices.
Amazon, one of the largest online retailers, plays a significant part in this trend. The company鈥檚 marketplace allows smaller retailers and manufacturers to offer their apparel through Amazon鈥檚 site. Amazon receives a cut of the proceeds, and the smaller companies gain access to Amazon鈥檚 enormous customer base. This model appears to be working very well, as apparel and accessory sales on Amazon鈥檚 marketplace rose 48% in 2015.
Department stores lead online apparel market
While this growth in online sales is eating away at sales from physical stores, it doesn鈥檛 seem to be hurting online sales from clothing stores that also have a brick-and-mortar presence. In fact, according to Internet Retailer, the top 9 American department stores together hold the largest share of the online apparel market. Their websites grew by 19% in 2015, mostly from apparel.
Almost two-thirds of total online sales from the top American apparel e-retailers were from retail chains, compared to about 14% from web-only sellers, according to Internet Retailer. Because department stores were early adopters of online sales and have the resources to promote their sites, they have accumulated a large and loyal customer base. Online-only clothing stores may still be seeing healthy growth, but they have strong competition from other retailers.
Challenges for e-retailers
Despite the promising growth rate of online apparel sales, there are still some hurdles to overcome, and they all stem from one problem: fit. For all the advantages that online shopping brings, seeing how clothing fits on one鈥檚 body is still the biggest factor in making a purchase, and a large deterrent from completing a transaction. This means that conversion rates are very low 鈥� a 3% rate is considered good. Customers may browse online catalogues, but they will often decide either to not buy the product at all, or to try it on in person first.
Size charts, while helpful, are often not enough for consumers to judge the fit of a product. Sometimes they do not offer enough measurements, such as only providing a waist size but not one for the chest, or vice versa. Or they may neglect to list sleeve length. With an incomplete picture, many consumers are unwilling to risk the purchase. Also, even complete measurements cannot predict exactly how a garment will sit or how flattering it is, and something that is technically the right size may still end up not being a good fit.
Even when a consumer does decide to make a purchase, the sale isn鈥檛 necessarily a successful one. Return rates are nearly 30%. Offering good return policies may encourage shoppers to take a risk and buy clothes online, but with the difficulty in determining fit and appearance, these policies also mean that many pieces of clothing are returned. This, combined with the industry鈥檚 very low conversion rate, means it can be very challenging to make successful sales.
However, this is still a growing market with a lot of promise. Many companies are looking for innovative ways to improve the online experience and increase sales. There are already many apps on the market or in development, for example, that make use of augmented reality and other technology to help consumers see just how a piece of clothing would look on them. As this technology becomes more refined and more widely used, it could help improve both conversion and return rates. Considering how well this sector is growing despite these challenges, there is much potential for it in the future.
