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Which trends present opportunities and threats on the European apparel market?

Takes about 26 minutes to read

Major changes are affecting the garment market and manufacturing process. Keeping up with these changes is vital for the survival of your business. Online and offline commerce are merging into “unified commerce”. New (digital) technologies like wearable tech, Big Data, Artificial Intelligence and Virtual Reality are big game changers, often in combination with sustainability and waste management. Opportunities for Direct-to-Consumer (D2C) sales are growing. Global supply chains are being realigned.


1 . ”Unified commerce”, personalised shopping experience, ”omnichannel” strategies

The distinction between e-commerce, or online sales, and offline commerce, is blurring. The various forms of business are merging into one, which can carry different names: “hybrid commerce”, “digital commerce”, or “unified commerce”. Apparel brands are fusing physical and digital stores and integrating all their activities in a centralised (IT) infrastructure. The challenge is to make sure customers get the same information and have a similar experience at every so-called touch-point with a brand. Touchpoints can include a brand’s (mobile) website, social media activities, advertising, and brick-and-mortar stores.

For shoppers, the boundaries between off- and online are also fading. Today’s consumers expect a unified (“seamless”) and highly personalised shopping experience. They expect access to unique, personalised content at home on their laptop, on the go with their mobile devices and in physical shops with in-shop technologies, such as digital changing rooms and interactive mirrors.

Many brands are embracing “omnichannel” strategies, integrating cross-media sales and marketing activities with shop activities, inventory management, back-office support and supply chain setup. This approach calls for stronger and more unified branding, excellent cross-chain communication, and centralised IT infrastructures. Software brings all of these business processes together – all with the aim of helping shoppers make a quick, accurate and satisfying purchase.

Omnichannel shoppers spend more money than those shopping only online or only offline (or browsing online and buying offline).

One result of omnichannel growth is that successful e-commerce organisations are opening physical stores. These stores tend to be a mix of physical items combined with online selections and presentations. The aim is to enable shoppers to see and buy the entire assortment.

“It is important for clothing stores to understand and implement omnichannel retail methods into their business strategy.  Vertically integrated channels and faster fashion are merging to reshape the industry faster than some apparel retailers are able to respond.  How retailers overcome these challenges will be the key differentiator between those who are winning and losing market share.” (Apparelsearch.com)

2 . Getting familiar with the use of Big Data

Consumers’ service expectations are growing. They want to be able to order online, return for free and create their own personalised styles. Proactively identifying consumer needs and wishes through data analysis, and creating an offer that matches or exceeds expectations, are critical to the profitability of the business.

This is turning the influencing and guiding of shoppers into a separate business model. Using Big Data to monitor shoppers’ online behaviour in real-time has enabled companies like Asos and Zalando to increase their sales substantially. The use of Big Data to provide online shoppers with precise information on size, quality and more – or to accurately predict shoppers’ next purchase – will soon be sweeping the sector.

One challenge in this area, especially for businesses with a limited market share, is getting hold of large quantities of Big Data. Big Data companies offer help in using data to optimise business.

Using Big Data can help you as a manufacturer to understand consumer trends and requirements as well as buyer requirements: understanding the market demand will help you to understand your customer.

Social media are a vital part of omnichannel retailing. Facebook is still the leading social media platform in fashion (check these Facebook statistics for leading fashion brands). SnapChat is the fastest grower. It is especially popular among young people aged 13 to 34, logging 10 billion video views daily.

More and more fashion brands are using SnapChat, partly because it centres on real-time, authentic content and today’s consumers like that. Also, SnapChat gives brands immediate contact with users’ smartphones, whereas Facebook posts are only viewed by an average 5% of a brand’s followers.

  • Companies that combine e-commerce and online activities with offline commerce will be the most successful: e-commerce cannot survive on its own.
  • Large e-retailers will open offline stores, or service points, to combine online and offline.
  • Like the USA, Europe will probably get more big shopping malls dominated by the leading global brands, but with room for – usually short-lived – innovators and niche fashion concepts.
  • Younger generations will do much of their buying online. Older folk will continue to prefer offline shopping.
  • Both younger and older people will view offline shopping not as functional, but as an experience, which means it will have to involve multiple sensory experiences: food, music, media, etc.
  • Brands that until now have relied mainly on offline shops will have to find ways of embracing e-commerce, adjusting their business model, and regrouping their offline and online goals and activities.

Tips:

  • Start systematically collecting whatever data you can in a database.
  • Focus on market data and (internal) company data. Internal data can be of value in helping you improve efficiency, sustainability and other aspects of your business. Think, for example, of data on fabrics, production times, pricing, lead times, shipping, ecological footprint or sales.
  • If you feel you are behind on e-commerce and omnichannel developments, start catching up now. If your younger staff members know more about the Internet and social media than you do, talk to them and ask them for input.
  • Ask your buyers which threats and opportunities they face regarding e-commerce and omnichannel strategies and find out if you can help.
  • Look for, and study, the examples set by successful omnichannel retailers, such as the United Kingdom’s Oasis, Netherlands-based retailer Zalando and sports retail giant Decathlon.
  • Check the Internet and the social media discussed above to see examples of how it all works. Check this social media overview to find out what there is and how to use it.
  • Explore the power and opportunities of social media by becoming an active user. Here are three more retailers with a strong social media presence: Kiabi (France), Topshop and Oasis (UK).
  • Provide excellent digital data on your products, add photos or videos, find out whether your buyer needs different kinds of packaging and logistics solutions for e-commerce. Talk to them about this and try to help.
  • Make sure your buyers – whether businesses or shoppers – get a seamless experience, regardless of where or in which channel they contact you. Tell the same story and offer the same mood and conditions on your website as you do on Facebook, SnapChat, at trade fairs, in your PR materials and in your sample rooms.

3 . Direct-to-consumer (D2C) sales

The Internet has made it easier than ever for consumers to shop further away – and for manufacturers to sell their goods anywhere in the world. Direct-to-Consumer (D2C) sales therefore offer great opportunities, especially among younger consumers. They are eager – and smart enough – to skip the middlemen and go directly to the brands and manufacturers of their preference. These severely shortened short supply lines can go from anywhere on the world to anywhere else.

Many big brands are investing in D2C sales. For example, Nike announced plans to grow its D2C sales by 250 percent by 2020. This article explains why Nike is investing in D2C. This article looks at why D2C is becoming an important part of the omnichannel experience. Smaller brands can also tap into this trend.

Online sales platforms like those of Aliexpress, Alibaba, Amazon and eBay are encouraging consumers to buy directly from factories in Asia. It’s easy and cheap. Alibaba is opening a warehouse in Europe. China has come to an agreement with several parcel delivery services to deliver at reduced cost. These developments will all boost D2C sales. In the Netherlands, consumers alone order €817 million worth of products from e-commerce stores outside of Europe in 2017.

Tips:

  • Try experimenting with D2C sales alongside your regular business-to-business (B2B) activities. You can use your own web shop, an existing online platform or social media.
  • Empower your staff to get involved in your D2C sales: give them access to Internet, encourage and train them to “sell” the concept in their own network and to grow an online network and share the story.
  • If this is too costly or too difficult, consider training just some of your staff – or involving their children, some of whom are likely to be more open-minded and tech-savvy.
  • Add value by investing profit in the local community and in your own future, for example, by offering employees’ children training in digital technologies, automation or data science.
  • Read up on social media, for example, in this 2017 article in Business Matters on why social media marketing is important for small to medium-sized enterprises (SMEs).
    “Digital retail is often applied to the end of the supply chain, where retailers sell to consumers. But the opportunities of digital technologies today are available to the whole supply chain – literally everyone” Léon Mölenberg, Senior policy advisor Ecommerce Europe

4 . Storytelling and social influencers

Investing in and improving your organisation will help your business grow, but you must also promote your organisation, making sure potential buyers and even consumers are aware of your unique selling points (USPs). This is where storytelling can be useful.

Storytelling is a powerful way to move people. It means using a compelling story in words and pictures to appeal to consumers on an emotional level. Use a story about your product’s origin, your region, your family-owned company, your design, or an environmental or social project your business is involved. Some brands tell stories about moral values they believe in. It is a great way of connecting with shoppers on an emotional level and thus creating customer loyalty. Nike’s “Equality” campaign is a good example.

Consumers care more and more about how their clothes are made: the story behind the product sells. Storytelling is all about increasing this kind of emotional involvement in your brand. Use social media and content marketing stories. Tell your story well and consistently, so as to engage listeners by linking (product) facts to emotions. It is a vital part of the experience consumers want.

The role of social influencers in adding credibility and visibility to your stories and your brand is also growing. Think of online bloggers, vloggers and brand ambassadors reviewing, or praising, your products.

Tips:

5 . Sewing robots and automation

Technology is changing the apparel industry with new production techniques, faster communication, the possibilities of scanning sizes. Particularly in fast fashion, labour-intensive production will likely make way for capital-intensive production, dominated by new technology and robotics. This means Europeans will see near sourcing as a major time-saving opportunity. For slow fashion, labour-intensity remains a leading factor: in this segment, most European buyers will prefer far-shore sourcing.

3D printing, smart factories and robotised manufacturing have set firm foot in the footwear industry and are likely to step over into apparel. Adidas has launched a fully robotic shoe factory in Germany (you can read about it in this article in The Economist). The sewing robots described in this 2018 Wall Street Journal article have the potential to shift production back to Europe, as cheap robotised production may make outsourcing to low-wage countries less necessary.

The use of automation is being pushed forward by rising wages in Asia, with many European fashion companies considering rising production or sourcing costs as a major business challenge. Automation may help equal out the cost model between low-wage countries and Europe, driving Asian production for Asia and European production for Europe.

Another innovation example in this market is spray-on fabric developed by Fabrican (you can see how it works in this Fabrican video). Spraying yarns directly onto the body is a way to combine spinning with personalisation. It is an example of a technique that could change the industry as we know it.

6 . As a supplier you need to evolve from contractor or sub-contractor to partner

Because of technological and other changes in this industry, buyers require new kinds of supply chain service. This means that as a supplier you need to shift from being a contractor (or sub-contractor) to being a partner.

Virtual designing, 3D technologies and digital showrooms are examples of technology spinoffs in fashion. Digital showrooms and presentations are increasingly being used to visualise products in all their variety without requiring the production of sales or other samples. In Tommy Hilfiger’s virtual showroom, which was recently opened, wholesalers can browse collections without the need for physical samples.

As a supplier, you have to be aware of these changes and the changing supply chain service levels involved. For example, buyers will want you to deliver more digital data and presentation material along with your products.

Tips:

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  • Read up on new technologies affecting production, logistics, sizing and measurement and consumer trends, for example in this Launchmetrics article.
  • Look at markets outside your own for new crossovers being facilitated by technology, for example, health and apparel. Find out whether these crossovers offer your business new opportunities.
  • You have to engage in co-creation and problem-solving with your business and export markets.

7 . Technology is pushing demand for faster production and delivery

The “need for speed” is evident in the fashion business. Technology and consumer trends are its main drivers. It presents both threats and opportunities. If you want to sell high volumes, you can use IT solutions that will speed up your ordering, production and delivery processes. You may also choose to avoid the speed trend, focusing on slower fashion with higher margins.

European buyers in the fast fashion segment will tend to cut down on suppliers to gain speed. Instead of having many different suppliers, they will want to invest in stronger relationships. If you are in such a relationship, you will benefit from more stable business. But your buyer will also expect you to show more goodwill and to move faster. A vertical supply chain setup – in which the buyer owns, controls, or strongly influences the other players in the supply chain – increases your speed and will always be preferred by the bigger customers.

Buyers will also seek out factory owners who are willing to take time to discuss needs, wants and options aimed at more speed. This can cost time, but it means less difficulties when problems have to be solved. These buyers will see you as a partner and want to share their dream with you, as shared passion, again, will accelerate things.

Another way of getting more speed is to simplify designs. This is an option European buyers will also be looking for.

In addition, manufacturers are moving their sample and design rooms nearer to their largest customer. It speeds up approval and manufacturing and enables customers to react more quickly to market trends.

Tips:

  • Find out how important speed is to your buyer – and to your own business. If you want to move towards fast fashion, connect with buyers in that segment and follow the tips for gaining speed. If you feel more confident in slower fashion, work on highlighting other selling points, such as quality, design, reliability or uniqueness.
  • Build local (knowledge-sharing) networks of fabric suppliers and other manufacturers so that you can fulfil the need for increasing speed in manufacturing and delivery.
  • Cut down on the number of suppliers you work with to increase speed and invest in stronger relationships to create more goodwill.
  • Look for creative ways of simplifying designs (but beware of designs that are too easy to copy).
  • Look carefully at your sourcing as a potential time-saver, assigning the right materials to the right locations.
  • Use an enterprise resource planning system (ERP) to accelerate ordering and communication. 
  • Look for IT solutions that will accelerate production and delivery. An Excel is no longer enough!
  • Find alternative solutions for fabrics/trims in order to shorten cycles.
  • Consider creating a sample room next to the building of your biggest customer to increase speed in the supply chain.

8 . Ageing population continues to grow, but the millennials are coming

There are more and more older people in Europe. Younger target groups tend to dominate fashion and general consumer trends and it is important to follow the trends they set. But older groups of consumers offer a growing opportunity for business, too. Demographic changes will differ significantly within Europe. In general, Eastern European countries have high rates of population growth and lower standards of living (although they are improving).

The percentage of people aged 65 years and older is projected to increase from 17% in 2010 to 30% in 2060. The number of people who are 80 years and older is expected to increase from 5% to 12% in the same period. Another important change is that older people are becoming more active.

All of this means they are becoming more and more important as a consumer group. While many clothing brands traditionally focus on kids, young people and families, the “oldsters” offer important new opportunities for suppliers.

Younger consumer groups are still important, too, of course. In the coming 5 to 10 years, baby boomers (individuals born in the period 1946-1964) will dominate apparel consumption. After that, the Millennials (individuals born in the period 1980–2000) will become an important consumer group.

These two groups of people are likely to develop new outlooks on fashion and design, as well as on such aspects as sustainability. For example, millennials are likely to easily adopt garments with integrated gadgets and wearable technology. Another example is practical clothing: the growing numbers of elderly consumers receiving care increasingly prefer clothing that can be easily put on or taken off.

Tips:

  • Realise that different age groups have different needs and wants in apparel. Identify the segments or niches that are best for your products. For more information see our study on Channel and segments in the European apparel market.
  • Understand and cater to the needs of specific consumer groups. For more information see our studies on specific apparel segments, such as the 50-plus consumer segment.
  • Most suppliers from developing countries work in the business-to-business (B2B) segment. If you are a B2B supplier, your (European) buyer will determine which consumers groups he targets. Many buyers target a mix of consumer groups. Help your buyer – and distinguish yourself from your competitors– by knowing what these different target groups need. Actively keep in touch with your buyer and make sure you understand his goals and ideas.
  • For more information on ageing, see this 2018 European Commission study on Population Ageing in Europe.

9 . Sustainability, transparency and waste offer new business opportunities

The reputation of the fashion industry in terms of social, environmental and economic responsibility is far from perfect. The industry has been known for using toxic dyes, polluting rivers and farmland and causing harm to people. It uses too much water. Labour conditions are often rough, with poor wages, long hours and underage workers.

The push to change the industry is growing stronger. The drivers behind this push for sustainability are non-governmental organisations (NGOs). Their many reports and media campaigns are making consumers and buyers in Europe more aware than ever of the need for sustainable, responsible business – and the damage that is done without it.

Most consumers and buyers in Europe know that the three Ps of corporate social responsibility (CSR) – people, planet, profit – have to be in harmony. And increasingly, they assume the industry will make it happen. As a supplier you will increasingly be expected to play a part in this. It offers good opportunities for becoming more competitive.

10 . European players are looking for sustainable solutions

Consumers expect fashion businesses to clean up their act regarding the environment, animal welfare, labour conditions, community welfare programmes, fair wages and more. For example, cotton is one of the most water-intensive crops to grow, and textile dying and leather processing involve highly toxic chemicals that put workers, local water supplies and eco-systems at risk.

European players are therefore looking for materials, fibres and techniques that are sustainable and functional, such as raw, natural, synthetic, renewable or recycled materials.

Alternatives for cotton and wool are available, but retailers and brands are reluctant to replace cotton with a sustainable, but more expensive alternative. Alternatives cost more because they cannot be produced in the same volumes as cotton and because production requires investments in special spinning machines and the like. And even if these problems can be solved, it is uncertain whether consumers will really embrace a replacement for cotton.

Eco-friendly dyeing technologies are also emerging. See, for example, DyeCoo’s waterless dyeing solution. Levi Strauss has modernised and transformed its brand in part by emphasising sustainability.

Ultimately, many garment industry players want to build a closed loop supply chain, involving a recycling model that allows for maximum re-use of used clothes. This aspect of the industry will offer increasing growth potential in the future.

11 . Consumers are usually not willing to pay for sustainability

It is important to realise that most consumers and buyers are not willing to pay higher prices for any of these changes. This means progress in this area is gradual and not automatic.

It also means there is a lot of confusion about corporate social responsibility (CSR) in this industry. As a supplier you may often be that told a good CSR performance will give you a competitive advantage, but because of the many different standards going around, it is difficult to know where to start.

There are good examples of how good storytelling can boost more conscious buying behaviour, such as this video on T-shirt production.

Tips:

  • Aim for co-developing realistic CSR policies together with your buyer(s). This will help you avoid missteps and strengthen your business relationship.
  • Embrace gradual change, targeting small, one-step-at-a-time improvements, rather than thinking you can change the world overnight.
  • Set clear priorities: you cannot tackle child labour, human rights violation, unfair labour practices, health and safety risks, environmental harm, corruption and supply chain traceability all at once.
  • Make your CSR performance as good as you can. A good CSR performances means less risk for your buyers. This is perhaps a stronger argument than the argument of actual environmental or social impact.
  • Decide whether you want to be among the early adopters or whether it suits you better to follow the trend and wait until best practices are widely established.
  • Expect questions about your own (Tier 2) suppliers and the conditions under which they produce your buttons and zippers, fabrics and so on. Spread the CSR message and inspect practices and standards all the way back to the beginning of your supply chain.
  • Create a basic, clear CSR standard for your own company – and use it as a selling point. For inspiration, consider the example of Plummy Fashions.
  • Look for CSR measures that will not just attract buyer interest, but also improve your efficiency and possibly even your margins. A good example is lean manufacturing: while it may initially slow down production during implementation, it can result in 20–40% efficiency gains.
  • Find out how you could adjust your production process in order to provide a cleaner product, for example by using natural and low-impact dyes, as well as applying more efficient dyeing techniques, eliminating chemical additives and finishes, and improving wastewater treatment.
  • Follow (social) media as they can impact trends in a matter of hours. For example, a viral clip of an angora rabbit being skinned can suddenly freeze the market for this material.
  • For more information see our study on Buyer Requirements and our study on how importers list their requirements in contracts.

12 . New growth markets in Europe

Europe’s economic rebound is causing new markets to develop. East European countries are especially interesting. Disposable incomes in countries like Poland and Romania are growing every year and more and more consumers there are eager to spend on fashion. Demand is growing in these countries.

13 . Turning waste into a resource

Another aspect of your environmental performance that is often scrutinised by non-governmental organisations – and that therefore is of increasing interest to buyers and consumers – is how you deal with waste. European consumers currently use 16 tonnes of material per person per year, of which 6 tonnes become waste, according to data published by the European Commission. This means that better waste management offers huge potential for improvement – and for a more competitive market position.

In Europe and the USA, we have vast amounts of waste clothing, so it seems inevitable that recycling will grow strongly in the coming years. The prospect of a circular economy will strengthen this development. In some countries, such as Italy, quality waste materials are already a commercial hit.

One of the big challenges in garment waste management is how to collect waste by convincing the customer to return used garments rather than throwing them in the garbage. Ideas like compensating the customer for the return of their second-hand clothes are already under discussion. This will result in a higher price for waste products and therefore a higher price for recycled products.

One example is Mudjeans’ “Lease a Jeans” concept, which invites shoppers to buy or lease a pair of jeans and send them back when they are worn out, so that they can be recycled.

There are many other examples of fashion companies tackling sustainability problems – and generating new business as a result. In the USA, Evrnu is taking on the waste problem with patent-pending technology that turns old clothing into fibres for new clothing. Bionic Yarn produces denim from ocean plastic.

For players like these, waste is no longer a problem, but a resource. They understand that they can turn “waste” into a viable resource. As a supplier, you can tap into this trend by exploring new waste management solutions yourself. If you communicate it effectively, a strong or innovative waste management performance can significantly improve your market position and competitiveness.

Governments in Europe are pushing garment manufacturers to take full responsibility for their waste. Cotton and cheap fabrics considered to be waste in Europe are currently being recycled in three ways:

  1. What is wearable is being sold to Africa and, to a lesser degree, to East Europe;
  2. Some waste is being shredded into insulation materials for the automotive industry;
  3. The remainder is being landfilled.

A lot of new initiatives are being taken to encourage the recycling of waste into new yarns or garments. In fact, as viable recycling methods emerge, this trend may have a strong influence on moving manufacturing back to Europe, as it may be cheaper to process recycled materials in Europe rather than shipping them to outsourcing locations.

Tips:

  • Realise that waste is not a burden but an opportunity: minimise your waste, but also be aware that the remaining waste flow has value.
  • Look for creative examples of waste reuse, such as: having waste cuttings made into simple toys in community projects (social enterprise); having leather shavings pressed into shoe soles; grinding leather shavings or other waste into floor tiles; etc. For more examples, read this article on the rise of sustainable fibres in fashion.
  • Think holistically about your resources. Waste is not just about leftover materials or unsold products; you can also waste time, machines, people, capacity.
  • Unsold products are another opportunity. Find a market for them!
  • If your production waste is relatively costly, fix it; if not, repurpose it.
  • Make sure your designs allow for maximum efficiency in material usage (for example, avoid fabric designs that are so intricate that cutting the fabric up renders large amounts of it useless).
  • Aim for waste-friendly packaging.

14 . Production moving away from China

The Chinese government recently introduced new environmental legislation with higher standards. It is predicted that over 80,000 factories will be unable to meet these standards and will have to shut down. The news is affecting the entire manufacturing business and many China-oriented organisations are shifting their business to countries such as Ethiopia, Myanmar, Cambodia, Vietnam, Pakistan, Egypt and Bangladesh. For fabrics, accessories and trims, China will remain one of the largest suppliers in the global manufacturing industry.

The volume business is under heavy pressure to maintain its current low price levels. Margins for manufacturers in this segment are shrinking. In response, more and more manufacturers are eager to move to higher price levels.

15 . Improved sustainability means greater transparency

Large retailers, non-governmental organisations (NGOs) and governments are pressuring European businesses not only to operate in a more sustainable manner, but also to be more transparent. This applies both to individual businesses as well as to entire supply chains.

A good example of the push for transparency is the Fashion Transparency Index report published in 2018 by NGO Fashion Revolution. The Index ranks 40 high-visibility fashion brands based on their supply chain transparency and governance practices. The average score was 42%, with only three brands receiving a “top rating” of up to 77%. High performers make their supply chain policies available to the public and have auditing and reporting policies in place. Most low performers merely have a code of conduct available on their websites.

For suppliers, increasing transparency is inevitable: if you cannot offer the kind of transparency your buyers want, they will find other suppliers. At the same time, it is a good way of getting more business: the better your performance in this area, the more attractive your company will be to suppliers in higher segments.

Blockchain technology offers a new way of realising the desired transparency in a supply chain. A label or tag added to a product can be used to store all relevant data concerning that product, for example, which farm supplied the cotton, who made the yarn, what was used to dye it, who manufactured the product, how it was shipped, or what costs were involved in each step. All of these “blocks” of data are stored on the tag and can be accessed and verified by any number of computer users participating in the chain. The fact that data storage and verification are decentralised guarantees their reliability, among other things. An example of blockchain technology applied in the fashion industry is Openmodestories.com.

Tips:

  • Pursue transparency both within your own organisation and in the supply chain you are a part of. Trust that transparency will win the day. For example, your buyers will increasingly want to inspect your suppliers’ companies as well as your own. This means you should stop buying fabrics at the cheapest fabric supplier if he is not transparent or certified, and instead, focus your sourcing on transparent suppliers.
  • Be as open as you can about your production process, labour conditions, sourcing and so on. If you know you cannot comply with CSR standards in some areas, communicate this with your buyer and suggest co-developing an improvement plan. Show your willingness to improve. It may keep you in business.
  • Use your website and promotional materials to openly share the story behind your business.
  • Familiarise yourself with blockchain technology as a means of reshaping your supply chain and reaching new transparency levels.

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