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2024: A Resilience Test for US Fashion

1/15/2024
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After a strong recovery in 2021, which allowed fashion (*) to surpass pre-pandemic levels in the US, sales grew modestly in 2022 at 3% in current value terms. Although initial expectations for 2023 were even more pessimistic due to historic levels of inflation and the subsequent cost-of-living crisis, resulting in reduced incomes and forcing consumers to reprioritise their spending in favour of essential items, the industry’s growth remained positive but further slowed down to close at less than 1%.

Expectations for 2024 are positive but cautious. US consumers have proven to be resilient but the macro environment remains uncertain, making this another challenging year for the industry.

Growth to be driven by price increases as macro environment remains uncertain

Lower inflation and interest rates will give US consumers some relief, but lower economic growth and higher unemployment rates paint another year where they must be cautious with their spending. Some of these short-term pressures include rising credit card debt and the resumption of student loan payments, highlighting the shrinking financial cushion for some consumers as other costs grow and cut into their incomes.

In this scenario, price increases will continue to drive dollar sales growth in 2024, which is expected to increase by 3% in current terms but less than 1% if inflation is excluded.

After two years of declines, unit sales are expected to remain flat, growing only half a percentage point vs 2023

Source: Euromonitor International

Chart showing US fashion retail salesPrice increases will differ by category, with apparel and footwear expecting the lower increments on par or below the projected inflation (2.6%). Bags, luggage, jewellery and watches, on the other hand, are expected to raise prices above inflation, with bags and luggage predicted to record the highest increase at 4.2%.

Price strategies will play a key role in the year ahead. As per Euromonitor International’s Inflation Projection Tool, Cost of Goods (COGS) increases will moderate in the short term, tempting the industry to recover some of the lost margin during the pandemic years. At the same time, fashion brands would not want to risk volume sales by further increasing prices to consumers, whose budgets have already tightened.

Sportswear and watches to grow the fastest, while footwear is least promising

Sportswear showed remarkable resilience during the pandemic, outperforming overall apparel and footwear in the last three years. Although its growth has decelerated, the trend is expected to continue over the forecast period. Several key factors underpin this resilience, including the greater awareness around health and wellness, the increasing popularity of hybrid lifestyles, the accelerated adoption of casual dress codes across the US, and consumers’ growing preference for comfortable and versatile apparel and footwear.Chart showing US Fashion growth

Wellness is also behind the positive outlook for watches, which is mainly driven by connected watches. An important component of consumers’ wellness journey is the ability (and desire) to monitor their activity and health indicators, which has led to the accelerated adoption of smart wearables post-pandemic.

Wellness trends will continue to shape consumers’ habits and preferences in the US; “health and wellness” is the top area in which they plan to increase their spending

Source: Euromonitor International’s Lifestyles Survey 2023

Footwear, on the other hand, expects another challenging year. These products typically have a longer lifecycle compared with apparel, and consumers already made purchases during the previous surge in demand in 2021. This, combined with the fact that remote or hybrid working remains prevalent, is expected to contribute to the less favourable performance of the category.

As e-commerce appears to have reached its peak, what now?

E-commerce accounted for 41% of fashion sales during the first year of the pandemic, but growth has decelerated since then, suggesting the channel has reached its peak

Source: Euromonitor International

In 2024, sales through this channel are expected to reach approximately 39% share of industry sales.Chart showing US retail fashion sales

Embracing e-commerce was fashion’s initial step into a digital transformation, and by now, most players in the US market have omnichannel at the core of their commercial strategy. The fashion industry commitment to digitalisation and high-tech solutions remains steadfast to provide consumers with seamless online and offline experiences. As already witnessed in 2023, it is expected that Gen AI will be one of the most influential technologies shaping the fashion industry moving forward, as its potential is set to be harnessed across the value chain, particularly in product innovation, marketing, sales, and further enhancing consumer experiences.

Although consumers are expected to remain cautious with their spending in the short term, over the forecast period, fashion is anticipated to return to its normal growth pattern, with digitalisation, wellness and sustainability continuing to shape the industry in the coming years.

(*) Fashion includes the following categories: Apparel, Footwear, Bags, Luggage, Traditional and Connected Watches, and Jewellery

Read our Apparel and Footwear and Personal Accessories US reports for further analysis on the US fashion market.

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