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How Does Fashion Retail Look in Latin America Post-Pandemic?

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Fatima Linares Bio
Roberto Ramirez Profile Picture
Roberto Ramirez Bio

Despite the challenges faced since the pandemic, the Latin American fashion industry has proven to be resilient. By 2022, sales had surpassed 2019 levels, both in dollar and unit terms.

The pandemic brought retail shifts to the regional industry benefiting retail e-commerce the most: this channel’s share jumped from 5% in 2019 to 14% in 2023. However, physical stores are still appealing to consumers in the region, forcing brands to carefully think their omnichannel strategies.

E-commerce will continue gaining share, but at a slower pace

Before the pandemic, buying certain categories such as jewellery or even apparel and footwear online was not the first option for most Latin Americans, either because they wanted to try the products first, due to the overall low penetration of e-commerce, or because of low levels of financial inclusion which made digital payments difficult when shopping online.

Since the pandemic, diverse online strategies have captured the attention of Latin American consumers, with social selling being the most accepted, as shifting to WhatsApp, Instagram or Facebook to buy their fashion items was the fastest route to online shopping. Additionally, affiliate marketing has evolved into an effective technique for product launches, through collaborations with bloggers and influencers to promote products. E-commerce has gained share across categories, and it is expected that brands will reap the benefits from the online infrastructure put in place during the pandemic and the consumer gaining confidence shopping online.Chart showing Growth/Decline of Fashion Sales by Channel, 2015-2019 and 2019-2023Fashion sales through e-commerce peaked at 16% in 2020 and thanks to its explosive growth over the last four years, the channel has become the second largest in the region, only behind specialist retailers. In this sense, department stores in the region invested in their omnichannel strategies, developing marketplaces and shortening their delivery times. Mercado Libre, Dafiti, and Falabella are positioned as the most relevant marketplaces for fashion in the region.

Once pandemic restrictions were lifted, consumers returned to physical stores and e-commerce growth started to slow down. We expect this channel to continue growing, but at a slower pace, 7% over 2023-2028, to account for 17% of fashion sales in the region by 2028. To sustain the dynamism, it is important for brands and retailers to incorporate new technologies and maintain the pace that is occurring in other regions and is attractive to the local consumer, with AI and hyper-personalisation expected to gain more relevance in 2024.

The entrance of Shein boosts fast fashion (and e-commerce) sales in the region

Chinese ultra-fast fashion brand, Shein, has been the biggest winner since the pandemic. Its sales grew by over 800% since its entrance in the region in 2019 to reach over USD2 billion and to rank number five in the Latin American fashion market by 2023.

The main reason behind the brand’s success is affordability, but also its ability to quickly respond to consumers’ changing needs. In 2022, Shein launched its pop-up stores initiative in Mexico, which showcases how the brand, a digitally native one, understood how stores are relevant for consumers in the region. The ephemeral format was initially launched in Monterrey, León and Mexico City, but has been extended to other regions since then due to its success.

Chart showing Top 10 E-Commerce Retailers in Apparel and Footwear, 2023 Sales and 2019-2023 CAGRIn April 2023, the brand announced plans to localise its manufacturing in the region by creating production hubs in Brazil and Mexico, reinforcing the relevance of Latin America for the company. The company plans to ship Brazil-made products around Latin America from 2026 onwards, which is expected to further help its position in the region, making it a strong competitor in the coming years.

Physical stores dominate sales, but their role is set to evolve

Physical stores remain relevant in the region. Per Euromonitor’s Voice of the Consumer: Lifestyles Survey, fielded January to February 2023, “see or try before buying” and “immediate purchase” remain top motivations, selected by 44% and 41% of fashion consumers, respectively. However, the relevance of these factors has been decreasing since the pandemic, dropping by eight and five percentage points, respectively, in the last five years.

Consumers expect more from the stores, and retailers have understood the message and are re-evaluating the role of the stores. Per Euromonitor’s Voice of the Industry: Retailing Survey, fielded in June 2023, turning these spaces fully or to some extent into small fulfilment centres is among the most common expected changes for retailers in the region.Chart showing answers to the question : As your company re-evaluates the role of the store, what changes are you exploring with store formats? % of respondents, Latin AmericaWhen thinking about the renewed role of the stores, consumer experience is at the core of future strategies.

61% of retailing professionals in the region mentioned that building out more experiences to elevate the brand experience is the top planned change for their companies for the coming years

Source: Euromonitor International Voice of the Industry: Retailing Survey, fielded June 2023

In response, many brands have incorporated technologies into their stores to attract consumers, such as VR, AR and click and collect.

Retail shifts are expected to continue in the region as omnichannel is the path forward. Retail 3.0 will continue to be the focus, where both specialists and department stores will need to rethink the concept of the physical store, turning them into customer loyalty centres, logistics hubs, service centres, and experience hubs, considering that inflation still keeps demand contracted in several countries in the region. Brands must meet consumers wherever they are while ensuring seamless experiences both online and in the stores. E-commerce will continue to gain relevance, but physical stores are expected to maintain their enduring importance in the region.

Learn more about retail, fashion, and Latin America in our report: Retail Shifts in Latin American Fashion.

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