EUROPEAN APPAREL MARKET - SUMMARYImportadores y Distribuidores

Lex van Boeckel – Searce March 2013

CONTENTS

THE EU APPAREL MARKET

Market size

Market differences

Fast fashion

Apparel sub-sectors

Knitted and woven clothing

Price levels

Trends and Future

Opportunities

– EU apparel market € 311 billion in 2010.

– Europe (27 countries) is the largest apparel market in the world.

― 30% of the global market. – Europe (EU 27) is followed by:

• North America (USA + Canada) - 29%,• Asia Pacific (including Japan) - 27%,• Latin America - 6%• Other regions - 7%.

THE EU APPAREL MARKET SIZEApparel

– More differences than the USA.

– EU market is hightly fragmented and competitive.

– Diversity in outfits in the North, West, South and in the East being related to climate and culture.

– Germany is the largest market.

– Italy, France, UK leaders in fashion trends.

– Consumer spending on clothing:• German consumers spent around 4.4% of their total expenditure.• Danish consumers spent 5.6%• Polish consumers spent 2.2%.

THE EU MARKET DIFFERENCES Apparel

People in the West and North are relatively more detached.

― Women are more emancipated by wearing what they want. (mood or situation)

― People in the North are more relaxed. The climate can be extremely cold (-15 – 25) with many wet seasons (snow & rain) often they wear comfortable, practical (waterproof) clothing.

Dress codes at work are more casual. Formal - classics with a twist.

– Women dress up for special occasions or when going out.

– Consumers here are well aware of sustainability issues (transparency).

EU APPAREL MARKET DIFFERENCESPeople in the West and the North

People in the South are more extravagant, leading a more ‘Bourgondian life’

― There is more a ‘flirt culture’ women are dressed more feminine men are dressed in style.

― In Italy, France and Spain designs are very diverse.― There is more personalisation by designs, brands and lively colours.― Less ‘mainstream fashion followers’.

Brands here have a long tradition and a good reputation.

― But large difference between people in cities and on countryside.

EU APPAREL MARKET DIFFERENCESPeople in the South

People in the East are rather practical in their choice of clothing.

― Younger people are attracted to western style clothing.

― New countries increasingly exposed to western clothing chains, hypermarkets, factory outlets and second-hand outlets (e.g. Zara).

― Big mainstream brands are very important = high quality.

Wages are still much lower

― Formal clothing styles are quite pronounced sometimes regarded as ‘kitsch’

EU APPAREL MARKET DIFFERENCESPeople in the East

Mainly for teens, tweenies (pre-teens 8 – 12 years), young people: ‘Standardized outfits’o Fashionableo Low in priceo Heavily promoted

Product development is vital o up to 6 collections per year – or moreo Many teens want to look like adults and stars.

Fast fashion retailers: Inditex, Vivarte, Mango, H&M, Bestseller, Esprit, Next, Arcadia, Benetton, C&A, etc...

28,000 (fast) fashion chain outlets in Europe o incl. clothing discounters e.g. Primark, Takko, Kiabi, Gémo...

Independent fashion stores offering medium-high range, non-mainstream fashion – many have a difficult time now.

FAST FASHION IN THE EU Apparel

• KNITTED AND WOVEN CLOTHING Largest sub-sector covering trousers & shorts, shirts & blouses, T-shirts, jerseys & cardigans, dresses & skirts, suits & ensembles, jackets, blazers & coats.

• LEATHER CLOTHING Jackets, coats, belts, gloves, trousers, leggings, shorts, skirts, dresses and vests.

• BODYWEAR Underwear, intimates incl. lingerie & shapewear, bras, night & indoor wear and hosiery.

• BABYWEAR Baby jackets, coats, romper suits, vests, pants, napkins, gloves, mitts and mittens.

• SPORTS CLOTHING Anoraks, tracksuits, swimwear, beachwear, special sportswear (fitness, racket sports, teamsports, snowsports, golf), outdoor sports.

EU APPAREL MARKET SUB-SECTORS

EU APPAREL MARKET SUB-SECTORSShare by value

EU APPAREL MARKET SUB-SECTORSDevelopment 2006 - 2010

EU APPAREL MARKET SUB-SECTORSKnitted and woven clothing

PRODUCTION• Around € 74 billion of knitted & woven clothing was made in Europe (Italy, France, Germany, Spain, Portugal, UK, Denmark, Poland, Romania and Bulgaria). • Most was exported to the EU countries and to the BRICS-countries.

• Due to more outsourcing (Asia), the number of medium-large sized textile companies has decreased in the past two decades to 47,000 (2010).

• Main importing manufacturers/brands were: Adidas, Valentino Fashion (Hugo Boss), Benetton, Triumph, PPR/Gucci (Puma, Gucci), Bestseller Group (Vero Moda, Jack & Jones, Only), Only the Brave (Diesel), Pentland (Speedo, Elesse), LVMH (Louis Vuitton, Fendi, DKNY)...

MAIN SUPPLIERS (2010) EU imports € 95 billion (55% from DCs)• China (import share was 25%), Turkey (8%), Bangladesh (6%), India (4%), Morocco (2%), Tunisia (2%), Vietnam,

Indonesia, Pakistan, Sri Lanka, Cambodia and Egypt...

• Fast growing: Albania, Moldova, Mexico, Philippines, Laos, Honduras, Colombia, Nepal, Mongolia and Armenia.

• Other EU countries, USA, Canada and Asian countries such as South Korea, Taiwan, Malaysia, Singapore are excluded here .

SUB-SECTOR - KNITTED AND WOVENEU Apparel – Product and Main suppliers

There are in Western and Northern EU countries five different price-quality levels

– The low-middle segments taking up high share of the EU apparel market. – Lower segments are more represented in Eastern EU countries.

EU APPAREL MARKETPrice levels

Segment Share Description Examples of prices

High price luxury segment

4% High quality, designer brands, exclusive, trend setting

Dolce & Gabbana: Dresses €245-€1,750; Tops €135-€995; Sweaters €160-€395

Upper middle price segment

12% Branded, high quality, good choice of designs, well-made

Hugo Boss: Dresses €149-€599; Tops €29-€195; Sweaters €99-€249

Middle price segment

32% Good to medium quality, trend following, well-known high street brands

Diesel: Dresses €35-€180; Tops €16-€110; Sweaters €30-€85

Low to middle price segment

41% Produced in larger quantities, more basic styles and fitting, medium quality, less fashionable

Marks & Spencer: Dresses €15-€69; Tops €5-€40; Sweaters €18-€185

Low or very low price segment

11% Produced in large quantities, low quality, unbranded

• Fast fashion is still rising - clothing retailers and hypermarkets still expanding. Especially in the new EU member states.

• Pressurized margins for all actors in the value chain. - Fickle consumer demand - Growing competition retailers - Oversupply of cheap imports - Increased cotton prices - Rising wages China.

• H&M and Zara are still doing well - compensation by new business in Asia – and by diversification in e.g. home furnishings.

• However - Fast fashion is slowing down:o Changing consumer behaviour & confidenceo Growing fatigue to keep up with trends.

• Move away from mainstream fashion.

• Boho style and Vintage still popular.

• Trading up to better quality clothing that is comfortable and lasts longer.

EU APPAREL MARKETMain Trends

Aging population (in 2020 – 50% will be OVER 50 years) new variations .• Consumers are:

more individualising more professionalising more influenced by media more participatory – they want to interact more with producers, retailers and ‘tailor-made’. more keen on prices – value for money. Private label quality has improved – Germany. claiming more for social and ecological responsibility. Ethical fashion market was € 10 billion in the USA and around € 1 billion in the EU (UK, Germany, Scandinavia, Switzerland, Netherlands, France and Italy).

The Eastern EU markets are still expected to show growth due to a growing middle class and expansion of chains.

EU APPAREL MARKET The Future

• Around 100 countries supplied the EU with clothing and textiles in 2010.

• Countries in Latin America produced less than 5% of the EU’s apparel supplies Big challenge!

• Smart combinations of Fashion – Comfort and Convenient/Functionality.

• Fashion accessories (shawls, hats, gloves..) that go well with your e.g. dresses collection.

• Clothing for the plus size segment.

• Diversity in the European consumers (immigrants) and the growing tourist market (China, Russia)

• Eco and Ethical fashion e.g. by using organic cotton, sustainable principles within the whole value chain incl. fair trade practices. More variation in styles !

• On-line sales are still increasing due to busier lifestyles, new small entrepreneurs in on-line selling. Internet connections are still expanding.

EU APPAREL MARKETOpportunities

Good comprehension of your market potential and key target markets and assessment of your risks and weaknesses (SWOT analysis).

As the EU market is quite diverse focus on one country - or a cluster of countries.

Clever product/market combinations based on a good knowledge of the market. We will give an example on the German market for women’s control underwear.

Don’t just compete on price as the Asian countries do.

Strategy: Know how to (co-) design, assess future trends within your target market (seasonal, short terms, long term), choose the right channel, sizing, pricing and promotion.

Supply: If you supply to fast fashion retailers try to be geared up to make short runs, do more preplanning and use collaborative software with your customer.

EU APPAREL MARKET Key Succes factors