Posting a ‘V-shaped’ rebound from the pandemic, global luxury sales surged 7 per cent to $301 billion in 2021 over 2019 pre-pandemic levels, reveals consulting firm Bain & Co. Sales of luxury players including Chanel and Hermes’ grew almost 30 per cent. However, the impending global economic recession threatens to derail this growth story, explains a Business of Fashion report.  With inflation and interest rests soaring across Europe and North America, rising fuel and food prices are straining household budgets. Primary driver of the luxury industry, the US saw its economy shrink 1.6 per cent Q-o-Q between January-March, indicates the Bureau of Economic Analysis. EU Statistics agency Eurostat figures reveals, inflation in Europe reached its highest levels of 8.6 per cent in June. 

So far, consumer expenditure on luxury items has been resistant to deteriorating economic conditions. This can be seen from the 19 per cent rise in sales compared to the pre-pandemic sales, says Bain. The analysts attribute this to revenge spending after resumption in travel, socializing and travel. 

Luxury’s share in sales declining

However, despite continuing sales upsurge through summer, the share of people indulging in luxury sales is set to decline.  Statistics show, wealthy shoppers tend to spend less when the market is down though the impact of this decline is often less dramatic than other groups.  A few analysts expect luxury sales to be more resilient during the current crisis as lower income and middle-class consumers have been more affected than high-income earners. Previous recessions had affected luxury consumers more than this time, notes Adam Cochrane, Analyst, Deutsche Bank

Distinction between luxury and affordable brands blurs

Yet, luxury sales are not determined by ultra-rich consumers only. Even middle class and aspirational shoppers make up for a significant percentage of this category. Off late, brands have been introducing more accessible products in categories like streetwear, sneakers, eyewear and small accessories to attract these shoppers. 

The distinction between absolute luxury and more accessible brands has blurred as brands are offering products at wider price points, says Federica Levato, Partner, Bain & Co. Brands appealing to higher-income groups are likely to perform better during the current recession while those appealing to aspirational consumers will be the hardest hit. 

Brands with strongest recall to win 

The pandemic made a clear distinction between the winners and losers as companies with strongest brand recall excelled while smaller players struggled. The impending recession is expected to make this this distinction even clearer.

According to UBS, one of the only companies to report positive sales growth during the recession is likely to be Hermes. They also expect positive sales by LVMH while Tod’s and Ferragamo are expected to falter. 

Scale allows luxury players to invest in brand building, especially during difficult times like these, says Daniel Langer, CEO,  Equité and Executive Professor, Pepperdine University. They can play a bigger role in influencing consumers and boosting their emotional well-being, he adds. 

Brands like Chanel are exploring this strategy to tide over pandemic losses. It increased marketing spend by $1.8 billion in 2021. This enabled it to increase revenues by 23 per cent to $15 billion last year. The recession can prove to be a great opportunity for brands to play a bigger role in the industry and invest in winning customers’ trust. 

Better equipped to face difficult times

Depending on how quickly China recovers from the recession, Bain & Co expect the luxury industry to grow between 5 and 15 per cent this year. However, the industry seems to be better prepared to face the crisis than it was in 2008. 

Brands seem to be better equipped to respond to unpredictable demand with shortened lead times and more agile supply chains. They also have a better control over distribution channels, and are strategically reducing dependence on wholesale channels. This enables them to achieve a higher margin on each sales and boost bottom lines. It also enables them to control discounts and encourage full-price sales 

Brands need to also focus on inventory management during times of volatile demand. They need to stock more classic times like bags, shoes and fine jewelry, that can be carried over from season to seaon. This will enable them to retain brand value and be culturally revelant. 

India’s exports of leather and leather products are expected to grow in 2022-23 on account of growing demand for these products in global markets, says the Council of Leather Exports. Changes in global market dynamics caused by the pandemic have created huge export opportunities for the sector. Also with a slew of trade agreements signed and in the pipeline and active support of the government are helping sustain the export growth in the remaining months of this year.

Shipments from the sector rose by 32.5 per cent in 2021-22 from the previous year. The healthy export growth witnessed in 2021-22 is continuing this year also, with export of leather, leather products and footwear increasing in April to May 2022 from April to May 2021. In this period exports to the USA registered a growth of about 78.5 per cent. Shipments to India's largest market Europe too registered a growth of 44.6 per cent during the first two months of this fiscal. Exports to other markets like Canada, Australia, the UAE have also grown this year. Signing of trade pacts with the UAE and Australia are expected to help in further boosting outbound shipments.

More than 200 small mills involved in recycling cotton waste into yarn and fabrics across Tamil Nadu have come together and formed a recycle textile federation called Recycle Textile Federation. Creating awareness among members on the markets where the products and services have a demand is the focus of the federation.

Headquartered in Coimbatore, the federation presently has 230 members representing various mills from Tamil Nadu. The federation has plans to bring together such mills across the country to collectively address the needs of the industry, identify markets in different parts of the world, and direct its members to cater to places that need their products and services.

There are 400 mills in Tamil Nadu that process/recycle cotton waste and PET bottles into yarns and garments, with Coimbatore and Tirupur having 180 such mills. The federation would first strive to bring them together and function as an entity that would represent their common needs and demands and would also go for national and international coordination.

Roica’s partners are presenting their latest innovations at Milano Unica, July 12 to 14, 2022. For instance, Cifra is presenting its innovative garments for men and women, combining fashion and function. The garment design offers a perfect shape with body mapping technology that creates dedicated ventilation zones, for a feeling of comfort and freshness as well as an innovative aesthetic impact. A few of the yarns by Roica’s partners are Roica EF, a sustainable recycled stretch yarn obtained from pre-consumer materials and Roica V550, a sustainable degradable stretch yarn which smartly breaks down without releasing harmful substances.

Roica is Asahi Kasei’s iconic premium stretch fiber manufacturer. Roica is able to redefine performance, sustainability and circularity of stretch, while delivering the style, support and, most importantly, 360° comfort requested by a new generation of consumers. Showing its leadership, the company marks a unique milestone in the world of stretch, enhancing a contemporary wardrobe made of groundbreaking principles that are easily conveyed and transparently visible to the end consumer. Cutting-edge tools such as hangtags provide, through simple and well-designed icons, clear and concise functional information showing for each application the values and performances of each Roica family component: Roica Color Perfect, Roica Resistance, Roica Feel Good, Roica Eco-Smart and Roica Contour.

Global apparel brands are negotiating hard with Indian exporters as cotton prices have fallen 15 per cent and the rupee has depreciated against the dollar. They want Indian apparel exporters to supply garments at the pre-covid level prices.

The impending recessionary pressure in the US and Europe is forcing global brands to negotiate hard with Indian exporters, who have now started looking at other countries like Japan, Australia and Latin America for developing new markets for Indian apparels.

Since the rupee has depreciated against dollar, foreign buyers are driving hard bargains to lower the prices of garments. However Indian exporters can’t give huge discounts despite the rupee weakening because cotton prices have not come down to the 2019 level. As per Narendra Goenka, Chairman, Apparel Export Promotion Council (AEPC), cotton prices have dropped by 15 per cent from the high of Rs 1 lakh per candy (356 kg). It will fall further in the coming weeks.

Raja M Shanmugham, president, Tirupur Exporters Association (TEA) says, global buyers now want garments at the pre-covid prices. For instance, the price of a product that was sold at $7 this year due to high cotton prices, they are now asking for $5, the price at which it was sold in pre-covid times. At best, they can offer a price which is 15 per cent lower than what they are offering now.

The recessionary trend in the US and Europe will impact orders for spring 2023 that are manufactured and shipped between October to March. Exporters are expecting a decline of export orders up to ten per cent for spring 2023, which will impact the second half of the current financial year. This means that the projected garment exports for FY 23 will be missed. Exporters are now looking at newer markets like Japan, Latin America and Australia to make up for the expected losses.

Sonnet Textile Industries, based in Bangladesh, has produced about six lakh pieces of Fifa T-shirts for the Fifa World Cup to be held in Qatar this year. The factory has made the T-shirts on behalf of Fifa-licensed Russian sports chain shop Sportmaster. And this is not the first time for Sonnet which made two lakh pieces of official jackets with Fifa logo for the 2018 Russia World Cup. The apparel maker also received a work order for three lakh T-shirts for the 2020 Euro Cup.

Sonnet established in 2009 amid the global recession and survived on sub-contracting all through 2009. In April 2010, the factory received an order from the US for the first time to baby rompers. In 2010, a group of Russian buyers visited Sonnet and they ordered 2.45 lakh T-shirts. The company then focused on marketing. In 2011, Sonnet received an order from a US buyer that helped it stabilize the balance sheet. With the US order, Sonnet recovered its losses, stabilized its courses and started expanding. It has not had to look back since then.

Now, about 1,800 people work at the three factories. Its T-shirts, jackets, active wear and sportswear are exported to Russia. It exports sleepwear and undergarments to the US. Children's items, rompers and T-shirts go to Italy. Besides, Japan sources various garments for men, women and children from the company.

Japan’s textile and apparel imports in May grew 13 per cent year-on-year and 10.4 per cent month-on-month. Imports from China moved up 15.3 per cent from the same period last year and 21 per cent compared to last month. Japan’s textile and apparel imports in January to May were down 0.1 per cent from the same period last year and 2.7per cent compared with the same period in 2019.

Both in terms of import volume and value, Japan’s textile and apparel import demand recovered in May, showing a large rise, and Japan’s textile and apparel imports value from China was only slightly lower than that of the total imports.

In recent years, the proportion of import volume and value of Japan's textile and apparel imported from China in total imports had a certain seasonal rule, accounting for the largest share in September or October every year, then gradually falling back to a relatively low level in April or May of the next year, and then fluctuating. Japan's textile and apparel imports growth hit a new-2022 high because of the low base in the same period of 2020.

Global denim jeans market is growing at a CAGR of 4.2 per cent. As per a report by Allied Market Research, titled, ‘Denim Jeans Market’, denim jeans market was valued at $56.2 billion in 2020 and is estimated to reach $88.1 billion by 2030, growing at a CAGR of 4.2 per cent from 2021 to 2030. The most recognizable fabric in the world is undoubtedly denim. No other type of fabric has attracted such widespread acclaim around the world. Consequently, the denim industry has been viewed as a lucrative alternative in the mass market.

The Asia-Pacific region is providing lucrative opportunities for growth, owing to a rise in disposable income in emerging economies such as China and India, which has significantly increased the spending capacity of people on clothing for personal grooming, thereby boosting the growth of the global denim jeans market. Factors such as a growing standard of living, introduction of denim jeans with antimicrobial properties, launch of eco-friendly denim jeans, surge in trend of wearing denim jeans in work stations, offices and special occasions, and per capita consumption of the denim jeans are contributing to the growth of the market in more than one way.

Key market players are focusing on product innovations with various designs, patterns, colors, and fitting. On top of that, several fashion influencers on social media and e-commerce platforms are helping the fashion industry to grow with a wide array of denim jeans types such as skinny, tapered, athletic, and regular fit.

India’s exports of leather and leather products are expected to grow in 2022-23 on account of growing demand for these products in global markets, says the Council of Leather Exports. Changes in global market dynamics caused by the pandemic have created huge export opportunities for the sector. Also with a slew of trade agreements signed and in the pipeline and active support of the government are helping sustain the export growth in the remaining months of this year.

Shipments from the sector rose by 32.5 per cent in 2021-22 from the previous year. The healthy export growth witnessed in 2021-22 is continuing this year also, with export of leather, leather products and footwear increasing in April to May 2022 from April to May 2021. In this period exports to the USA registered a growth of about 78.5 per cent. Shipments to India's largest market Europe too registered a growth of 44.6 per cent during the first two months of this fiscal. Exports to other markets like Canada, Australia, the UAE have also grown this year. Signing of trade pacts with the UAE and Australia are expected to help in further boosting outbound shipments.

Even though most apparel sold in the US is made overseas, many designers and brands in the country continue to flaunt their garments as ‘Made in the US’.

As per a Lifestyle Monitor report, the US currently makes 97 per cent of its apparel overseas. This is in sharp contrast to the 1960a when about 95 per cent of the apparel sold in the country were made in the country, says the American Apparel and Footwear Association. However, change in the trade policies in the 1990s led the industry to seek low-cost manufacturing from developing countries. The apparel and textile industry lost 81 per cent of its jobs from 1979 and 2019, shows data from the US Bureau of Labor Statistics. 

Focus on local manufacturing

To control the steep decline in manufacturing activities, American apparel makers and retailers need to focus on manufacturing, according to 61 per cent of surveyed Americans by the Thomas Network. Nearly 45 per cent of them opined, the quality of American products is superior. 

Rob Magness, Founder and Lead Designer, Grown & Sewn, the Brooklyn, NY-based brand, says, the desire to offer American quality fuelled his ambitions to start his company more than a decade ago. Known for its cotton twill and canvas pants and shirts, Grown & Sewn also offers cotton work shirts, T-shirts and a railmen’s-inspired jacket. Its goal is to offer good value to customers through clothes that people wear every day, says Magness.

Around 52 per cent consumers to the 2020 and 2021 Cotton Incorporated Lifestyle Monitor Survey consider it important to buy clothes made in the US. Nearly 38 per cent say, they always or usually check the country-of-origin information before purchasing clothing, according to the Monitor™ research. Another 36 per cent say they check it sometimes while 53 per cent and 43 per cent of women say their clothing choices are often determined by the country of origin. 

Most apparels, sold both online and in-store at Grown & Sewn’s location in Brooklyn, as well as other store locations in the US and Japan, are manufactured at a family-owned factory in San Francisco, says Magness. 

Despite the pandemic, both long-term and newcomer American-made brands continue to operate smoothly. Starting as the Ashland Shirt & Pajama Company in Ashland, PA in 1932, the company metamorphosed into Gitman Bros., a boutique shirt maker, in 1978 and continues to cut and sew its shirts in Lafayette, TN. Its neckwear is made in Pilot Mountain, NC. The company recently presented its collection at the Man/Woman Paris SS23 show. Meanwhile, created by sisters Jakki and Connie Wang, Wee Monster offers kid’s wear designed and produced in Los Angeles. The brand not only creates local jobs but also supports local vendors. 

Local garments over sustainable 

MonitorTM research shows, customers are mostly likely to purchase apparel marketed ‘Made in the US,’ over clothes marketed sustainable, environmentally friendly or recycled. The virtual event held by The Fashion Institute of Technology showcased over 6,500-plus Garment District businesses operating in New York’s garment center. Attendees viewed the offerings of factories in Manhattan including Super Rush Trims, Majo Sourcing and Thready Made.

Some customers’ definitely appreciate Made in USA apparel from brand, says Magness. However, others don’t where the product is made. American brands should just focus on their niche products and clientele and continue to offer them good and consistent products, he opines.