Back to Basics: What Does it Mean for the Apparel Industry?

Having always been a dynamic and ever-evolving sector, apparel business owners will need to adapt with changing consumer preferences, technological advancements, and economic fluctuations. It is extremely crucial for brands to stay ahead of the curve and adapt to the shifting market landscape. Recent data has shown that the industry has witnessed a growing trend towards simplicity and a return to basics.

This back-to-basics approach has gained momentum as consumers seek timeless, versatile, and sustainable clothing options. Brands are reinvigorating their portfolios as they are employing to thrive in this new era.

KEYPOINTS

Why are consumers buying more basic and casual wear?

• Increased unemployment rates seen in early November 2023 is having a direct effect on how consumers approach their spending
• Now, more than ever, there’s an elevated awareness in shopping habits, with a notable shift towards seeking greater bargains and discounts.
• Luxury retailers are deeply impacted as well. There’s a noticeable pullback from upscale shoppers, resulting in decreased sales in the luxury sector.
• This shift is likely to alter the product lineups and promotional tactics of high-end brands.
• Kering’s portfolio, including brands like Gucci, Saint Laurent, Bottega Venetta, and others, experienced a downturn in North America during Q3, with each brand showing negative growth.
• The wholesale revenue for these brands in Q3 ranged from -17% to -38%, which can be succinctly described as extremely disappointing.

The answer is clear and simple. When you have other priorities to focus your income on, with the increase of loan rates, mortgage and car debts are all on the rise, luxury apparel that has little or maybe no value in the long run is no longer your key expenditure. So where do you go? You go back to square one – basics!

• Apart from that, the back-to-basics movement is also a response to the fast fashion frenzy that dominated the apparel industry for years.
• Consumers are increasingly concerned about the environmental impact of disposable fashion and are seeking alternatives that offer longevity and sustainability.
• This shift in consumer mindset has created a demand for high-quality, timeless pieces that can be worn for years to come.
• Brands that embrace this trend and offer classic, well-made garments are reaping the benefits.

To succeed in the back-to-basics era, brands must reinvigorate their portfolios by focusing on several key areas:

• Strengthening brand identities: One of the primary goals of the back to basics approach is to elevate and energize lifestyle brands
• Companies can resonate with consumers across geographies and demographics: Invest in their most powerful asset – their timeless iconic pieces
• Creating trend-right product assortments with clear points of view
• Delivering engaging omnichannel experiences
• Implementing innovative marketing strategies: This elevation work involves evolving product categories, product mix, and shopping experiences to create excitement and desirability.

Ralph Lauren’s Driving Growth Through Core Products

Taking Ralph Lauren’s customer-centric approach as a key example, their strong brand identity and the strength of their core products are the heart of its success.

• By understanding consumer preferences and delivering exceptional customer experiences, the brand has built strong connections with its target audience.
• Through personalized marketing activations, targeted promotions, and robust customer service, Ralph Lauren continues to enhance customer satisfaction and loyalty.
• However, the main factor for the success of Ralph Lauren in these trying times is the strong brand identity and how they maintain the quality of their core products.
• Core products represent the foundation of a brand’s offering: Have the quiet luxury to withstand changing trends and appeal to consumers seeking timeless classics.

We continue to invest in our brands for the long term, and we’re seeing consumers respond to that. The second point, which is actually quite important during challenging periods like this for consumers is our iconic core products anchor us think beautifully made casual wear sweaters, maybe blazers, tweet jackets, Oxford shirts, really the foundations of a wardrobe.

And these timeless products deliver through cycles and when things get more challenging, we know consumers tend to gravitate back to core products, products, and brands they know and trust.

Patrice Louvet, Ralph Lauren CEO

• Ralph Lauren’s core products, such as cable knit sweaters, jackets, and heritage tweed blazers, have experienced high single-digit growth in Q3 2023.
• These iconic pieces have resonated with consumers, underscoring the importance of core products during challenging times.

The Gap Inc. Exceeded Q3 Expectations with Fun, Fashion, Value

• The Gap Inc., a family destination known for its quirky, fashion-forward, and affordable clothing, has successfully reinvigorated its brand by focusing on a clear brand positioning in the value space.
• The brand offers every day, basic and casual wear for the whole household, from infants to adults at an extremely affordable price point has been able to resonate with consumers, especially in trying times.
• Product assortments has improved, striking a balance between essentials and exciting new trends.

• Through innovative marketing campaigns and a compelling pricing strategy, The Gap Inc. has regained a powerful stand in the apparel conversation.
• The brand’s efforts have resulted in market share gains and a positive comp for the quarter.
• Adjusted operating margin improved to 6.8%.
• The company ended the quarter with a strong cash balance of $1.4 billion, generating over $500 million in free cash flow year-to-date.

When you look at, what we talk about in terms of trend right products, I think that we’ve done a good job and arguably a very good job with providing what we call the needs. And in that case, it’s providing great basics. And what we have to do a better job of is creating the wants. And that’s where sort of the interest comes as a fashion brand, complementing our assortments with interesting, various different ways that we could leverage trend. Currently, we see trends like cozy, the sweater category working.  

Richard Dickson, The Gap Inc. CEO

When the mentality of consumers is increasingly focused on value and sustainability, reflecting a shift towards more conscientious purchasing decisions, it is no surprise that brands under The Gap Inc. like Old Navy and Banana Republic, a brand that offers confident, trend-right assortments at optimum pricing has exceeded expectations by a pleasant surprise.

The Terrace Trend: A Game-Changer for Adidas

• Brands like Adidas are setting high standards in adapting to the change of consumer preferences and market dynamics.
• In the Q3 earnings call, Adidas highlighted the terrace trend as a significant factor in their brand’s recent success. The popularity of these styles has contributed to increased sales and market share for Adidas.
• Revenue of $6.42 billion showed a marginal year-over-year increase of 0.14%, exceeding expectations by $155.67 million.
• The terrace trend refers to the resurgence of retro-inspired styles that originated in the soccer terrace cultureof the 1970s and 1980s.
• Adidas is now leveraging this trend, characterized by the popularity of styles like the Samba, Gazelle, and Spezial, has been pivotal in turning the brand around lately, and have become highly sought after in recent years.

• In addition to the terrace trend, Adidas has identified another style that is gaining popularity in the fashion world: the Superstar. This iconic sneaker, especially in Black, White, and Triple Black colorways, has become a staple in streetwear and fashion circles.
• Adidas plans to focus more on this style in the future, taking full advantage of its popularity to drive sales and brand recognition.
• Adidas understands the importance of staying ahead of consumer preferences and market dynamics. By continuously developing new silhouettes, designs, and colorways, while maintaining the identity and persona of the brand, Adidas aims to capture the attention and loyalty of its target audience.

As the apparel industry continues to evolve, brands like Adidas are leading the way in adapting to changing consumer preferences and driving growth through strategic product development and brand positioning.

The future looks promising for Adidas and the broader apparel industry as they embrace new trends that focus more on staple wear with basics in mind and also casual styles that will continue to meet the ever-changing demands of consumers.

American Eagle Outfitter’s Shows Promise

American Eagle Outfitters, commonly known as American Eagle, a brand that specialises in casual clothing, accessories, and footwear shows promise in Q3.

• Increase in gross margin to 41.8%
• The company’s outlook for the holiday quarter is solid, with expected revenue growth and operational improvements. The raised fiscal 2023 guidance anticipates mid-single-digit revenue growth.
• American Eagle Q3 sales were strong, with record net revenues of $1.3 billion and Aerie brand revenue up 12%.

Looking Ahead

• The main challenges impacting most companies include decreased consumer traffic due to macroeconomic headwinds and rising cotton prices.
• These factors have continued to exert financial pressure and most companies have acknowledged this.
• Cotton price hike will effect the pricing of apparel as companies will no longer be able to absorb the increase in price of raw materials and overhead costs.
• Financial pressures are expected to persist in the coming quarters.

The big question is, as business owners, what can be done?

• Speed and Light Stock Levels: Aim to keep less inventory on hand and respond more swiftly to changing trends in the market.

• Increasing demand of fleece! Big businesses have repeatedly mentioned the uprising call for fleece.
• Under Armour has talked about Unstoppable Fleece.  A collection that will centre around fleece clothing, which is known for its warmth and comfort.

As the apparel industry continues to evolve, embracing a back to basics approach will be crucial for brands looking to thrive in a competitive landscape. By prioritizing customer satisfaction and consumer needs, streamlining operations, and focusing on core strengths, companies can position themselves for success in the new era of the apparel industry.

Low-income consumers are generally more worried about the inability to pay rent, debts, mortgages, while the upper income consumers are having concerns about their investments, the political environment in the U.S. and geopolitical conflicts. By elevating their brands, driving growth through core products, and responding more strategically to consumer’s demands and needs, companies can navigate a rapidly changing market landscape effectively and successfully.