The clothing industry has two sides in which shops with an appealing location or attractive website can quickly see the turnover growing, while the rest has a hard time. This is the conclusion of ABN AMRO and Locatus in a Tuesday-published survey that combined turnover data with data on locations.
The industry is just partly able to benefit from the economic prosperity. For instance, the combined sales of retail and online sales in 2018 only increased by 2 percent.
The gap in the sector is large, the researchers report. For instance, one in five clothing stores grew by more than 10 percent last year, while more than half of the stores saw sales decline. By as many as a quarter of the retailers, the decline in turnover was even greater than 10%.
Small margins in the clothing industry
A decline in turnover means a substantial profit drop for clothing retailers, because the margins in the industry are very small.
For example, the business result margins for fashion items for individual target groups such as men, women or children are on average 3 to 4 percent, while those of lingerie stores only amount to 2 percent. For shops with a mixed target group, the margin is even negative on average.
ABN AMRO’s forecast for the industry is that the average growth is still falling this year. This is based on the disappointing turnover of the researchers, with more than half of the entrepreneurs seeing a decline in the first quarter.
The researchers expect the dichotomy between successful and less successful entrepreneurs this year and in 2020 will increase.
Quality remains important, but more is needed
The strong differences depend on an important part with visibility, both in the shopping street and on the Internet. Quality and service remain decisive for success, but according to researchers, more is needed to realise turnover growth.
In Amsterdam, Rotterdam and The Hague it turned out last year that a busy and visible location is very good for turnover growth. Clothing stores have achieved 7 percent turnover growth here. If these cities are not counted, the turnover growth in the Randstad provinces decreased.
Moreover, not only does the Randstad achieve turnover growth: Retailers realised 3 percent growth in the north. In Southern Provinces It is more difficult and the turnover decreased by 7 percent. This is possible because there are considerably more shops in the south.
Influence of A-locations on turnover
Also within a region there are variations in locations, which can make the difference between growth, downtime or shrinkage. Consumers seem to have a lot more eye for shops at A-locations, where between 75 and 100 percent of shoppers are passing by.
In 2018, a staggering 44 percent of all ‘ offline ‘ sales were achieved by stores In such locations, while only 21 percent of the stores were located In such a place. This means that a store’s turnover is tripled by an A-site on average. The turnover per square metre is even more than four times higher.
The online turnover also grew strong and was even the cause of the overall growth of the industry. If this turnover is not counted, there would have been a 5% contraction instead of the 2% growth.
Stores that get less than 10 percent of sales from online sales saw their turnover decrease by 5 percent in 2018 on average. The entire clothing industry achieves 15 percent of the turnover from web sales. According to ABN AMRO, that share in 2019 and 2020 will only increase.
By: NU.nl
