Eu­rope on the verge of re­tail growth, fi­nally! Are the manufacturers ready for the next phase of boom?

Eu­rope on the verge of re­tail growth, fi­nally!

Apparel Online - - Front Page -

Af­ter many years of re­main­ing on the back­foot, the EU econ­omy fi­nally looks to be on an up­ward pro­jec­tile.

2017 can safely be con­sid­ered as the turn­around year for the econ­omy, with pos­i­tive news on many fronts au­gur­ing well for the fu­ture. The re­cov­ery re­mained consistent through­out the year and was in high gear in the fi­nal quar­ter of 2017, as ex­ports grew con­sid­er­ably in Novem­ber and the un­em­ploy­ment rate fell to a mul­ti­year low in Oc­to­ber. Sig­nif­i­cantly, the Fo­cusE­co­nomics panel raised its GDP growth fore­cast for the fourth con­sec­u­tive month and now sees the Eu­ro­zone grow­ing at a strong 2.2% in 2018. Iron­i­cally, the Euro area econ­omy is en­joy­ing the strong­est pe­riod of eco­nomic growth in more than a decade, de­spite lin­ger­ing po­lit­i­cal un­cer­tainty. Ac­cord­ing to the re­cently re­leased –The Fo­cusE­co­nomics Euro Area Re­port – Ire­land, Latvia and Malta are fore­cast to be the fastest-grow­ing economies in the Euro area this year, ex­pand­ing at rate of 3.8% or above. Con­versely, Italy will be the re­gion’s slow­est-grow­ing econ­omy, with a fore­cast of 1.4%

growth. Re­gard­ing the other ma­jor economies in the re­gion, Spain will out­per­form the rest, with a 2.7% ex­pan­sion. Ger­many’s econ­omy is seen in­creas­ing at 2.3%, fol­lowed by France’s at 2.0%.

The re­tail sce­nario in the Western and Eastern part of Eu­rope are poles apart. While the value of the to­tal re­tail mar­ket in Western Eu­rope in 2017 reached around

2.6 tril­lion eu­ros, the re­tail mar­ket in the Eastern part only reached 565.6 bil­lion eu­ros, a note­wor­thy dif­fer­ence, though both are on a growth path. It can­not be over­looked that the west of Eu­rope has many pros­per­ing coun­tries, such as France and Ger­many. The mar­ket value of re­tail­ing in Ger­many alone cov­ers one fifth of the to­tal re­tail­ing in Western Eu­rope, and when com­bined with France, the to­tal re­tail­ing ac­counts for nearly half of the whole of Western Eu­rope. The main growth in re­tail has been com­ing from online sales. A re­port by For­rester pre­dicts that online re­tail sales will grow at an av­er­age of 11.3% per year over the next five years in Western Eu­rope. Italy and Spain will see the fastest online sales growth, and by 2022, 20% of non-gro­cery re­tail sales will be online.

Emerg­ing mar­kets in Eastern Eu­rope such as Ro­ma­nia, Poland and Slo­vakia have rapid growth rates for GDP at over 3%, but they are com­ing from a lower base than more ma­ture economies in Western Eu­rope and pay lower wages. A fact to be con­sid­ered is that go­ing for­ward these mar­kets will be at­trac­tive to manufacturers who can com­pete on price. So Eastern Eu­rope may de­velop as a con­ducive man­u­fac­tur­ing base for Western Eu­rope in the next decade. Also those manufacturers that are fast and flex­i­ble sup­pli­ers op­er­at­ing close to Eu­rope with a ver­ti­cal sup­ply chain will have a good chance to con­nect with re­tail­ers who buy short runs of on-trend prod­ucts with a view to sell­ing out be­fore hav­ing to re­duce prices.

In the mean­while, manufacturers from other sourc­ing des­ti­na­tions look­ing to ser­vice the im­prov­ing re­tail sce­nario in Eu­rope have to be very care­ful in ap­proach­ing the mar­ket. So, what are the fac­tors that can im­pact growth for ap­parel re­tail…? For one, prod­ucts must clearly stand out from the rest be­cause of their de­sign, ori­gin, pro­duc­tion tech­nique in­volved or story be­hind them. There are op­por­tu­ni­ties in sports­wear and ath­leisure cat­e­gories, with gar­ments of­fer­ing per­for­mance ben­e­fits such as breatha­bil­ity, mois­ture wick­ing, mul­ti­way stretch, or wa­ter­proof, quick-dry and smart fab­rics that can mea­sure body met­rics, hav­ing a def­i­nite edge over reg­u­lar gar­ments. Re­tail ex­perts are of the opin­ion that coun­tries that ben­e­fit from Eu­rope’s Gen­er­alised Scheme of Pref­er­ences (GSP), will be pre­ferred, pro­vided they com­bine this as­pect with highly ef­fi­cient pro­duc­tion in or­der to of­fer a cost price ad­van­tage over com­peti­tors in non-duty-free coun­tries or a bet­ter prod­uct at an equiv­a­lent price level. Fur­ther, while coun­tries in Eu­rope may show sim­i­lar macro-trends, the com­pet­i­tive land­scape is unique for each one. The best way to find out which coun­try matches the of­fer­ings that a man­u­fac­turer may have, is to con­duct de­tailed re­search on each coun­try, look­ing at prod­uct seg­ments and price lev­els.

The se­cret of fu­ture growth of business in Eu­rope is to de­velop styles that can be par­tially pre­pared in ad­vance and are only fin­ished ac­cord­ing to the fi­nal con­sumer re­quest, pos­si­bly at an­other lo­ca­tion closer to the point of sale. The re­al­ity is that if a man­u­fac­turer can of­fer the flex­i­bil­ity of shorter pro­duc­tion runs and/or quicker lead times, such of­fers are in high de­mand. This strat­egy can help to meet the grow­ing con­sumer in­ter­est in cus­tomi­sa­tion and pre­mi­u­mi­sa­tion.

An­other im­por­tant di­rec­tion is to im­prove sus­tain­abil­ity per­for­mance. The race is on to in­dus­tri­alise the re­cy­cling process and to cre­ate a cir­cu­lar econ­omy for cloth­ing. The bot­tom line is that Euro­pean re­tail is fi­nally look­ing up and ap­parel con­sump­tion in the re­gion is fore­cast to grow to ¤ 372 bil­lion by 2020.

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