Here’s another opportunity that department stores can’t capitalize on
The retail sector may finally emerge from its crisis caused by COVID. However, it is only bouncing back in a pre-pandemic headwind that still hits thousands of stores a year. Indeed, the headwind may even be accelerating in light of the latest sartorial trend: personalized clothing. Deloitte estimates that personalized apparel could represent up to 30% of the apparel market by 2030. The proliferation of new printing and fabric manufacturing technologies has already brought some brands into the industry, but we don’t. ‘We are still in the early stages of the movement. .
The bad news: even the most iconic physical store chains like Macy’s (NYSE: M) and Nordstrom (NYSE: JWN) are not well adapted to this change, adding to their current plight.
Cut from another fabric
You may already be part of this paradigm shift. Denim brand Levi’s (NYSE: LEVI), for example, allows online shoppers to choose laser engraved designs, custom colors and embroidered text for clothing online order. Sportswear brand Nike (NYSE: NKE) allows consumers to design their custom shoes from scratch, choosing their own combinations of colors, sole shapes and style. Amazon launched Made For You in December, offering consumers a way to design a t-shirt with a custom fit and color. Even a funky foam clog company Crocs (NASDAQ: CROX) takes action by letting its e-commerce customers choose the pins they want to adorn their shoes.
None of these advancements are life-changing for the apparel industry, but these customization options are part of a powerful trend that will only get more powerful as time goes on. Deloitte’s take on the custom clothing trend explains:
[W]While only 15% of consumers said they tried on personalized clothing in 2019, 33% said they expected to try them on in the future. Based on our analysis of how quickly emerging business models have been adopted in the past, we estimate that players offering fully customizable clothing could claim 10-30% market share by 2030.
Deloitte specifically attributes technological advancements as the primary driver of this trend. The capabilities of offering personalized clothing to the mass market simply did not exist until now.
Stores are not suitable for the shift
To their credit, department stores are also improving their games when it comes to providing more personalized service.
Take the aforementioned Macy’s for example. Most stores offer tailoring services, and shoppers can delegate the work of selecting new outfits to personal stylists. The company also makes it a point of honor to relocate certain stores in the mall to affluent residential areas and to equip the locations with new engagement technologies.
Nordstrom does even more with the idea of meeting customers where they are the way they want to be met. Its “Nordstrom Local” initiative calls for small gas stations closer to people’s homes, offering pickup of orders, changes and more without requiring a buyer to visit a mall. A clothing making service would be a natural extension of this existing presence. Deloitte even says retailers will see an opportunity in the personalization trend as it allows stores to buy fewer products that end up being branded to get them out.
However, seeing an opportunity and being able to seize it are two different things.
The biggest hurdle that department stores can face on this front is cost. Fabric laser engravers and industrial 3D printers can cost thousands or even hundreds of thousands of dollars apiece, for example, and their operation requires training. This is also another function that already stressed brick and mortar stores are expected to fulfill, requiring more employees and more square footage that could be used in other ways. A chain of stores could certainly centralize the production of these garments at a remote facility, but Levi’s and Amazon have already done so.
Even beyond the cost, however, department stores still face the long-standing challenge of maintaining their relevance. As important as e-commerce has become, Digital Commerce 360 estimates that less than 40% of clothing spending in 2019 was made online. Apparel market research firm Common Thread Collective predicts that this proportion will reach 60% globally by 2024. In absolute terms, the size of the online fashion market is expected to reach $ 953 billion. by 2024, doubling the 2018 total of $ 439 billion.
Conventional department stores remain too distracted by a larger war with e-commerce competitors to devote significant resources to the custom clothing movement.
Sew it all together
The conclusion for investors is not obvious. While custom clothing is a great brand builder for players like Amazon and Nike, the budding market isn’t likely to shake the tax needle much for either company. Likewise, department stores are not inclined to use personalized clothing to make one. turn around tool.
Nonetheless, it is a development that investors should keep in mind. On the off chance that a brick and mortar name like Nordstrom is able to plug into the trend and merge it with existing services, it could indeed be a growth engine. The most likely opportunity for investors, however, will likely be offered by a brand that caters directly to consumers, or even companies that provide the equipment needed to manufacture custom clothing.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.