Euro Apparel Fashion Goes Off the Rail

Across the progressively enlarging EU, per capita spend has barely risen despite the fact that average earnings have increased. Europeans are finding the allure of technology (the latest TVs, MP3 players, mobile phones and computers of various shapes and sizes) and property, increasingly attractive. Verdict says that the combination of space growth, an aging population and muted fashion trends have helped to dampen the attractions of fashion: increasingly, consumers are making do with what they already have in their wardrobes.

While growth across the EU as a whole is extremely unexciting, this is far from being a uniform picture. The biggest and most sophisticated markets of Germany, the UK, France and Italy are showing some of the flattest demand patterns. However, a very different story emerges from the smaller and often more recent recruits to the EU. There is a clear message to the expansion-hungry fashion retailers from the more mature markets: if you want to be able to move into the fast lane of retail sales growth, you may well have to look to the East where the growing EU fashion markets are less saturated and consumer appetites have yet to be sated.

Verdict Research reports the average spend per head on clothing in EU member states was £ 430 or € 630 in 2006, creating a total market value of £ 199 bn or € 292 bn. But the amount the average person spends varies dramatically by country.

In Slovakia, for example, average spend per head is just £ 71 (€ 104) – the lowest in the EU – however this figure is growing quickly. Since 2001, annual clothing expenditure per capita has risen by an extra £ 19 or € 27 per person – more than 25 %.

Meanwhile combined clothing sales through the ten new member states (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia), jumped by more than a fifth between 2001 and 2006, from £ 6.4 bn or € 9.3 bn to £ 7.7 bn or € 11.3 bn.

Among the major markets, Italy upholds its reputation for style with top spend at £ 602 or € 883 per person followed by the UK at £ 556 or € 815. However, it seems Italians have revised their budget. When compared to the UK for example, where average spend per head has risen by £ 38 or € 55 over the last five years, in Italy the figure has actually fallen by £ 19 or € 28 from £ 622 or € 911.

Slow or negative growth is evident across all the six major EU clothing markets: Between them, these countries account for £ 4 out of every £ 5 spent on clothing in the EU, but combined sales in these markets rose by just 3.9 % in the five years to 2006. As a result, retailers in the top six markets - Germany, Italy, the UK, France, Spain and the Netherlands, are increasingly looking abroad for new opportunities to grow.

Leading Continental retailers have already made major inroads into international markets. The top five non-UK clothing retailers in the EU: Inditex, H&M, C&A, Benetton and Cortefiel have on average half of their EU stores in non-domestic markets.

UK retailers pale in comparison to such figures. Despite all being large enough to rank in the Top 10 EU clothing retailers, the Top Five UK clothing retailers have just 17 % of their EU stores located outside the UK. UK retailers have only recently turned their focus onto serious investment in international operations and need to make inroads quickly if they want to catch up with their Continental rivals.

Across the EU, the market remains highly fragmented. Inditex holds the highest share of the EU clothing market with just 2.5 % of the market value, followed by H&M. Marks & Spencer takes third place, but the vast majority of its clothing sales are from a single market – the UK.