In 2011 Brazil, which is the world’s 10th largest economy was considered by US-based consultants A.T. Kearney to be the most desirable country for global retail expansion.

However, last year (2022) Brazilian market research company IEMI Market Intelligence reported the demand for clothing in local retail was 6.27 billion pieces, 2.7% more than in 2021, but 2.8% less than 2019 (pre-pandemic) due to families’ indebtedness and inflation.

Brazil fashion market needs to reduce costs to boost domestic competitiveness

Fernando Pimente, managing director of Brazilian Textile and Apparel Industry Association (Associação Brasileira da Indústria Têxtil e de Confecção – ABIT), which is helping the sector to boost sales, tells Just Style the country needs to improve its competitiveness, by reducing costs, “acting in the international market” as an exporter and importer, and protecting its “borders from illegal trade from platforms that do not meet the legal requirements of production”, among other measures.

The sector has also been impacted by high interest rates of 13.25% set by the Banco Central do Brasil (BCB), which has upset left-wing President Luiz Inácio Lula da Silva, branding Brazilian rates back in August as the “highest real interest…in the world”.

But the rates have been high to combat inflation, which was 16.08% last May (2022) for clothing purchases according to the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística – IBGE), due to “very strong cost pressures, mainly from raw materials, such as cotton, which had the highest price levels in the last ten years”, but also dyes and energy among others, added Pimentel.

General Inflation is now falling as it was 3.16% in June, and the central bank cut interest rates by 0.5% in August, so the ABIT managing director is optimistic about Brazil’s prospects as a clothing and textile market.

“Brazil keeps being a very promising market for clothing,” with a large population that likes fashion and with a “very outdoor life”, he noted, stressing that knitwear, beachwear and casual wear sales have been strong, especially since the pandemic. Brazil’s consumers want “versatile, comfortable clothes with technological touches” that are not too expensive, he observed.

Pimentel noticed that, except for the luxury segment, where international brands still dominate sales, for mass consumption, Brazilian brands have performed better in the “last few years”, alongside overseas brands companies, including multinationals, who have learned how to deal with the demanding Brazilian market, including its bureaucracy.

Fashion sourcing major China suffers deflation and job losses among target fast fashion consumers

There is similarly sluggish demand in China, which is still the world’s largest textile and clothing exporter. It has an economy flirting with deflation. Plus, its jobless rate among young people (aged between 16 and 24) in urban areas, which is the target of fast fashion business, rose to 21.3% in June (a record high since such data was first published in 2018), according to China’s National Bureau of Statistics.

The country’s consumer confidence index has barely budged since April 2022, when it dropped to a historic low in the past 30 years to 86.7, said the statistical bureau.

Frugal consumers hurt the fashion retail business, especially the mid to low-end market, said Dr Di Fan, assistant professor at Hong Kong Polytechnic University’s school of fashion and textiles.

“The middle and low-income consumers have been hit harder due to reduced income during the pandemic. This financial strain has likely curtailed their spending on fashion, taking a toll on the middle to low-end market,” he told Just Style.

Indeed, major companies including Swedish fashion retailer Hennes & Mauritz (H&M), Spanish fashion retailer Mango and Spanish fashion conglomerate Inditex have recently been racing to close stores in China.

Inditex also withdrew three of its fast fashion brands from China – Pull&Bear, Bershka and Stradivarius last year (2022).

Chinese local brands are faring no better. For example, high-profile women’s fashion brand La Chapelle filed for bankruptcy in June (2023).

But things are a bit different for more upmarket brands. Uniqlo, the Japanese fashion retailer that is favoured by Chinese consumers for its functional materials and high quality, plans to add about 100 stores per year particularly in smaller China cities, according to Chinese language media, citing its China chief marketing officer Wu Pinhui.

International brands reducing their mass market presence have also been building their presence for higher-end lines. For example, H&M has been opening stores in China for its more expensive brands – & Other Stories and Arket – since 2021. Similarly, during the pandemic Inditex invested in Chinese online sales for its more expensive Oysho and Massimo Dutti lines.

“Many consumers now lean towards more durable and sustainable fashion products, demonstrating a heightened awareness of sustainability. This evolving consumer preference could be driving fast fashion companies to adjust their strategies,” said Dr Fan.

He continued: “There’s a robust recovery in the high-end, luxury sector. Brands could consider developing upscale, more durable lines that align with this sector’s expectations.”

India’s inflationary pressures impact retail performance

India is another potential giant clothing and textile market for global fashion retailers, however it has also witnessed a demand slowdown. This is due to inflationary pressures, according to an ‘Indian Fashion Retail Industry’ report released in June 2023 by India-based investors service company ICRA, which is linked to Moody’s.

“Given the expected muted performance in H1 FY 2024 (April to September 2023) ICRA expects the slowdown in revenue growth to be 10% and affect profit margins by 1% in the financial year ending in March 2024,” said the report.

Rahul Mehta, chief mentor of the Clothing Manufacturers Association of India, in Mumbai, told Just Style: “the general recessionary sentiments and an effect of over purchasing that happened in 2022 following the pandemic are the major reasons for the present sluggishness in sales.”

According to Germany-based statistical agency Statista, in 2023 India’s fashion market sales are expected to generate $16bn and will increase at more than 13% annually (compound annual growth rate – CAGR) over the next five years. The average annual revenue per India consumer is expected to amount to $42.97 in 2027, it said.

This figure, however, masks the broad range in spending power amongst Indians as to succeed in India, foreign brands must understand the correct pricing, have long term vision, and not consider the entire population as potential customers, which could be deceptive, said Mehta. He named Inditex’s Zara, H&M, US fashion brands Arrow and Levis and Indian fashion brand Louis Philippe are among those that have been successful in the Indian market.

Brands also need to be adaptive, said Mehta, pointing to US fashion brand Tommy Hilfiger, which serves children’s wear lines in India with more focus than it does in its home market: “It realised that kidswear is a huge and growing market in India and there are no strong Indian kidswear brands,” he said.

To navigate such complex market conditions, fashion retailers rely more on traditional sales channels than ecommerce, explained the ICRA report.

“Players are recalibrating their channel expansion mix in favour of offline expansion, with online sales being viewed as a secondary and supplemental channel,” it said.

 By Just Style