The online apparel market is expected to make up 29.3% of total apparel sales by 2027, however a new report has warned fashion brands and retailers face four key challenges that could inhibit growth.

GlobalData’s Global Online Apparel Market to 2027 report projects that by 2027, the online channel will make up 29.3% of total apparel sales, which it adds is only 0.9ppts higher than the share it reached in 2020 and stands as a testament to the “enduring appeal and benefits of stores.”

According to the report, despite the reopening of physical stores post-pandemic slowing the growth of online apparel sales, online spend remained 44.2% higher than 2019 levels in 2022 at $538.8bn.

The report states that the market is projected to have grown a further 4.0% in 2023, with a CAGR of 6.5% forecast between 2022 and 2027 at the back of easing inflation and retailers’ ongoing investments in their online propositions.

However, GlobalData noted that the ability to “touch, see, and try on” items remains important to many apparel shoppers. Technologies such as artificial intelligence and augmented reality have not yet been able to replicate this experience online.

Despite this, the report suggested that the online market is supported by the ease of price comparison and deal-tracking using price comparison sites and extensions, with 53.9% of consumers stating that they tend to compare or check prices online before making a purchase to cope with rising price.

What is driving the global online apparel market

The report identified four areas driving the global online apparel market, including:

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• The convenience of online shopping – Favoured by many consumers because of its ease and convenience with an array of payment options like ‘buy now, pay later’ and rapid fulfilment options such as same day delivering enhancing the overall consumer experience.
• Online allows for easy price comparison – Price comparison enables shoppers to get “best value for money,” especially at a time when consumers’ budgets are squeezed. Price comparison sites allow shoppers to compare prices across platforms while discount tracking extensions notify consumers of price drops.
• Social media platforms – Major driver of online spend, accelerated by the pandemic as social media platforms allow consumers to discover new brands through consumer engagement and influencer partnering. In fact, social media platforms are also becoming purchasing channels in their own rights, with the launch of TikTok Shop following Instagram Shop.
• Technology advances – Apparel retailers are using technology such as artificial intelligence (AI) to improve their online propositions, such as by enabling size recommendations, personalised product recommendations, and targeted marketing. The rise of generative AI, although still in early stages, is expected to improve retailers’ services like chatbots and personalised recommendations.

Online apparel market’s four inhibitors

The report also suggests there are four major inhibitors that fashion brands and retailers will need to overcome moving forward:

• High returns rates – Key problem with online shopping is the high rate of return due to poor fit or product quality which dents retailers’ profits. Traditionally, retailers offered free returns amid fierce competition but there has been a shift away since 20022 due to the impact on profits.
• Benefits of instore shopping – Consumers can try items on and get a better idea of colour and feel of products, and access better customer services. This limits the growth of the online channel, especially as apparel brands are integrating technologies to attract consumers to their stores.
• Threat of cyberattacks – Retailers and brands operating online are at risk of cyberattacks, so they must invest in data security measures to prevent attacks, which could compromise the personal data of shoppers. Attacks like this can significantly harm brand perceptions, potentially putting some consumers off shopping online and driving others to purchase from other retailers in the future.
• High inflation – The high inflation rates, driven by elevated energy prices amid geopolitical instability, has tightened consumers’ discretionary spending, especially in Europe and the US. This is especially the case for non-essential sectors, including apparel where many consumers will have turned to resale channels, diverting spending away from the traditional apparel market.

Secrets to online apparel market success

• Customer retention – Apart from rewarding customer loyalty with special prices and benefits, brands must use customer data to ensure their proposition continues to meet their shoppers’ needs. Brands should also focus on building a community through shared values to deepen customer engagement and boost sales.
• Personalisation – Online brands leverage customer data to personalise marketing and product offerings, improving the shopping experience. Many retailers such as Zara, Levi’s and Walmart offer tailored product recommendations online by using data on consumers’ browsing and shopping habits, and ASOS adapts its content based on shoppers’ search history.
• Buy now, pay later options – Buy now, pay later (BNPL) options have become increasingly prevalent among online players, as consumers are drawn to the convenience of purchasing items without being saddled with the interest rates often associated with credit cards. Online apparel retailers looking to maximise convenience should offer BNPL options, as these are especially attractive in the current economic climate. However, retailers should ensure that consumers are made fully aware of the financial agreement they are entering into.
• Investment in fulfilment – The adoption of new technologies can transform fulfilment by expediting or automating the process. For instance, using autonomous vehicles and drones can optimise last mile of delivery especially for remote locations. Technological advances can also help online retailers implement more sustainable fulfilment processes through more efficient routing, and electric vehicles can be used in dense urban areas.

Online apparel market growth by region

The report further highlighted that Asia Pacific is forecast to see its share of the market increase the most, rising from 35.7% in 2022 to 41.0% in 2027, to become bigger than the Americas.

It attributed this to Asia Pacific’s young population and growing middle class, pointing out that the region also has a rapidly increasing internet and smartphone penetration, making online apparel players accessible to more shoppers.

In addition to this, the Middle East and Africa, which the report stated is currently the smallest online apparel market, is expected to experience the strongest value growth with a CAGR of 13.8% between 2022 and 2027 on the back of strong economic development.

Lastly, GlobalData expects Europe and the Americas’ share of online apparel market to decline by 1.6ppts to 23.6% and by 4.2ppts to 33.5%, respectively, between 2022 and 2027. This, the company said, is partly due to high inflation pressuring consumers to reduce their apparel spend, while they are also the most established online markets, giving them less scope to grow moving forwards.


By Just Style