A fashionable recovery

UK apparel entered the pandemic in a weak state. Too many stores, too much footage, too many websites, all adding up to chronic oversupply. Having its footage shut down for long periods has made things materially worse still. And the massive shifts in lifestyle and workstyle have posed huge challenges as the reduced spend that survived pivoted away from formal, to casual.

Those naive enough to think that the early part of 2021 would be very different have already been disappointed. However, with vaccines beginning to be rolled out there is significant light at the end of the tunnel. Q1 21 is going to more of the same. Those early in the queue to be vaccinated are not the traditional mainstays of fashion spending. Q2 will be a little easier as the cohort of protected consumers gets a bit bigger and the prospect of economic recovery begins to take meaningful shape. The second half of calendar 2021 offers real light at the end of the tunnel.

As we recover from this appallingly damaging period, I expect the Government to delay dealing with the economic costs and extend financial support longer. It will be essential to stimulate the economy and domestic consumption. I estimate UK apparel lost around £20bn of spend in 2020 (-28%) and significant shortfalls will continue for most of the first half of 2021. However, the second half should see a progressive bounce back in spending.

I am forecasting H1 of 2021 to be nearly as bad as 2020, characterised by a continuation of lockdown and severe disruption to consumption. Spend will be down 25% relative to H1 2019. There will be material pent-up demand for so many of the things we have been prevented from doing. The usual spectrum of social interaction that triggers fashion spending (leisure activities, travelling and going to work) will begin to resume. As the vaccine programme unfolds there should be a phased relaxation of restrictions, and the public will want to spend again. I expect the apparel market in H2 2021 to recapture 90% of its 2019 levels, worth £29bn. The recovery should build into the Christmas trading period with momentum to carry into 2022.

While the ground lost in 2020 will not be fully recovered, these forecasts predict a year-on-year sales uplift of £6bn. How will you plan for this? How will you ensure that you don’t miss out on the opportunity whilst avoiding buying too much stock and/or simply buying the wrong stock? Planning requires a fresh approach to forecasting and agility on a very different level. Advances in AI and machine learning are able to support just-in-time merchandising and lower the risks in decision-making. Making the right buying decisions, then allocating inventory through accurate demand forecasting by channel will be critical to take advantage of the H2 2021 mini boom.

TPC has developed proprietary AI tools using data science and machine learning to forecast demand and support optimised inventory management. If you think we can help, get in touch for an informal chat richard.hyman@tpc-group.com