As a consultant, clients ask me two questions more than any other: How do we become more environmentally sustainable, and when will the apparel market turn around?
Not surprisingly, these are the central questions of our times. Still, they set up a seemingly interconnected relationship between sustainability initiatives and business objectives.
Let me explain. For an industry that prides itself on a good fit, it's striking how some environmental advocates misjudge the practicalities facing clothing brands these days. It's not a case of proposing new ideas that fall on deaf ears but instead of those ideas failing to be realised in the context of a brand's business objectives. Most strikingly, many new ideas are challenging to scale while failing to fit the needs of making a profit.
There's no shortage of new ideas, that's for sure. However, because it's difficult to get brands to adopt these ideas, many initiatives have struggled to gain traction in the industry. No wonder there are so many initiatives; it isn't easy to scale to an all-encompassing standard. Consequently, the industry is left with overlapping or competing standards, which are sometimes misused in marketing campaigns by brands looking for cover in sustainability messaging with their customers.
We end up with greenwashing. Yet, the lack of a universal standard emanating from the environmental community ironically encourages terrible behaviour on the part of some brands. The more well-meaning an environmental programme is, the greater the odds some brands may misuse its goals, kick it to the curb, dress it up with cynical marketing — and a load of hooey.
Please don't misunderstand. The struggle to clean up the industry is essential. Besides the ethical issues posed by indiscriminate destruction of the environment, the realities of our industry's seeming disregard for its impact on the planet are appalling. If not by the advocates inside of brands, then they should be addressed by government regulators. Greenwashing and misuse of sustainability goals need to end.
But how does an advocate gain genuine buy-in through brand management? It's not easy, but there is a road map. I suggest checking out a new study recently published by Fashion Makes Change entitled "Scaling Sustainability Solutions in Fashion." This is essential reading for any sustainability person working at a brand.
After all, business is business
But we still have the business case to consider. Philosophical question of the day: does sustainability matter if there's no business? It's worth pondering. Our industry is predicated on overproduction. That's no secret. It all comes down to ensuring clothes are on the racks when anticipating demand. The last thing any brand wants to face is empty shelves and lost sales opportunities – like what happened during the pandemic. Yet, overproduction, by its very nature, is wasteful. And the rush to make stuff faster and faster bakes in new and inventive ways of cutting corners. When clothing doesn’t sell, so much ends up in landfills, burnt, or in an ocean.
So, we have an industry that wants and needs to make money but, thanks to environmentalists' advocacy, has come to grips with the reality that it makes too much stuff and pollutes the planet. Environmentalists may be less interested in the profitability of businesses than in their mission to clean up the industry. Still, without sound economics, there is no business.
A look at the US apparel market
Let’s consider the current state of the clothing market. What are the factors affecting the business? The US apparel market, for instance, has been terrible. Yet, how do we make sense of it these days? The market is no longer going in reverse but is stuck in low gear. There's growth, albeit modestly. The freefall witnessed after the bust-and-boom cycle of the pandemic has been marked by a return to normalcy. Let's look at some standard measures of market performance.
Many things are happening and there are other factors we could include in the market snapshot. Even so, the key takeaway from the data is that the market is recovering. Indeed, it's far from booming, but it has stabilised and shows modest improvement.
There are reasons to be optimistic:
- Retail sales. After struggling for much of 2022 and 2023, apparel retail sales have gained momentum, albeit modestly. For the first quarter of 2024, apparel retail sales are up by 2%, an encouraging sign of improvement
- Inventory/sales ratio. This ratio has declined, suggesting that much of the excess inventory that plagued the industry over the past few years has been drawn down. There’s room for retailers to restock if demand builds
- Inflation. Although topline inflation has garnered shock headlines in the media over the past few months, apparel inflation has remained relatively tame, up just 1.3% for the 12 months ending April. This compares to topline inflation (less fuel and food) of 3.4%. Modest inflation can translate into greater consumer spending
- Imports. Apparel imports are rising again. Over recent years, imports declined as the retail industry worked off excess inventory from the pandemic and anaemic consumer demand. As imports make up such a large portion of the US apparel market, import performance is a timely indicator of new demand for clothing. On a quantity basis, US apparel imports rose 1.5% during the first quarter of 2024 compared to 2023. For the full year of 2023, apparel imports were down by 22% compared to 2022 — quite a change
- Import Prices. Imported apparel prices plummeted by 8.5% during the first quarter of 2024 compared to comparable year-ago levels. Several factors weigh on prices, including previous weak demand and a strong US dollar. There is also more competition in the global market. New market entrants have helped drive down prices as they battle for market share
- China. It's impossible to avoid discussing China when reviewing the US apparel market, as it still dominates sourcing. China lost considerable market share over the past few years but has regained momentum in 2024. US apparel imports from China are up 9.8% for the first quarter of 2024 compared to 2023, but prices have declined by 9.6%
- US dollar. The dollar has strengthened recently, impacting the prices brands and retailers pay for imported clothing. A strong dollar translates into deflationary prices, so imported clothing is cheaper, and margins are bolstered.
- Consumer sentiment. Although breathless media headlines claim US consumers are in a dour mood, current sentiment levels are much higher than year-ago levels. Although consumer sentiment has weakened over the past few months, compared to last year, attitudes are comparatively jubilant
- Personal consumption. Folks are still spending. Despite doom and gloom propagated by some, reality challenges the spin.
So, what's the narrative about the market? Here you go: Demand has improved, the pandemic-induced supply chain quagmire is history, inventories are down, and inflation and prices remain low, suggesting there's room for more clothing to be sold and, perhaps, at better prices as demand accelerates. The bottom line for our industry is to be patient. The market is mending. Baselines have been re-established, and demand has improved. Consumers are still spending on clothes, attitudes are better, and wallets are still open to purchase new clothes.
But this brings me back to sustainability. What's the narrative for that? Here you go: When the pandemic squashed the market, advocacy within brands for new sustainability programmes was a Sisyphean struggle at best. Companies struggled to survive; sustainability was a luxury they could not afford. But today, that will be less the case as the market improves.
The intersection of business and sustainability
Any such discussion about business and sustainability is risky, requiring a stroll on a tightrope. An improved market should cheer everyone. For sustainability advocates, will a reenergised market increase willingness to incorporate sustainability programmes substantively, or will things remain as before? The latter is more likely than the former unless something changes. A recovered market takes away the argument that we can't afford sustainability.
For a notoriously cheap industry, consumers keep their wallets open to buy your stuff; now it's time to put a crowbar into the industry’s collective wallet and pay for sustainability. It's better for the industry, better for its customers, and better for the planet.
