10427 The Retailer Autumn 2018_Final Draft Pages

Transaction data reveals key trends in fashion retail

Raj Pattni Head of Insight Platform Barclays

BARCLAYS’ ANALYSIS OF CUSTOMER SPENDING ON FASHION REVEALS OVERALL SALES GROWTH IS SOFTENING, BUT WHO ARE THE REAL WINNERS AND LOSERS? Against a backdrop of high-profile store closures and changing customer expectations, growth in fashion and accessories spending has been slowing down over the past two years, according to transaction data frommore than 8 million UK Barclays current account and Barclaycard credit card customers. Despite an improvement in the second half of 2017, year-on-year growth in overall fashion sales was just 2.3% in the year to June 2018, barely keeping pace with inflation, and hit negative territory in the first quarter of this year. Average transaction value (ATV) has also declined, as many customers trade down to budget brands. However, detailed analysis of spending by Barclays highlights the widely varying fortunes of different fashion retail categories and channels. Online gains In-store spending still makes up the majority of fashion sales, with a 63% slice of the market, but online is rapidly gaining momentum, having increased its share of sales by 7% over the past two years. Brands with a balance between in-store and online channels still dominate. Yet brands that trade predominantly online have enjoyed faster growth, as consumers increasingly favour purchasing via mobile devices and with the convenience of free and fast delivery. Of particular note, 47% of purchases from female-orientated clothing retailers are now made online. Our research shows the majority of customers (54%) now spend both online and in-store, underlining the critical importance of omni-channel experiences and in-store connectivity. Yet, surprisingly, the proportion of over-65s who shop online-only is greater than that of 18-24s. While many traditional high street stores are struggling and need to transform their business models, some online brands are finding more innovative ways to enhance the customer experience through “try before you buy” options, pop-ups and showrooms. So, it seems that the influence of the omni-channel consumer is here to stay and having a balanced channel strategy is likely to be key to future success. In response, many fashion retailers will be looking to evolve their in-store experience to meet changing customer expectations. Shopping frequency Bricks-and-mortar stores still have the edge over online in terms of

the number of fashion and accessory purchases made per customer annually. On average, customers made 14 purchases in-store compared to 8 online in the past year. At the same time, the use of contactless cards has doubled over the last two years, with 35% more customers using them, accounting for 8% of all fashion retail sales.

Category changes Few clothing and accessories retailers have been more affected by changing shopping habits than department stores. Barclays’ data shows that department stores have seen their market share fall over the past two years, along with a 5% decline in ATV to leave sales growth flat-lining. The analysis shows that affluent families are the key customer group across all fashion categories and, for the first time, family fashion retailers have overtaken department stores to take the largest market share. With consumers demanding an increasingly dynamic in-store shopping experience, it is clearly essential that department stores develop business models that support a more digital-first approach and find new propositions to attract younger customers, while retaining older ones. Location, location, location The analysis suggests that location is more critical to the success of a store than ever. While every area of the country has seen a rise in online purchasing, there is a big variation in regional performance and signs of an emerging north-south divide, with in-store sales growth falling by 60% more in the south of England than the north. London has been particularly affected by falling in-store sales at the expense of online growth, suffering a 4.4% decline at bricks-and- mortar outlets, the biggest drop in the country.

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