Consumer confidence and spending created some momentum for the fashion sector in 2018. Continued strong consumer confidence, along with the threat of trade regulations and a tight labor market, will be dominant themes for the sector—and the broader retail space—heading into 2019. In 2018, apparel retailers saw sales rise 7.5 percent for the week of Black Friday ended Nov. 24, compared to a year earlier. The overall increase in retail sales during the same period was just .5 percent, indicating that despite ongoing migration to online transactions, brick-and-mortar stores are still very relevant in the fashion industry. Amazon remains a threat, as it continues its push into fashion. Amazon’s infrastructure provides distinct advantages over middle market competitors. Its ability to collect and analyze data to meet the ever-changing preferences of today’s consumer is a significant asset that helps it capture even more market share. Amazon has also perfected speed through its supply chain, which has also been a focus for many of the big names in fashion, including Macy’s and Kohl’s.
Middle market fashion brands and retailers that offered a compelling shopping experience using features such as augmented reality were able to maintain market share and protect their brands in 2018. They must continue to present strong digital strategies to remain competitive next year. The fashion sector will also need to heighten its focus on managing costs. The future of tariffs and the ongoing trade dispute with China will play a significant role in whether fashion companies importing from China can survive. Some expect they will be able to absorb an additional 10 percent cost increase resulting from the trade spat, especially if the cost can be shared with Chinese suppliers. However, an increase in tariffs to 25 percent may be too much for some fashion companies to shoulder, and could further strengthen disruptors such as Amazon as they continue to use artificial intelligence and data to help drive sales and reduce cost.
Creating an engaging consumer experience that showcases the brand becomes is increasingly important–and more challenging in a tight labor market. With unemployment at record lows below 4 percent, labor remains tight in 2019, and wages will continue to rise. The labor shortage will challenge the entire supply chain, from manufacturers to distributors and retailers. It will be a challenge to find good help in stores, online, in the distribution center, on the design team and in the sample room. Many middle market fashion companies feeling the labor crunch have begun hiring longer-term and planning to keep more help on staff through the slower seasons to avoid difficulty finding qualified workers in 2019.