Industry Profiles: Apparel and Accessory Stores

Overview

During the decade of the 1990s, the performance of apparel and accessory stores fluctuated with the industry. Because the country faced an economic recession in the early 1990s, apparel sales remained sluggish during this period. However, most of the industry's segments began to recover by the mid-1990s as the U.S. economy turned around. The apparel industry continued to strengthen in the late 1990s with strong prices and apparel demand. Brand names and fashion also played a more prominent role in the industry in the late 1990s, since consumers became less interested in discount apparel than they had been earlier in the decade. By 2001, the nation's economy had taken a turn for the worse. Large numbers of workers were victims of unemployment, which has a significant impact on consumer spending. According to the Daily News Record, retail sales of men's and women's apparel fell nearly seven percent, from $150.4 billion in 2000 to $140.2 billion in 2001.

With a saturated market in the United States and economic growth in countries such as Mexico, U.S. clothing retailers began tapping new markets around the world in the mid to late 1990s. This trend continued in the early 2000s. Furthermore, changes in the makeup of the U.S. population spurred these expansions abroad. People aged 50 and over tend to buy less clothing, and in the United States the baby boomer generation started to reach that age. According to WWD, women, who account for 70 percent of all apparel and accessory purchases, tend to reduce their apparel spending by 20 percent around the age of 55. The Daily News Record indicated that in 2001, shoppers aged 55-64 reduced their spending on apparel by approximately six percent. This number was much higher (14 percent) for consumers over 65.

History of the Industry

Retail clothing stores emerged in the United States during colonial times. In those early days, stores were extensions of tailor shops. There were few stores relative to the size of the growing population, however, because owning a variety of clothes was considered a luxury. During the 1800s, with the expansion westward, clothing retailers were mostly manufacturers who sold their merchandise through catalogs. It was not until the late 1800s, with innovations in mass manufacturing and the growth of cities, that most retail clothing stores began operating exclusive of tailor shops.

Samuel Slater built the first textile mill in a locale convenient for sailors coming off ships who needed ready-to-wear clothing when they arrived in port. As the seamen could not afford custom-tailored clothing, tailors in port cities like New Bedford, Boston, and New York made standard-size suits for them to wear as soon as they arrived on land. These early garments were made of the roughest cloth and were also frequently purchased by southern plantation owners for their workers. The industry continued to develop as the demand for ready-to-wear clothing increased. The steady stream of immigrants to the United States, the Gold Rush in 1849, and the Civil War all stimulated the industry. When the Civil War ended, opportunities in the industry continued since people moving to newly-opened land in the West purchased ready-made clothing before they departed.

The invention of the sewing machine, the rise of mass production, and the increase of retail stores by the late nineteenth century led increasingly more people to rely on ready-made clothing as a reliable means of obtaining fashionable clothing. In the 1890s, ready-to-wear clothing came into its own, and by the turn of the century, ready-made apparel was available in abundance in the United States. By the 1920s, it was considered more fashionable to buy clothing from a store than to make it at home; and as the population continued to move toward urban and industrial centers, apparel and accessory stores spread across the country.

Casual and sportswear stores, a new segment of men's and boys' retailers, developed in the 1960s. Changes in lifestyle and increased demand for more variety in men's wear led to the decline of many tailored-wear retailers. By the 1970s, leisure wear was the fastest-growing segment of men's and boys' retailing.

Like other retailing that benefited from the country's growing population, shoe stores did well from the beginning of this century through the 1920s. The industry expanded rapidly as the economy strengthened and became highly competitive by the 1950s, when fashion trends changed and footwear styles grew more diverse. The retail shoe industry experienced another boom during the late 1970s and the 1980s, as athletic footwear sales increased dramatically along with America's infatuation with fitness and sports.

For many years, the department store and the downtown women's shop were the mainstays of women's wear retailing. Along with the growth of women's wear retailing came the increasing importance of fashion, and focused outlet stores like The Gap and The Limited began luring customers away from department stores. Retailers such as Bloomingdale's and Dayton Hudson department stores re-examined the big picture in 1995 and revamped their women's apparel collections in an effort to win back shoppers.

During the twentieth century, family retail clothing stores moved from small, individually-run stores to regional chains and then, in the 1990s, to nationwide chains of large stores. According to the National Retail Federation, the vast majority of family clothing outlets in the mid-1990s were chain stores.

Key Competitors

The leaders in the women's clothing store retail industry in the United States are The Gap, Inc. and The Limited, Inc. The Gap, founded in 1969, is an international specialty retailer specializing in men's, women's, and children's casual clothing and accessories. The Gap operated 4,200 stores throughout the world in 2002, including 2,966 Gap stores (Gap Adult, GapKids, Gap-Body, and babyGap), approximately 450 Banana Republic stores, and about 800 Old Navy locations. In 2002, the company's sales totaled $13.8 billion.

The Limited had 4,600 stores in the United States in 2002 and brought in $9.4 billion in sales. The Limited focuses mainly on women's clothing with its Limited, Express, and Lerner New York stores. However, its Structure stores sell men's clothing as well. In the early 2000s, The Limited was in the process of re-naming Structure to Express Men's. The Limited's subsidiary, Intimate Brands, Inc., operates Victoria's Secret lingerie stores, Bath & Body Works, and the White Barn Candle Company. Victoria's Secret experienced success in the 1980s by introducing a new approach to lingerie sales. The Victoria's Secret concept was originated by Roy Raymond in San Francisco. After studying the lingerie market, Raymond saw an opportunity to target men who liked to buy lingerie for their wives or girlfriends, yet were embarrassed to venture into the intimate apparel section of a department store.

In the early 2000s, Spiegel, Inc. and its Eddie Bauer stores remained one of the industry's leading retailers of men's and women's clothing. Eddie Bauer's retail and mail order businesses were growing rapidly. During this period, the company operated 560 Eddie Bauer stores as well as a number of Spiegel Ultimate Outlets and Newport News stores. However, Speigel's sales totaled $3.1 billion in 2001, a decline of more than 17 percent from the previous year.

Another industry leader involved in retail and manufacturing is Brooks Brothers, the oldest men's retail store in America. This company was started in 1818 by Henry Sands. Brooks Brothers was the company that invented the button-down shirt and the argyle sock. The company outfitted notable early Americans like Abraham Lincoln and Franklin D. Roosevelt and continues as the last retailer of truly conservative apparel in the men's clothing industry. As of 2001, the company also was selling apparel for women. That year, Brooks Brothers posted sales of $635 million, up less than one percent from the previous year.

The following retail companies led the footwear segment of the industry in sales in the early 2000s: Foot Locker, Inc. with 2002 sales of $4.4 billion; Payless Shoe-Source, Inc. with 2002 sales of $2.9 billion; Footstar, Inc. with 2001 sales of $2.5 billion; Brown Shoe Company, Inc., recording approximately $1.8 billion; and The Athlete's Foot Group, Inc. with 2000 sales of $248 million.

Industry Projections

The men's clothing and accessory store industry includes many small, independently-owned businesses and dozens of larger chain stores. These companies carry different product lines, including tailored clothing, work clothes, and heavy outerwear. Stores specializing in men's clothing accounted for almost nine percent of all clothing store sales in 2001. Growth has been relatively flat in this category, with sales averaging $9.8 billion from 1992 to 1996 and $10.5 billion between 1997 and 2001. In 2001, sales totaled $10.6 billion.

Because growth rates in men's and boy's wear apparel stores were below the rates for the total apparel and accessory industry, these stores re-evaluated product lines and pricing strategies in an effort to improve their financial performance in the mid to late 1990s. Consumer demand for value- priced clothing caused changes in brand name pricing and marketing. In the early 2000s, one trend affecting this category, as well as the women's clothing category, was the increasing popularity of casual work environments. According to Standard & Poor's, the number of professional workers allowed to wear casual apparel at work increased from only 20 percent in 1995 to more than 50 percent by 2000.

Stores specializing in women's clothing accounted for about 27 percent of all clothing store sales in 2001. Growth also had been relatively flat in this category, with sales averaging $30.4 billion from 1992 to 1996, and $30.4 billion between 1997 and 2001. In 2001, sales totaled $32.8 billion. Although the weak economy had a negative impact on this segment of the apparel industry in the early 2000s, one strong category was intimate apparel. In Textile World, Vanity Fair Intimates President Ellen Rohde called intimate apparel "replenishable and almost recession-proof." Because of a renewed American spirit in the wake of the September 11, 2001 terrorist attacks against the United States, patriotic themes joined other strong fashion trends in this category in the early 2000s.

The family clothing store segment accounted for more than 47 percent of all clothing store sales in 2001. Growth was the strongest in this category, with sales averaging $37.7 billion from 1992 to 1996 and $52.5 billion between 1997 and 2001. In 2001, sales totaled $57.3 billion. This segment of the industry is highly competitive, and marketing research and sales promotions are central to companies' operations. Other factors affecting sales in this industry segment include national economic trends, regional population growth, seasonal factors such as weather and holidays, and dramatic changes in fashion and clothing trends.

While retail businesses of all types were expected to grow in the United States, family clothing stores had a slower growth rate in the 1990s than in previous years. Other types of retail stores, such as specialty stores, discount stores, and hypermarkets, took business away from this industry segment. However, while the number of stores has decreased, individual stores have grown in size, on average doubling both their inventory and floor space.

The children's and infants' wear segment of the industry consists of hundreds of small independently-owned shops and dozens of larger retail chains. This industry segment's sales managed to grow at an annual average rate of approximately 6.6 percent in the 1990s despite the country's recession, which negatively affected overall retail sales. Fueling this growth was a rise in birth rates in the late 1980s and mid-1990s, which increased demand for infants' and toddlers' wear. By the early 2000s, this demographic trend had caused growth in the number of retailers catering to children, including The Talbots, Inc. (Talbots Kids), The Gap, Inc. (babyGap and GapKids), Gymboree Corporation, and the Children's Place Retail Stores, Inc. Census Bureau data indicates that the number of children under five years of age will continue to grow through the 2000s, which likely will fuel additional growth in this particular apparel industry segment.

The shoe stores segment of the industry benefited from the widespread popularity of athletic shoes, which helped shoe stores through the recession that affected other apparel stores more drastically during the late 1980s and early 1990s. In the mid-1990s, the U.S. athletic footwear market stood at almost $11.4 billion and accounted for approximately 40 percent of all shoes purchased. Furthermore, this segment's overseas markets expanded rapidly through the first half of the 1990s. Overall growth in the shoe stores category has been steady, with sales averaging $19.3 billion from 1992 to 1996 and $21.5 billion between 1997 and 2001. In 2001, sales totaled $21.7 billion.

While the apparel industry as a whole faced sluggish sales in the early 1990s, miscellaneous apparel and accessory stores, which sell items such as belts, bathing suits, and sports apparel, continued to have slow sales even after the rest of the industry started to recover in the middle of the decade. Into the early 2000s, discount stores and home shopping have provided direct competition for specialty stores and have taken business away from all clothing stores, but especially from miscellaneous apparel stores.

Global Presence

As the industry moved into the mid-1990s, efforts to establish specialty retail operations abroad were beginning. Manufacturers of clothing and accessories were well aware of the opportunities abroad, and many had established joint ventures in foreign markets. The retailers, however, found it more difficult to penetrate foreign markets. The North American Free Trade Agreement (NAFTA) was ratified in 1993 to create a free trade zone between the United States, Mexico, and Canada. In the early 2000s, international expansion was still an important growth strategy for U.S. firms, which operated in a mature domestic market.

In addition, mid-priced U.S. apparel retailers were doing well in Japan, according to U.S.A. Today. The new trend in the Japanese market was a push toward affordable causal clothing and convenience. In 2002, Eddie Bauer operated a Web site especially for its Japanese customers. At that time, the company also had a strong retail presence in Japan, as well as in Germany and the United Kingdom, made possible through licensing agreements and joint ventures. The Gap opened four stores in Tokyo and opened its first freestanding store in 1996. By 2002, the retailer's overall international presence had expanded considerably, to more than 650 stores in Japan, Germany, France, Canada, and the United Kingdom.

Employment in the Industry

The U.S. Department of Labor reported that in 2000, the number of people employed in this industry was estimated at 1.2 million and that they were paid an average hourly wage of $9.68 per hour. Wages for those in the industry's managerial portion were somewhat higher, averaging out at $27.29 per hour. Family clothing stores employed the most people, with a workforce of roughly 464,510 people. The next largest categories were women's clothing stores, which employed 280,460 workers, shoe stores (191,430), and men's clothing stores (82,020).

Overall, the Department of Labor estimated that employment in department, clothing, and accessory stores will increase 4.2 percent between 2000 and 2010. However, many part-time positions in this industry are often available due to a high turnover rate. In addition, sales-people are often hired on a temporary basis during peak selling periods such as Christmas and tourist seasons. Other occupations supported by this industry include bookkeepers, accountants, and secretarial and clerical personnel.

Sources for Further Study

arbitman, jacob, et al. "apparel industry." the value line investment survey, 21 november 1997.

borland, virginia. "shape of things to come; part 1 of a two-part feature focusing on the intimate apparel industry, including fiber, yarns, and fabric, as well as forecasts and trends." textile world, march 2002.

brady, jennifer. "analysts predicting a bang-up 2nd half for apparel retail." wwd, 16 september 1996.

chirls, stuart. "analyst sees more change ahead for domestic industry." wwd, 16 december 1997.

larson, kristin. "trend outlook: feminine looks and patriotic themes." wwd, 5 december 2001.

lazich, robert s. market share reporter 1996. detroit, mi: gale research, 1996.

———. market share reporter 1997. detroit, mi: gale research, 1997.

"occupational employment statistics." bureau of labor statistics, u.s. department of labor, 24 may 2002. available at http://www.bls.gov.

"retailing: specialty industry survey." standard & poor's industry surveys. new york: the mcgraw-hill companies, december 2001.

russo, david a., et al. "apparel industry." the value line investment survey, 20 february 1998.

schneiderman, ira p. "the $3.8 billion plunge; skittish consumers sunk men's wear sales in 2001, but outerwear beat the trend." daily news record, 4 march 2002.

u.s. department of commerce, economics and statistics administration, u.s. census bureau. annual benchmark report for retail trade and food services: january 1992 through march 2002. washington, may 2002.

u.s. international trade commission. "forces behind restructuring in u.s. apparel retailing and its effect on the u.s. apparel industry." washington, 11 november 1996. available at http://www.usitc.gov/332/ittrexmp.htm.

"u.s. retailers set fashion trend." u.s.a. today, 18 june 1996.