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The State of the US Clothing and Apparel Industry during the COVID-19 Pandemic

By: Douglas Daly – May 20, 2020

The Coronavirus pandemic led to a huge shutdown of non-essential businesses nationwide in early to mid-March.  As malls were left empty, customer spend suddenly ground to a halt within weeks.  In April and May, this sector has shown a steady, yet modest recovery.

Figure 1: YoY Weekly Clothing & Department Store Spend and Transaction Volume (Facteus)

As customers are spending more time at home and away from the malls, retailers have an opportunity to better serve their customers.  With Facteus’ 17+ billion transaction dataset of nationwide card spend data with over 120 clothing retailers and department stores identified, we provide a deeper understanding of the clothing industry.

 

Industry Performance by Clothing Retailer

Like in our earlier industry analyses, we applied a machine learning algorithm (unsupervised clustering algorithm called Gaussian Mixture Model – GMM) to cluster business performance based on weekly sales relative to week ending March 1, 2020.  In this case, we see a major separation between winners and losers:

Figure 2: Weekly clothing & department store spend & transaction volume by cluster relative to March 1, 2020 (Facteus)

Cluster 0 and Cluster 1 each represents about 40% of our merchant population and are doing poorly, while Cluster 2 appears to be having an incredible year.  Looking deeper, we see a story similar to the restaurant industry in recent months.

Merchants who differentiate themselves by providing a unique shopping experience are now at a disadvantage; customers often do not associate them with online shopping.  Further, customers may choose to postpone buying clothing which typically requires some personal tailoring or fitting.  And besides, who wants to buy a new suit when you work at home all day?

 

Losers
Major department stores (Marshalls, Nordstrom, Lord & Taylor)
Other stores with weak online presence (Burlington Stores, Mens Wearhouse, Bealls)

Winners
Online retailers (6PM, AliExpress, Teespring, NFL Shop, Zappos, Wish.com)
Casual clothing with strong online presence (Lululemon Athletica, Loft)

One major exception to this rule is Saks Fifth Avenue.  The retailer has experienced considerable growth in online sales in May while many of its physical stores remain closed.To be among the winners, having an online ordering mechanism is not enough.  The merchant must be one where buying online seems natural to the consumer.  To test this theory, we tracked each merchant’s online revenue and compared it with their total revenue on March 1.

Figure 3 Clothing industry online revenue as fraction of March 1st total revenue (Facteus)

The best performing merchants improved dramatically in online sales; they often exceed their total (online and offline) sales for March 1.  This may have come naturally to them as on average, online purchases accounted for 75% of their March 1st revenue.

What’s also interesting is that while Clusters 1 & 2 have seen significant growth in online revenue, Cluster 0 has remained flat and thus can attribute most of its revenue recovery to in-store sales.  This is striking as Cluster 0 lost on average 80% of their business almost exclusively to in-store sales, little progress has been done to take advantage of the online channel.  Further, most of the growth in Cluster 0 can be attributed to merchants in the South and Midwest where social restrictions have been relaxed recently such as Bealls Florida, Bealls Texas, Belk, and Shoe Carnival.

 

Clothing Industry by Region

Similarly, we analyzed industry performance from a regional perspective to see if different local norms or shelter in place practices impacted business sales.  We applied our clustering approach this time by US states and further dividing by online vs offline sales.

Figure 4 Weekly transaction count & spend by State cluster (Facteus)

Figure 5 Clothing offline spend clusters by state

Nationwide, all clusters show a sudden drop in total offline sales in March followed by steady growth in online sales over the past month.  In early May, offline sales rebounded considerably in several states where the shelter-in-place restrictions have been relaxed.

 

The coming weeks and months should prove interesting for this sector.  How will businesses who differentiate themselves on the shopping experience survive in the age of curbside pickup?  Will states that now enjoy an in-store sales rebound continue to do so?

 

We will continue to provide updates on how COVID-19 is impacting the health of businesses and how their customers change how they interact with them. Please visit FIRST.facteus.com often or follow us on LinkedIn or Twitter (@facteus) to be notified when we publish updates.

Appendix – List of Merchants in the Study: 6PM; ABERCROMBIE & FITCH; ADIDAS; AEROPOSTALE; ALIEXPRESS; AMERICAN EAGLE; ANN TAYLOR; ANTHROPOLOGIE; ATHLETA; BANANA REPUBLIC; BEALLS FL; BEALLS TX; BELK; BLOOMINGDALES; BOSCOVS; BURLINGTON STORES; CARTERS; CASUAL MALE XL; CATHERINES; CATO FASHIONS; CHAMPS SPORTS; CHARLOTTE RUSSE; CHARMING CHARLIE; CHICOS; CITI TRENDS; CLAIRES; COACH; COLUMBIA SPORTSWEAR; DILLARDS; DRESS BARN; DSW; DXL; EBAY; EDDIE BAUER; ETSY.COM; EXPRESS; FAMOUS FOOTWEAR; FINISH LINE; FOOTLOCKER; FOREVER 21; FRANCESCAS; FREE PEOPLE; GAP INC; GOODWILL; GOODYS FAMILY CLOTHING; GORDMANS DEPARTMENT STORES; H&M; HANNA ANDERSSON; HOLLISTER; HOMEGOODS; HOT TOPIC; INTUIT; J CREW; JC PENNEY; JOS. A. BANK; JOURNEY’S; JUSTICE; K&G FASHION; KATE SPADE; KOHLS; LANE BRYANT; LEVI’S; LOFT; LORD & TAYLOR; LULAROE; LULULEMON ATHLETICA; MACY’S; MARSHALLS; MAURICES; MENS WEARHOUSE; MICHAEL KORS; NASTY GAL; NBA; NEIMAN MARCUS; NFLSHOP; NIKE; NORDSTROM; NORDSTROM RACK; OLD NAVY; PACIFIC SUNWEAR; PALAIS ROYAL; PEEBLES DEPARTMENT STORES; POSHMARK; PRETTYLITTLETHING; PUMA SE; RACK ROOM SHOES; RAINBOW SHOPS; RENT THE RUNWAY; REVOLVE; ROSES DISCOUNT STORES; SAKS FIFTH AVENUE; SAKS OFF FIFTH; SEARS; SHOE CARNIVAL; SHOE SHOW; STAGE STORES; STEIN MART; STITCH FIX; TALBOTS; TEESPRING; THE CHILDRENS PLACE; THE GYMBOREE; THE REALREAL; TJ MAXX; TOMMY HILFIGER; TORRID; TORY BURCH; TRUNK CLUB; UNDER ARMOUR; UNIQLO; URBAN OUTFITTERS; VARIETY WHOLESALERS; VENUS; VICTORIAS SECRET; WISH.COM; ZAPPOS; ZARA USA; ZULILY