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Online shopping just isn’t playing to the strengths of retailer Zara

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This month, Credit Suisse analyst Simon Irwin previewed Inditex, the biggest fashion group in the world and owner of flagship store Zara. Irwin concluded that online shopping just isn’t playing to the strengths of Zara.

In the age of the Internet and online shopping, costumers can easily review stores and products. And this isn’t working in Zara’s favour. The shift from offline to online shopping, exposes problems with the quality of the products and fit of the Spanish store, as well as their online service. On many review websites, such as Sitejabber and Trustpilot, costumers are complaining about the poor quality of Zara’s products.

The broker previewed Inditex’s results of the first half of 2018 and notes that their shares just had the worst week in seven years time. After Morgan Stanley rated the retailer from ‘great’ to ‘good’, the shares fell 8.7 per cent. Irwin expects 2018 to be the sixth consecutive year in which the Ebit margin will decline. According to Irwin’s estimations, online sales will only make up for 10% of Inditex’s sales over 2018. This is only a little growth compared to five years ago, when online sales made up for 2.4% of Zara’s total sales.

It seems like Zara just performs better as a physical store, where people are triggered to search for gems, rather than online, where costumer reviews can have a negative impact on sales.



Is fashion being reduced to objects rather than outfits?

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Looking at the latest financial figures in the fashion industry, a lot of luxury brands are doing really well right now. But many people seem to overlook the fact that most of these houses are actually the ones that are mainly focused on accessories. Does this mean that fashion is being reduced to objects rather than outfits?

Gucci is one of the examples of brands relying strongly on their lines of accessories. The luxury house was founded selling fine leather goods. And even though the brand has a much wider focus nowadays, it’s the accessories that still make sure the brand reaches almost 10 billion euros in annual sales for the Kering group.

And the same goes for Louis Vuitton, founded as a brand for travel bags. Nowadays, Louis Vuitton sells a wide assortment of products, ranging from clothing to timepieces. But the shoes, bags and scarfs continue to be their best-sellers. And the stories of Prada and Bottega Veneta seem to be similar, both founded as bag companies and still relying on these products heavily.

It seems like a luxury brand just doesn’t do so well without their best-selling bags or shoes. The popular sneakers by Balenciaga are the perfect example. They were created by Demna Gvasalia, Creative Director of Balenciaga, who has made name as a distinct clothing designer. But even with his impressive resume, it’s the sneakers (selling for 900 dollars), which are most popular amongst their customers. And like Balenciaga, also Yves Saint Laurent is focussing all their time and energy on their best-stelling high-rise yeti boots.

The question that remains: is fashion being reduced to objects rather than outfits? Luckily, not in all cases. Hermès, known for its signature bags, has been working hard to rebuild their clothing line. And with success. Other than most luxury houses, Hermès is not only relying on the familiar accessories, but exploring different categories such as jewellery as well.

While most brands push their accessories, other brands might look at Hermès as an example of growth without the usual suspects. It’s not easy though.



Denim market & trend report 2018

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The denim industry has faced some challenges in recent years, having to compete with other fashion brands. But denim is about to make a comeback. The denim market will become more competitive by the end of the year, which means innovation can play a key role. And if you are smart, you won’t be waiting, but taking the lead. Get more insights into the current market in our denim market report.

The denim industry: from difficult years to growing sales

In recent years, the jeans industry has had a rough time, with 2015 and 2016 being the most difficult years. With athleisure being at its peak, retailers, department stores and online stores saw dips in their denim assortments.

But data shows that denim sales started growing again about 1.5 years ago. And they are still growing today. It was the luxury market that saw the first growth in 2017. And with denim trends being introduced on the luxury market, this inevitably means the same trends will be spreading soon and will be taken over by the mass market.

Market research is showing that in the US and UK, retailers got 42% more denim products in stock for this third quarter of the year, compared to the same time last year. There are no other fashion products, except for leggings, that are growing with this pace at the moment and the average price point of jeans has increased.

So if you want to take advantage of what is happening in the market right now and be innovative, take close look at the denim trends in 2018.

Denim trends of 2018

Skinny jeans still form the core for retailers when it comes to jeans. The most favourite model of the last years is still going strong, being 58% of all women’s jeans. But other styles have risen in popularity too in the last three months. The wide leg, with a wide silhouette and showing the ankles, has been selling very well this summer. And the flare jeans have been in the top of the best-selling products. Not many new arrivals in this style have been seen so far, so there is an opportunity for brands to experiment with the flare jeans.

And obviously, denim is not only about jeans. Sales of different denim clothing pieces, such as jackets, shorts and skirts, have grown with 12% already in the last month, thanks to the revival of 90s fashion. The biggest growing category in denim has been outerwear. In the last two years, sales have grown with 101%. The cropped or oversized denim jackets with zippers are very popular this fall.

Forecasts for the denim market are looking good. There are still a lot of possibilities in denim clothing when it comes to innovating, helping retailers to reach a premium price point.