There is a dichotomy in the clothing industry, in which stores with an appealing location or attractive website with a large turnover grow quickly, while the rest are struggling. ABN AMRO and Locatus conclude this in a new study in which they combine revenue data with data about locations.
The industry has only limited profit from economic prosperity. For example, the combined revenue from store and online sales in 2018 only grew by 2 percent.
The dichotomy in the sector is large, the researchers report. For example, one in five clothing stores grew by more than 10 percent last year, while more than half of the stores saw revenue fall. The sales decrease was even more than 10 percent at no less than a quarter of the retailers.
Small margins in the clothing industry
The drop in turnover means a substantial drop in profit for clothing retailers almost immediately, because the margins in the sector are very small.
For example, the operating profit margins for fashion stores for individual target groups such as men, women or children are on average 3 to 4 percent, while those of lingerie stores are only 2 percent. For stores with a mixed target group, the margin is even negative on average.
ABN AMRO's forecast for the industry is that average growth will come to a halt this year. The researchers base this on the disappointing turnover, with more than half of the entrepreneurs seeing a decrease in the first quarter.
The researchers expect the dichotomy between successful and less successful entrepreneurs to continue this year and in 2020.