In this second edition of our cost of living series, we look at the clothing and footwear industries. Based on our own research that surveyed over 2,950 consumers across the UK and the US, we provide insights into how these sectors have been impacted and how brands can take advantage of the opportunities on offer. We also look at brands that are getting it right.
Let’s set the scene
Economic hardships in the wake of the global pandemic and the wider cost of living crisis have become the new normal, with brands and consumers alike cutting back on spending where possible. It’s no secret that this has brought serious challenges for retailers and, of course, consumers struggling to make ends meet – but there are still many opportunities on offer for brands.
Clothing and footwear sit in a slightly grey area compared to other industries in that they could be considered both an essential and luxury item. This means that, despite households cutting back on spending across all aspects of life, for the most part, purchase intent in these industries remains, although in a way that’s different from what we’ve been used to over the past decade.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
Our survey demonstrates that, when compared to other verticals such as entertainment on demand, travel, and cosmetics, clothing and footwear are ranked as a higher priority in terms of purchases. What does this mean for brands? Even though times are tough, consumers are still willing to spend to a certain extent.
However, despite this promising signal, retailers need to truly understand their consumer base, think seriously about their product offer, and be creative with their marketing strategy, since individuals on the whole are being forced to be more careful when it comes to where they spend their money.
Know your audience
As we mentioned in the first edition of our cost of living series that focused on the travel industry, the economic crisis has highlighted just how crucial it is for brands to segment their consumer base according to how severely impacted they’ve been financially as a result of the cost of living crisis. WARC and Mindshare UK’s financial tolerance scale is an ideal tool for this.
Consumers who fall into the finance negative category are deeply impacted by the financial crisis, which predominantly dictates their spending behaviour. Finance neutral consists of those who are experiencing minimal pressure, and finance positive refers to those who haven’t really been impacted at all.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
Our survey indicates that a good portion of respondents across the UK and the US consider clothing and footwear as either high or medium priority (64%), yet a significant portion (36%) consider them low priority. While it’s clear that there’s a wide pool of valuable prospective customers who are willing to convert, there’s also a considerable number who may need a bit more convincing, or who may not be right for your brand at all.
It’s essential that clothing and footwear brands identify and segment their audience in line with the existing and fragmented shopper landscape, since not all consumers have been impacted equally. The level of impact affects their willingness to spend, as well as the types of messaging and offers they are likely to respond to.
According to Sarah Curran MBE, GM EMEA at True Fit, in Ecommerce Age, this is particularly important when informing strategy since some consumer segments may be more receptive to lower price points, while others may be interested in finding long-term value. In order for brands to succeed during this crisis, they must ensure they’re able to engage with consumers in a way that acknowledges and responds to this polarisation in expectation.
The key take-away? One size certainly does not fit all, and in fact, this approach is a sure fire way for brands to fail.
Shifting consumer behaviour
Consumer behaviour with regard to clothing and footwear shopping is something that’s undergone a lot of change over the past few decades, from the tradition of saving up and coveting long-lasting, timeless fashion pieces, to explosive fast fashion that saw consumers refreshing their wardrobe sometimes every few weeks. Clothing and footwear has seen it all.
The cost of living crisis has triggered a blast from the past in that consumers are less likely to spend so indulgently, in favour of taking their time in order to find the most value for money, an opinion echoed by the global data and software leader, True Fit. According to the EY Future Consumer Index, 76% of respondents who are primarily concerned about the affordability of products aren’t interested in keeping up with current fashion trends – a sentiment reflected in our survey, signalling a shift in consumer sentiment when it comes to fast fashion.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
On top of this, the once distinct online and offline shopping journeys have merged to create a totally seamless shopping experience, evolving the process into something that can happen at any time, at any place using any means.
Say hello to omnichannel shopping, your new best friend.
Make sure you’re engaging with customers and prospective customers at all stages of their shopping journey – according to Salesforce, 67% of shoppers use a variety of channels before deciding to convert, with 40% of shoppers saying they would be prevented from converting if a brand isn’t present on their preferred channel.
Where once the consumer journey was more linear, it’s now a sort of messy cloud of everything everywhere all at once. But this – along with exciting innovations in the tech sphere such as the use of augmented reality (AR) and virtual reality (VR) – brings enormous opportunities for retailers. According to an Ankorstore webinar featuring retail consultant and broadcaster, Mary Portas, AR and VR tools are only growing in popularity amongst retailers, with 47% trying them out as part of their strategies. To add to this, according to a 2021 Global Deloitte Digital Study commissioned by Snap, by 2025, it’s predicted that around 75% of the population worldwide – and pretty much all smartphone users – will use AR on a regular basis.
76%
Don't feel the need to keep up with the latest fashion trends
71%
Not willing to buy new products if they can repair what they have
60%
Are spending less on fashion and cosmetics
*Based on a the ‘affordability first’ consumer segment of the 11th wave of the EY Future Consumer Index
This shifting behaviour is also reflected in the rapid growth of fashion reseller platforms such as Depop and Vinted, and according to Google data, global searches for reseller brands are increasing, with Vinted up by 83%, Depop up by 56% and Facebook Marketplace up by 147%.
So, what can retailers take from this shift in consumer behaviour?
Shopping happens at any time.
The consumer journey isn’t a straight line from inspiration to conversion anymore. Shoppers are open to being inspired at any point in the consumer journey and want to know what their options are at all times. Now’s the time to build your brand presence.
Shopping happens at any place.
It’s essential that your online methods work in tandem with – and support – your offline methods. According to Google’s data, 77% of shoppers will research a product online before buying it offline, and 78% of consumers will use a brand’s app in store to aid their shopping journey.
Shopping happens through any means.
It’s true that consumers have extended their decision-making processes, but there are a number of exciting technological innovations that brands can use – such as AR and VR – to help them, and if you’re not convinced – Google data shows that search volumes for queries containing the terms ‘AR’ and ‘VR’ saw a huge uplift over the past year.
Changing loyalties and the importance of trust
If you’ve banked heavily on loyal customers in the past, you may want to reconsider. The shopping landscape has changed, and customers are increasingly preoccupied with finding the best prices and best value from their purchases – often at the expense of brand loyalty. Add diminishing trust in brands and you have yourself a game of retailer musical chairs.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
According to our survey, a significant portion of respondents (35%) across the UK and the US don’t trust retailers to act in their best interests at all, while 57% only somewhat trust them. In a climate where shoppers are desperately looking for the best value for money, this lack of trust could erode their sense of brand loyalty and drive them away into the arms of competitors.
When asked where consumers would likely reduce their spending, clothing and footwear ranked highest when compared to entertainment on demand, travel and cosmetics in both the UK and the US. This is interesting given that our survey also highlighted that clothing and footwear were the highest priority area for respondents, suggesting that while consumers are still willing to spend, they want to purchase less expensive products.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
Digging a bit deeper, when asked why they would reduce their spending, 47% of respondents in the UK and 49% of respondents in the US indicated that they would look for cheaper alternatives.
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US
What’s clear is that the cost of living crisis isn’t preventing a significant portion of shoppers from spending altogether. Research suggests that they’re just more picky when it comes to price and are preoccupied with finding real value for money. According to research conducted by True Fit, this longer decision making process, more considered purchasing behaviour and greater focus on finding the best value for money has led to longer intervals between purchases, yet with larger shopping baskets, with order value up by 17% last year compared to the year before. So, a big opportunity is still there, but first you need to cut through the noise.
Consumers are also increasingly on the lookout for items that offer more value for money and are similar, yet cheaper in price, to the products they would normally buy. This is highlighted in an article by Apparel Resources, and in EY’s Future Consumer Index, which reinforces the fact shoppers are opting more and more for own brands and private labels.
33%
Are trying out new brands instead of their usual ones
53%
Wouldn't buy new clothing or footwear if prices go up too much
21%
Are switching to private label or own brands
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and the US and 11th wave of the EY Future Consumer Index
Despite falling levels in shopper loyalty, brands should work to build up levels of trust between them and existing and prospective customers. After all, according to Google’s data, customers who are part of loyalty programmes are likely to make twice as many purchases and more than two thirds more likely to stay loyal to their brand.
So, what can brands do to increase brand loyalty?
Form solid connections with consumers
Messaging is key. It’s essential that brands really consider their brand messaging in an honest and sincere way that demonstrates they understand shoppers and their financial challenges.
Focus on quality and fair prices
In order to drive trust, it’s important that retailers keep their prices fair. Where price increases are inevitable, it’s essential to communicate the value shoppers would receive from paying the premium – why should they pay more for your product when they could get something that’s potentially better value for money elsewhere? To add to this, clothing and footwear items should convey value to the consumer in that shoppers can rely on them to last, without having to replace them not long after purchase.
While price remains a key behaviour driver for shoppers in the cost of living crisis, a portion of consumers are still willing to pay slightly higher prices if it means better value for money – items that are more durable and less likely to be replaced as often. This is echoed in a recent report conducted by Deloitte which found that 38% of shoppers in 2022 opted for more expensive items promising durability.
Being upfront and transparent is also essential. That means brands should avoid any hidden costs that could crop up.
Add value throughout the customer journey
There are many ways brands can add value to shoppers throughout their purchase cycle. For instance, perks such as offering free delivery after their basket hits a certain threshold, special cost saving deals on multiple items, or providing gifts alongside purchases could go a long way in communicating that brands are aware of their financial difficulties and doing their best to help out. According to our survey, 83% of respondents in the UK and the US stated that it’s either somewhat or very important for brands to be seen to be actively supporting consumers in the cost of living crisis.
Brands can add value during the customer journey by using tools such as live chats – making it easier for shoppers to reach out to brands and get their questions answered. Brands could also take advantage of advances in AR when it comes to virtual try-on tools which can help online shoppers arrive at a purchase decision. Alternatively, making a point of including user-generated content on websites can increase the likelihood of brand trust, as shoppers can fall back on photos, videos and feedback from other customers.
Consider partnering with influencers
There are other ways to gain consumer trust, such as tapping into the world of influencers, micro-influencers and nano-influencers, which, when done right, can be a tremendously effective tool for brands, particularly in the clothing and footwear space.
According to the Digital Marketing Institute, 86% of shoppers fall back on recommendations from influencers when it comes to making their purchase decisions. When it comes to brand trust, it’s not uncommon for shoppers to trust influencers more than they do brands themselves – from advice on what to buy, to warnings on which brands to avoid. De-influencing – where influencers criticise brands to their followers – is something that has gained significant traction in recent years with real consequences. On TikTok, the hashtag #deinfluencing has gained millions of views.
Shopper loyalty, when it comes to influencers, often varies – and understanding this is important when it comes to informing your influencer strategy. For instance, micro-influencers (typically with around 10k – 50k followers) and nano-influencers (typically with up to 10k followers) tend to garner higher levels of trust than bigger influencers or celebrities. This is because these smaller influencers are able to create closer and more personal relationships with their following, and a greater chance of impact on opinions and decisions.
How clothing and footwear brands are responding
Farfetch’s AI try-ons
Understanding that shoppers are more inclined to undergo a longer decision-making process that takes various factors into account, such as transparency from brands on whether or not an item of clothing is right for them in terms of fit, Farfetch partnered with Snap in order to offer customers the option to try on items of clothing on their smartphones using AI technology.
As early adopters of Snap’s new AI offer, Farfetch are reaping the benefits of this new technology – which sits natively on a platform their customers use – helping to keep users engaged while providing them with extra support when it comes to deciding whether or not to purchase.
A key takeaway from VOICES 2022, Business of Fashion’s annual global event, demonstrated that AR can provide shoppers with a greater level of understanding when it comes to the sizing of a product, as well as how it looks, which can lead to far fewer returns overall.
Macy’s virtual sampling
When it comes to clothing and footwear brands, it’s no secret that developing product sampling can be a long, arduous and expensive process – especially during the cost of living crisis. As a result, brands are reevaluating not only their marketing strategies, but also their internal processes, to identify ways to cut costs whilst also bolstering their sustainability credentials.
In response to shoppers’ concern when it comes to sustainability, and in the interest of reducing costs and unnecessary waste, Macy has been using AI technology to create 3D virtual sampling.
This initiative uses technology to scale back on the amount of physical samples, and by the end of 2022’s development season, 61% of Macy’s product samples were virtual, reducing waste and keeping costs low – and this is something that more and more brands are buying into.
In creating virtual samples over solely physical ones, brands are able to work faster and reduce costs, while also polishing their sustainability commitments – all of which are things that could positively impact the purchase journey.
Levi’s dynamic pricing
The cost of living crisis has put a lot of brands between a rock and a hard place – either they increase costs and risk losing customers to competitors, or they keep prices low and suffer the consequences of taking the financial hit. Levi’s opted for a hybrid option between the two, which has led to fantastic results for the global denim brand.
In applying AI to pricing, Levi’s have been able to work out how much it needs to discount items of clothing in comparison to competitors – in recent times, it noted increases in gross margins from pre-pandemic times. As a result of dynamic pricing, Levi’s have managed to maintain lower discounts compared to competitors, and a larger share of full price sales – all while supporting shoppers when it comes to cutting back on spending during the financial crisis.
While using AI to inform pricing can be labour intensive, involves a lot of data and decreases in accuracy the further forward you try to predict, there are some obvious benefits to brands – particularly in the clothing and footwear industries, which are a bit further behind compared to other sectors. Using dynamic pricing allows brands to adapt and respond to market trends and dynamics, making the setting of pricing more flexible. Great for brands, great for shoppers.
Summary
Despite the challenges faced globally as a result of the cost of living crisis, the clothing and footwear industries are in an exciting place. There are clear opportunities on offer to brands – whether that’s through the use of AR, using AI to inform pricing, partnering with influencers or finding ways to drive value throughout the entire purchase journey. Seizing these opportunities can help brands differentiate themselves from the competition and drive real, tangible business performance as a result.
It has never been more important to know – and segment – your audience, in order to understand how their behaviour may be impacted by the cost of living crisis. Using an omnichannel approach, brands can then speak, influence and sell to shoppers at any time, at any place, creatively. From forming solid connections with consumers, to focusing on quality and fair prices, to adding value wherever possible, the possibilities are endless.
Stay tuned for the next instalment of our Cost of Living series, and in the meantime, don’t hesitate to get in touch for more information on how Croud can help support your brand and help it thrive.
