Task

Research the potential for launching a clothing marketplace for Ukrainian designers in Ukraine and European countries.

Market Analysis

In the context of this section, we analyzed clothing production in Europe, its import and export, as well as the structure of the fashion market in EU member states.

Clothing production in Europe

The EU remains one of the leading global clothing producers. The volume of production reached 66.2 billion euros in 2020.

Clothing production in the EU comprises two main segments: the first involves inexpensive goods for mass consumption, primarily produced by developing countries in Eastern and Southern Europe, such as Poland, Hungary, and Romania, where there is a relatively abundant workforce. The other category is elite luxury clothing, manufactured by developed Western EU countries like Italy, the United Kingdom, France, and Germany.

Clothing import

In 2020, the EU accounted for 21.3% of the world’s clothing and textile imports. According to Eurostat statistics, the total European market for clothing imports was estimated at 127.4 billion euros. This corresponds to approximately 23.7 billion units of clothing (compared to 19.2 billion units in 2016). The market had been growing at an average rate of 4.7% per year from 2016 to 2020. During the pandemic, like other markets, it experienced a decline.

The clothing markets of Western Europe are much larger than those in Central and Eastern Europe. The six leading clothing import markets in the EU are Germany, France, Spain, Italy, the Netherlands, and Poland. While some Eastern European countries are growing at higher rates than Western European countries, they still have relatively small market volumes. Poland, as one of the developing countries, is a market to watch due to its rapid import growth.

Clothing export

The EU is also a major exporter of clothing. In 2020, it exported clothing worth 97 billion euros (compared to 89.1 billion euros in 2016). Clothing exports from the EU grew at an average rate of 3.0% per year from 2016 to 2020. The largest exporters from the EU in 2020 were:

  1. Germany — 14.8 billion euros.
  2. Poland — 6.8 billion euros.
  3. Italy — 6.5 billion euros.
  4. Spain — 6.4 billion euros.
  5. The Netherlands — 6.1 billion euros.
  6. France — 4.2 billion euros.
  7. Belgium — 3.8 billion euros.

These seven countries accounted for 35.3% of the EU’s clothing exports.

Structure of the European fashion market

The clothing segment in Europe reached nearly 130 billion US dollars in 2021, making it the largest on the fashion market. At the same time, the accessories segment reached about 48.8 billion dollars.

According to Statista Digital Market Outlook, revenues from all three segments are expected to continue growing. For example, it is estimated that by 2024, revenue from the clothing segment will exceed 200 billion dollars. The shares of the segments in the overall structure remain approximately the same.

The women’s clothing segment shows the highest growth rates, while in footwear, sneakers, and trainers are leading the way. In accessories, the division remains almost unchanged from 2015 to 2021, with no trends indicating a change.

Based on this, the European clothing market is attractive for creating product. It is recommended to launch the product in Germany. All major product groups show a consistently high level of demand with natural seasonality.

Market Trends

After analyzing the European clothing market, our team of experts identified the following trends:

1. Sustainability and Ethics

Sustainable and eco-friendly products are no longer a niche market, as they used to be. It is evident that the attitudes of modern consumers are changing. By 2030, the age group 18–24 years will be the largest consumer segment in the world. 41% of them stated they would pay more for eco-friendly clothing, and 58% believe that a brand’s purpose, values, and mission are important. 73% of all consumer groups would change their behavior to reduce their impact on the planet.

Specific data on trading or producing environmentally friendly clothing in Europe is not available because sustainability is not currently mandatory for tracking in terms of cost or volume. However, the adoption of eco-friendly practices by major retailers such as H&M, Zara, Mango, and the growing number of exclusively eco-friendly fashion brands in Europe indicate increasing prospects for this trend in the market. Industry experts expect this segment to continue growing in the future.

Key factors for eco-friendly clothing production/distribution include:

  1. Materials that are safe for the planet, have low CO2 emissions, and are organic.
  2. Environmentally friendly production conditions.

Recently, the ethics of production, including fair wages for factory workers and safe working conditions, have become an important factor. To facilitate the identification of such products, several certifications have been established to prove the eco-friendliness of products.

2. Personalization of Experience

Considering that fashion is focused on self-expression, it is entirely logical that modern fashion consumers actively seek a personalized experience in their purchases. This includes providing product recommendations based on purchase history, views, user experience, etc.

An example of this trend is Stitch Fix. Since its creation in 2016, the project’s value has grown to approximately $2.9 billion as of June 2020. The store starts by asking a few questions and, based on the answers, provides personalized product recommendations. However, such a model is more of an exception. Recommendations are usually made based on internal algorithms or specialized services connected to the online store. Examples of such services include:

  • Clerk.io;
  • Emarsys;
  • Nosto;
  • Qubit;
  • Retail Rocket;
  • Dynamic Yield;
  • Criteo.

3. Multichannel Interaction

The days of online stores growing solely through advertising or SEO are behind us. Now, consumers need to be targeted through all possible communication channels, including social media influencers. Before making a purchase decision, consumers often interact with a brand up to 10 times.

According to a Statista report, almost every second decision-maker in e-commerce in Europe and North America considers a multichannel strategy necessary, while another 20% consider it extremely necessary.

An example can be seen in the advertising campaign of the sportswear store Fabletics. The brand launched a direct advertising campaign with Kevin Hart. It all started with a series of ads initially launched through Kevin’s Instagram, leading to a customizable landing page (rather than the main page, product page, or collection page) and ending with a six-part quiz.

Simultaneously, Fabletics released paid and organic content through its own social media accounts, in which Kevin also participated. The culmination of the campaign was what is often considered the least “modern” channel: an email from Fabletics sent on behalf of Kevin Hart. Such a combination of channels provides better results than using them as separate parts.

4. Sales from Mobile Devices

According to eMarketer, mobile commerce will account for almost 50% of clothing online store sales. While there has already been a shift towards mobile traffic, sales were still mostly from computers and laptops. Now, sales are also gradually shifting towards mobile devices.

However, many e-commerce stores are still poorly adapted to converting the growing number of mobile shoppers. More than half of consumers find it more challenging to make purchases through mobile devices, and 16% feel that mobile channels lack content and functionality. Ensuring that your e-commerce store is optimized for mobile devices will make an excellent first impression, improve your customers’ shopping experience, and increase your conversion rate.

Other Trends

  • During the research, the following trends were also identified:
  • Product customization options;
  • A. R. and V. R. solutions for trying on clothing and footwear;
  • Voice search;
  • Live Shopping and Visual Commerce (e.g., sales during live broadcasts);
  • Sales through social media.

Survey of Consumers in Germany

100 consumers aged 18 to 60 of all genders were surveyed. Most respondents (67%) are employed. The average income is 1000–5000 euros per month, which is average for Germany (in 2021, the average salary was €4100). The general conclusions from the survey are as follows:

  • The survey confirms the general trend of an increasing share of online clothing purchases.
  • The top criteria for purchasing items are price, followed by purchasing convenience. However, the percentage of those who consider price in the designer clothing segment is lower.
  • 58% of the respondents make purchases on marketplaces, mentioning Amazon, Zalando, Vinted, and Yoox as the most common ones.
  • Most respondents buy designer clothing 1-2 times a year or once a quarter, accounting for 66% of all respondents in total.
  • 42% of the respondents pay up to €5 for delivery, while 40% pay €5-10. However, the percentage of those paying €5-10 is higher among those who buy from designers.
  • Those who buy designer clothing are willing to wait longer for delivery.
  • Customers of designer clothing make purchases outside the EU more frequently than the second segment of the audience.

All these survey results were taken into account in evaluating the business model and viability of the proposed concept.

Competitor Analysis

Small clothing manufacturers from Ukraine were surveyed. Their main sales channel is Instagram. Some have tried creating their websites or selling through marketplaces, but sales were minimal. They manage marketing independently. This group may potentially be the core of the target audience. General conclusions are as follows:

  • Most of the respondents are dissatisfied with their current sales volume, often attributing it to the war as one of the main reasons for the sales decline.
  • Instagram is the primary sales channel for most respondents.
  • Most have used or are using marketplace services, primarily Etsy. The overwhelming majority almost do not sell through this marketplace. One of the main reasons is the lack of time to manage the platform.
  • Most manage their marketing by themselves, simply replenishing the budget for a set advertising campaign.
  • Nearly all of them are willing to delegate marketplace promotion functions in exchange for a fee.
  • The majority consider a marketplace fee of 10-15% of the transaction amount acceptable. Some have come across fees exceeding 20%.
  • All the surveyed expressed interest in both entering European markets and having an additional sales channel in Ukraine.

During the interviews, the following potential competitors were identified:

  • VSISVOI — an offline store that is currently developing a platform for selling their clients’ products abroad. Currently not ready.
  • BRAVEUA SHOP — a platform based on the portal brave.ua, promoting clothing and accessories with Ukrainian patriotic symbols. Currently, appears abandoned.
  • ARBER — a marketplace from clothing brand creators. No signs that they want to expand into Europe.

Marketing Budget

The promotion of the project will require the use of the following tools:

  • Social Media Marketing (SMM);
  • Content Marketing;
  • Contextual Advertising;
  • Targeting;
  • Search Engine Optimization (SEO);
  • Public Relations (PR);
  • Design;
  • Analytics.

Considering that the product is new, in the first months, a budget will be allocated for tools that ensure brand recognition. Simultaneously, tools for increasing sales levels (SEO, context, conversion targeting) will be utilized. Branding campaigns will be maintained periodically (once a quarter) in the future.

To calculate the budget for SEO, we collected surface semantics and calculated the possible budget for PPC advertising.

Marketing Budget of Competitors

In 2021, Etsy spent $559 million on marketing (approximately 20-25% of their revenue). Zalando spent €930 million (8-10% of their revenue).

Even considering that these marketplaces operate simultaneously in many countries, millions of dollars are invested in promotion for each country.

Conclusions

As a result of the conducted research, the client was provided with all the necessary information about the European clothing market, as well as consumer survey findings. The report helped make a decision on the feasibility of launching this business, refine the business model, consider possible risks, and assess the necessary promotion costs.