In 2016, Britons were focused less on fashion, and more on enjoying themselves. We ate out and drank more, but spent less on clothes.
In other words, we “shifted towards the experience economy”, according to Richard Lim, chief executive of Retail Economics. “Since Brexit, the components within the economy holding up well have been consumer expenditure on recreation and culture, transport, hotels and bars.”
But while the nation was out sinking pints and enjoying itself, retail bosses were left sweating in the corner office.
The last time fashion fell out of favour to this degree, in the aftermath of the economic crisis, the industry contracted by three per cent, according to Glen Tooke, consumer insights director at Kantar Worldpanel.
The UK clothing industry is currently worth £50.7bn. If it shrinks by three per cent now, £1.5bn will be wiped off the market.
The pressure is on for big retailers that have made their name in fashion, with bosses facing a tough choice: persist with clothing, or expand in other areas.
Steve Rowe, the man heading up Britain’s largest clothing retailer, Marks and Spencer (M&S), is one of the chief executives facing this conundrum.
Last year, M&S made sales of £3.9bn in its clothing and home division, down from £4bn the year before.
Meanwhile, food revenues grew from £5.1bn to £5.4bn, prompting some analysts to suggest M&S should focus on this side of the business. Clearly, Rowe understands the company should play to its strengths and is converting several M&S clothing stores into food halls.
But can a mature company just give up on part of its business like a maths student who has discovered a passion for dance?
Clothing and home made up nearly 40 per cent of M&S’ sales last year. And clothing also represents a higher-margin trade than food, which is coming under constant pressure from German discounters Lidl and Aldi.
Another retailer hoping to shift its focus away from fashion is Debenhams, where directors have been inspired by the bright lights of the beauty hall.
The company changed its product mix at Christmas, boosting beauty’s share by five per cent. And investors seemed to buy into Debenhams’ new facelift; the department store’s shares climbed 5.4 per cent after its Christmas trading statement.
But, like M&S, Debenhams is one of the top 10 clothing retailers in the UK. As such, it is heavily reliant on fashion. And, like food, beauty is a lower-margin business than fashion.
“They have got to get better at clothing,” says independent retail analyst Richard Hyman. “And their new chief executive Sergio [Bucher] knows that. But they have to make their fashion business more relevant.”
Staying relevant is a problem for many of the established retailers. Despite having nearly 400 years of experience between them, M&S and Debenhams sometimes appear to think the only way to sell clothes is to drop the price, rather than to make them relevant and attractive.
“Retailers are devaluing clothing, literally and metaphorically. They’re on sale all the time,” Hyman says.
He has estimated that 65 per cent of clothing retailers were on sale even before the Black Friday period kicked off.
This is problematic in the long term, because if retailers can only shift their stock on sale, it suggests it isn’t very good.
This is where an opportunity arises for the brands that seek to be different.
Tooke says plenty of smaller, high-end brands are doing well in the current retail environment.
Ted Baker, for example, is fiercely focused on its customer base, and pitches its product at the right price. Its shares have climbed by over 15 per cent in the last two years.
Ultimately, the fashion industry is about catering to people’s tastes. Retailers are so fixated on competing with each other that they may have forgotten about their customer.
But the trader that knows what people want will always be able to charge a higher price for it.